Private housing infrastructure funding charges might be the best way to speed up development and boost housing supply, a property academic says.
House prices increased 24.3 per cent over the year to March, according to Real Estate Institute data.
While the Government’s recent housing policy changes aim to rein in prices, boosting the supply of affordable housing is likely to be key to any long-term solution.
Professor Graham Squires, from Massey University’s School of Economics and Finance, said private housing infrastructure charges could be an effective way to open up land and accelerate the development of more houses.
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That was one of the key themes to emerge from a Property Foundation-hosted expert panel discussion on a new report by Squires which looked at the funding of bulk infrastructure.
The report included a focus on a pilot infrastructure housing charge which was being utilised for the Milldale development currently under way in Wainui, north of Auckland.
Infrastructure for the development was being funded via a partnership between Auckland Council, Crown Infrastructure Partners and Fulton Hogan Land
As part of this, homeowner “infrastructure payments” would be collected with council rate bills and used to repay the borrowing for roading and wastewater infrastructure, which would eventually support the development of 4000 new properties.
Squires said it was an innovative way of approaching infrastructure funding as it spread the costs and avoided the constraints that local authorities usually had in terms of borrowing limits.
Such funding models might allow developers to progress projects more quickly and to release greater volumes of land to the market, which would enable more houses to be built, he said.
The panel also identified other benefits that could come from such funding models, such as aligning funding more closely to the beneficiaries and giving local authorities more power to act, Squires said.
“As long as the public is comfortable with the concept, it opens the door to innovative ways of financing that have not been possible before as there was a reliance on upfront funding via developer contributions and infrastructure levies.”
While the Government’s recent housing announcement contained significant funds for infrastructure acceleration, developers have said it is not enough.
But Squires said there was a huge amount of international funds under management looking for long-term investments offering secure returns in politically stable countries, like New Zealand, and that presented opportunities to find new ways forward.
The Infrastructure and Financing Act, which came into force last year, should also help. It established a new funding model to enable private capital to support the provision of new infrastructure for housing and urban development.
Squires said the panel agreed the new act would result in the costs of infrastructure becoming more transparent and borne by the communities and homeowners who benefit.
“Over time, the ambition is for increased use of the act to result in more serviced land and housing and increased affordability.”
Private housing infrastructure charges would not work well in certain situations, he said. “They would be more viable in large scale greenfield developments and the economic growth prospects of the area are also important.”