announcement today of a pilot scheme to bring forward infrastructure for
housing is a significant milestone and establishes a new direction for growing
New Zealand’s cities,” says Stephen Selwood CEO of Infrastructure New Zealand.
“The Government has announced
that third party debt will be used to finance the roads and water
infrastructure needed to unlock land for development in Milldale, north of
Partners will establish a ‘special purpose vehicle’ (SPV) to raise funds from
investors, comprising itself, Fulton Hogan and the ACC, to enable the
construction of bulk housing infrastructure which otherwise would be deferred.
“Home owners will repay
the SPV with an annual charge of between $650 and $1000 per annum.
“This is a material
additional cost to new homeowners, but the real benefit is that private finance
for infrastructure will increase housing supply, making homes cheaper.
Currently, lack of infrastructure means homes are not being built at the pace
required and the cost of housing remains out of reach of many New Zealanders.
“There should also be
some combination of lower development charges or lower general rates to reflect
the reduced dependency of Milldale homeowners on the Auckland Council. It is
important that these homeowners are not asked to subsidise wider growth
infrastructure across the region.
“The real opportunity
is expanding the model beyond Milldale and beyond Auckland to address the wider
national housing crisis.
“If developers can
access third party finance to bring forward bulk infrastructure investment,
development can proceed at the pace and scale needed to deliver the
productivity improvements critical to delivering enough homes to meet growth.
“This approach is
standard practice in the USA and enables that country to have one of the most
flexible and responsive housing systems in the world.
“There is no reason the
approach will not work in New Zealand and, when combined with the promised
reduction in planning restrictions, will overcome the greatest barrier to
getting affordable homes delivered.
“As long as general
ratepayers carry the risk and cost of debt from new development there will be
opposition to growth and investment in growth, which is in no one’s interest.
“Legislation is needed
to consolidate the model and allow it to be rolled out nationally.
“This legislation will
need to be clear on where the risk and responsibility for repaying debt sits.
The Milldale initiative relies on debt, but for the model to be successful in
meeting ongoing housing demand, developers will need to be able to partner with
investors repaid on the basis of risk taken.
“If risk is
disproportionately allocated to developers, then the model will not lead to the
increase in developable land required.
“The sooner private capital can be
injected into infrastructure for new development, the sooner growth cities like
Auckland, Tauranga, Wellington and Queenstown can increase housing supply to
meet demand,” Selwood says.
For further information and comment contact
Stephen Selwood on 021 791 209