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Tolls, levies a waste of time for funding housing infrastructure

Long-term bond financing avoids having costs front-loaded.
 
Demographia's Hugh Pavletich talks about Auckland's housing shortage on NBR Radio and on demand on MyNBR Radio.

Sally Lindsay
Fri, 23 Oct 2015

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Motorway tolls and congestion charges to fund infrastructure are not going to fix Auckland’s shortage of land for housing, Demographia’s Hugh Pavletich says.

The recently released Productivity Commission’s report on Using Land for Housing has urged the government to look at funding instruments councils can use to release more zoned and serviced land for development.

Total costs for providing infrastructure for new houses is about $80,000 per dwelling. The report says having effective processes to recover these costs from the people who benefit from the investment is important.  

Mr Pavletich, who co-authors Demographia’s reports on housing affordability, says the only solution the government should be looking at is bond financing infrastructure over the long haul.

“This is done throughout middle and north America where they don’t have any issues with housing affordability. Houses there cost three times income compared to Auckland’s housing affordability crisis where homes cost 10 times income.”

Mr Pavletich says bond financing over the long haul “avoids having all the costs front-loaded – called development levies by councils – which in reality are home-buyers levies with builders’ and developers’ margins thrown into the cost of new housing.”

“That doesn’t stack up for basic economic efficiency and intergenerational equity reasons.”

Auckland Council already has five bond issues of fix-rate retail bonds listed on the NZX Limited Debt Market.

However, the report says there is political pressure on councils’ using debt to fund projects. “Community attitudes and perceptions can constrain councils’ borrowing. Councils say they are faced with strong community opposition to debt due to a perception that the future repayment obligations will result in rates increases.

Mr Pavletich says he is appalled the commission’s report dealt lightly with this issue in its "extremely poor" suggested methods of financing infrastructure.

Owen Poland talks to Mr Pavletich about the report.

RAW DATA: Productivity Commission report Using Land for Housing

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Sally Lindsay
Fri, 23 Oct 2015
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Tolls, levies a waste of time for funding housing infrastructure
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