New Queenstown Lakes mayor John Glover says he’s personally experienced the frustration of trying to get council consent for small building projects.
“Sometimes, as a council, we’re quite difficult to do business with. If we were a restaurant and people had a choice to go and get their food somewhere else, we would probably have gone bankrupt by now.”
His fast-growing community will be one of the biggest winners from a new Incentives for Growth Fund, that budgets $400 million over four years to hand out to councils that consent more homes.
The fund has developed out of a much larger proposal from the Act Party, to give back 50 percent of GST on the construction of new homes. But while that would have been worth $1 billion a year to councils ($4b over four years), this week’s compromise is far smaller, and no longer purports to be funded out of GST.
Despite this, Act leader David Seymour remains convinced that it will speed up consenting and construction. “The only time you get prompt service from a council is when they’re issuing a parking ticket,” he says. “They’ll come to you, anywhere, anytime, because there’s money in it. Imagine how many consents they’d issue if there was money in it for them?”
He acknowledges that new housing developments can involve costs to existing ratepayers to provide the new infrastructure and services needed before houses can start construction. These costs act as a disincentive for councils to approve new houses and subdivisions.
Here’s how it works: for each new home consented up to 1 percent of the existing dwelling stock, councils get paid 0.25 percent of the national average consent value. This doubles if they consent up to 2 percent of existing housing stock, and the cash-back rises further to 1.25% of the national consent value if they exceed that mark.
Brad Olsen from Infometrics has run the numbers: he says the biggest winners are Auckland, Waikato, Waipā, Hurunui, Waimakariri, Christchurch, Selwyn, Mackenzie, Ashburton, Central Otago and Queenstown Lakes, which are already consenting more than 2 percent of existing dwelling stock.
Biggest winners from new housing incentive fund
So will it actually persuade councils to increase their run rates – or is the fund too small to overcome the actual impediments to new building consents, like the millions it costs to put in new infrastructure to support the housing?
“It’s a very good question,” Glover says. “It might. It will probably incentivise us to get maybe more through the door quicker, to speed things up. We’ve got a pretty insatiable demand for consenting in our district, so I guess if we’re able to streamline that and be more efficient and get them through quicker, then we’ll see a return from some of that Government money.”
The funding must be used for infrastructure-related expenditure like the roads, services and local infrastructure needed to support growing communities. And councils will be required to report annually on how they have used the money, to demonstrate that they are addressing growth impacts.
Regional economist Benje Patterson says this is big news for Queenstown Lakes in particular, which consents housing at around five times the rate of the New Zealand per capita average. “This initiative could be a windfall revenue gain that fundamentally begins a shift to the books for Queenstown Lakes District Council.”
But experts and local leaders elsewhere in the country are more wary. “I’m unsure if it will move the dial outside of a few high growth areas,” Olsen cautions. “That said, it’s something, and local government haven’t had a lot of new funding streams to support growth.”
Gisborne mayor Rehette Stoltz, who’s the president of Local Government NZ, says the fund is encouraging, and acknowledges the difficult situation facing councils that want to enable growth in their regions.
“While this funding would not provide as much incentive for councils to enable housing growth as sharing 50 percent of GST would, it is a step forward,” she says. “For councils where there is a need for growth, today’s announcement will come with benefits; but for other councils, alternative funding options must be made available.”
Desperately cash-strapped councils have been lobbying for solutions like a hotel bed tax of some description (Auckland, Tauranga, Wellington and Queenstown) or the ability to charge rates on Crown-owned land (Auckland, Kaikōura, Hurunui and Buller).
“Given that this is this Government’s last Budget this term, this was the last opportunity to address the funding required to implement the raft of reforms that are underway to the local government sector,” Stoltz adds.
She cites resource management reforms, emergency management and simplifying local government. “Given this isn’t addressed, a lack of funding or other funding and financing tools may result in services being reduced or cut.”
