Identification and analysis of building consent, inspection and approval costs: Appendix 4
Development Contributions
Development contributions and financial contributions are means of recovering costs of infrastructure required as a result of development. Financial contributions are provided for under the Resource Management Act 1991 and are focused on mitigating the environmental effects of development. The Local Government Act in 2002 provided development contributions as a new tool to recover growth costs. It required councils to have either a financial contributions policy and/or a development contributions policy.
Development contributions are typically considered as more attractive than financial contributions as they allow for better planning of cost recovery in advance of expenditure, are not as limited to recovering costs of the direct effects of development, and can be subject to judicial review only (a test of reasonableness), avoiding Environment Court challenges.
Policies vary considerably across councils. Development contributions began to be introduced in 2004 with the first cycle of Long Term Council Community Plans (LTCCPs) for local government planning. Those that were experiencing considerable growth were typically early adopters (such as Christchurch, Queenstown and Northshore) although Rodney retained their financial contributions policy, albeit with very high charges of $30,000 upwards per household equivalent unit (HEU).
The second round of LTCCPs in 2006 has seen more councils applying development contributions. Their introduction over 2004-2006 coincided with the introduction of the Building Act 2004 and, given their size, contribute heavily to the perception that the Building Act caused the significant increases in fees.
In 2008, around half of all councils charge development contributions fees, although a number of others, particularly smaller councils, continue to operate financial contributions regimes. Some mix development contributions with financial contributions for some infrastructure areas and some retain financial contributions only. Some rural and smaller councils where development has been limited often do not require contributions, preferring that developers build infrastructure where the need arises.
Development contribution charges can vary considerably within a council depending on the catchment area. New developments requiring considerable new infrastructure can be significant, whereas infill that utilises existing capacity can be much lower. Such variation makes it difficult to determine the overall impact of development contributions on total building costs or total fees.
In addition to the widening use of development contributions, there has been a general trend of development contribution fee increases as councils have broadened the range and extent of growth costs to be recovered. Fees per household equivalent unit are shown below:
- In 2004, Tauranga City Council set development contributions in a range from $6,152.70 to $20,900.79 depending on catchment. In 2007 this range was increased to $13,319.11 to $40,107.53
- Auckland City Council introduced a development contributions policy in 2005 which set a maximum fee of $6,145.88 plus 7.5% of the land value for parks and reserves. The 2007 maximum fee was $29,777.64 plus the equivalent of 5.65m2 at the value of the land.
- Queenstown Lakes District Council’s maximum fee increased from $12,965.63 in 2004 to $22,945.55 in 2006.
Other councils have set lower fees where ongoing growth pressure has been lower: for example, Hutt City Council set development contribution fees at $2,536 in 2006. North Shore City Council is an example of a council that set comprehensive fees in 2004 which only increased around 8% to approximately $26,000 in 2006.
Given the breadth of approaches to setting and reviewing contributions regime and range of growth costs being incurred, it is difficult to provide a generalised figure for development contributions, although the DPMC House Price Unit Report has suggested a range in 2007 of $5,000 to $40,000. The above examples are indicative of the range of fees and the range of increases over the period.
As these typically have been introduced in high growth areas, they are a key contributor to the perception that the Building Act has been the cause of major increases in building costs.