"Projects that would cost $30 million today are inflated to $250 million 30 years later and we're charging people for it now. It's like being forced to pay 2025 house prices back in 1995 - you just can't do that!"
This assessment comes from an independent review commissioned by Subdivision Advocacy New Zealand (SANZ), which found Auckland Council's proposed development contributions (DCs) calculations are severely flawed.
"The procurement system is broken," says SANZ spokesperson Kirsty Merriman. It doesn’t only affect developers but ratepayers and tax-payers also.
The proposed charges are 50% to 80% higher than justified due to faulty modelling and excessive 'allowances' for consultants, council costs, traffic management, and contingencies. This is deeply troubling and possibly illegal.
Key problems include:
- Failure to discount future revenue to present value while inflating costs
- The model has included a function to allow for discounting – it hasn’t been used
- Excessive project add-ons and contingencies such as:
- Traffic management at 13% or 20%
- Contingencies of 50-70% (industry standard: 10-20%)
- Unrealistic housing growth forecasts
- This significantly impacts the DCs as more households in an area can share the costs e.g. Manurewa Papakura forecast at 75 p.a versus the past five years data at 750 p.a.
- Outcome will impact delivery of affordable houses the most because the DCs make up the greater portion of their costs. You can read more about the impacts the proposed DCs will have in Matthew Gilligan’s blog.
- Ratepayers pay the lion’s share of the Transport Growth Projects e.g. the Mangere footpath renewal is 85% ratepayer funded. A along with higher than private sector overheads, a 70% contingency is applied, it is delayed for 10 years, the capex is inflated and the original $66 million dollar project turns into a $265 million dollar project.
“We are also calling on the Minister for Infrastructure Chris Bishop to examine the Review’s findings, which show the urgent need for the regulatory oversight that he has announced is coming as part of the transition to Development Levies.”
"If nothing changes, Aucklanders will face higher rates and housing costs. Construction will slow, affordable housing will suffer most, and the market will shift toward larger, expensive homes."
You can read the full report here.