25 Feb 2013

Rezoning profits may go back into community

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Written by: Brian Rudman
Photo by: Dean Purcell
Published: The New Zealand Herald – 25 February 2013

The Government is getting private developers to service Hobsonville Pt with infrastructure and build houses.

The Government is getting private developers to service Hobsonville Pt with infrastructure and build houses.

Auckland is considering putting profits from rezoning of development land into the community.

Property speculators hoping for windfall profits from Auckland Council’s planned citywide rezoning of development land might be wise not to spend their unrealised loot just yet.

The council is investigating ways of “taxing” what it calls “shared land value uplift” to fund desired improvements to community services and infrastructure, including affordable housing.

The “tax” would come on top of existing development levies, and is designed to return to the community a proportion of the unearned profits landowners stand to reap through no effort of their own when rezoning triggers rapid increases in land values.

As a report to today’s meeting of the Auckland Plan committee points out, “At the moment in New Zealand, any increase in land value resulting from the rezoning decision remains with the landowner.”

Before you start thinking the lefties have seized power at the town hall, the concept is hardly a radical one. Countries we tend to compare ourselves with, such as Canada, Australia and the United Kingdom, all do it.

In 2011, the Vancouver City Council secured approximately $180 million in public benefit commitments from developers following the rezoning of five large-scale areas. The report records that $40.3 million of this went to affordable housing, $37.2 million to community facilities, $28.2 million to heritage preservation, $22.2 million to parks and open spaces, $3.2 million to transportation, with the rest still to be allocated.

In Vancouver, the size of contribution is negotiated between the council and the developer, who first come to an agreement about the value of the property both before and after the rezoning. They then negotiate a “community amenity contribution” reflecting the windfall profits resulting from the rezoning.

Vancouver Council policy is that 70 to 80 per cent of the increase in property value arising from rezoning should be used for community amenities, including affordable housing.

In the UK, developers have to pay a community infrastructure levy, which is similar to New Zealand’s development contribution levies. In addition, they face an affordable-housing contribution, which is levied according to the increase in land value, following planning permission to build.

Australian state government agencies tend to take a more hands-on approach, setting up development agencies with the power to buy and rezone land for housing or other development, then either develop the land themselves, or do what the New Zealand Government is doing in Hobsonville Pt, which is to bring in private developers to service the land with infrastructure and build the houses. France and the Netherlands take a similar approach.

Auckland Council would need a change to the Local Government Act to introduce such a scheme. It is currently undertaking a financial assessment of the proposals, which should be completed by April.

The report also floats an alternative way of ensuring a supply of affordable housing, and that is to insist, as part of the planning requirements, that developers include a mix of price ranges in any housing development over a certain size. In return, the council would provide carrots such as fast-tracking of consents.

Scattering a mix of housing across the city would reduce the chances of creating a “very divided city” and also lessen the growth of pockets of deprivation, with all the associated social problems.

The report points to South Australia where state planning rules require that 15 per cent of new homes in significant housing developments meet affordability criteria.

In Vancouver, 20 per cent of the additional housing allowed as a result of rezoning has to be “affordable”.

In this country, only the tourist mecca of Queenstown has flirted with the issue, struggling to provide adequate accommodation for its low-waged hospitality industry workers.

In Auckland, we have a similar low-wage problem writ large. Complicating the issue is that unlike other countries we like to compare ourselves with, the community housing sector in Auckland, which elsewhere would be in the market for developer-supplied affordable housing, is neither strong nor vibrant.

And the traditional supplier of low-cost rentals, the Government, is keen to shed its responsibility.

These are key social issues that need confronting as part of the Unitary Plan process. Let’s hope they don’t get overlooked as the Nimby-bickering over the siting of apartment blocks gathers pace.



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