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Government reviews development contributions

- Friday, August 16, 2013

The impact of development contributions on the feasibility or otherwise of projects has long been a source of contention and concern for our developer clients.  It is often unclear how these charges are calculated, with little ability to challenge the reasonableness of the contribution.  There also seems to be huge inconsistency between Councils in relation to both the quantum and underlying basis for these fees, making them difficult to budget for in the early planning stages of a development.

As part of the Housing Affordability Inquiry Report a review of development contributions has been undertaken with a view to amending the development contribution regime in the Local Government Reform Bill which is expected to be introduced later this year.

The key areas of expected change are as follows:

Introduction of a new development contribution purpose and principles statement:

The idea is to provide a backdrop of guiding principles against which the development contribution policies of separate Councils will need to be set, and can be tested. The types of principles that are expected to be adopted are; efficiency, equity, accountability (in terms of contributions actually being applied by Councils as levied), transparency and certainty of quantum.  The actual need for the infrastructure which is intended to be the subject of a contribution will also be a focus.

Narrowing the range of infrastructure that is able to be financed by development contributions:

The Local Government Act lists three types of infrastructure that are able to be the subject of development contributions.  Contributions in respect of network infrastructure and reserves have historically been considerably less contentious than charges imposed in respect of ‘community infrastructure’.  

It is proposed that the definition of ‘community infrastructure’ be restricted to a narrow list, focussed on the types of infrastructure that actually service the local neighbourhood in question.  This list is expected to include community or neighbourhood halls, play equipment located on neighbourhood reserves and public toilets.  Any other community amenity outside the scope of the list is not intended to be the subject of a development contribution and will be funded from land rates or other sources.

Great transparency:

To promote transparency it is anticipated that Councils will be required to provide a development contribution policy that includes a schedule listing the projects to which development contributions relate, the expected cost of each project and the proportion of the cost of each project funded from development contributions.

Encouraging private development agreements:

Whilst private development agreements are currently being used, they are comparatively rare.  There will be a push to encourage these types of agreements. It is anticipated they will promote greater flexibility and cover things such as the timing and phasing of the infrastructure, the ownership, vesting and maintenance of infrastructure, a mechanism for resolution of disputes and clarity and certainty in respect of the transfer of land from the developer to Council.

New objection process:

A new ability for developers to object to the level of development contributions is intended to be introduced.  The developer will ultimately have the right to lodge an objection with an independent body (to be called the “development contribution commissioner”) whose decision will be binding on both parties.

Whilst the proposal will not alleviate all of the “pain” we are pleased to see the issue being addressed.