Peak body confirms developer contributions add to house prices

After years of debate on whether council endorsed Developer Contribution Plans (DCP) add to the price of developed land, the Housing Industry Association (HIA) has applauded new research released by the National Housing and Finance Investment Corporation (NHFIC) showing that the price of new homes is directly increased by the various developer charges being applied by local and state governments.

As identified in the NHFIC paper Developer Contributions: How should we pay for new local infrastructure, the HIA agrees with the findings that developer contributions for local infrastructure are inconsistent, lack transparency and have broadened in scope which has led to additional costs on new homes and potentially slows down new housing supply.

HIA chief executive industry policy, Kristin Brookfield, said that over the last decade, the charges being applied through these development contribution schemes have become increasingly significant.

“This is partially due the large range of infrastructure now included, and the gold-plated standards being sought by local and state governments,” Ms Brookfield said.

“A conscious decision to shift the majority of the upfront costs onto new housing developments emerged almost two decades ago.”
Villawood Properties executive director Rory Costelloe also agrees with the findings from the NHFIC.

“I totally agree that the price of new homes is being directly increased by developer charges applied by local and state governments,” Mr Costelloe said.

“Upwards pressure is also being caused by a lack of land supply, again because of local and state governments.
“Much of this failure can be sheeted home to a lack of decision-making and unnecessary red tape.”

The HIA is also concerned that state governments are now using this mechanism to add costs to new housing for infrastructure that clearly serves more people than just new home buyers each year.

“An up-front charge against a new development is the least efficient manner in which infrastructure costs should be recovered by governments,” Ms Brookfield said.

“These levies are now so significant they are impeding orderly and affordable residential development from occurring and significantly add to the upfront costs of new homes.”

The industry has had a long-held view that development contribution models are complex to calculate and to administer and introduce an element of uncertainty into the development process.

They further express concerns that the consequence of protracted decision-making leads to unnecessary holding costs for landowners and residential developers, with the cost ultimately being passed onto the home buyer and ends up being carried through for the life of the mortgage.

A review of the existing Torquay/Jan Juc Development Contributions Plan (DCP) has just been presented to the Surf Coast Shire council with the consultants describing the current DCP as significantly out of date.

Updated scope and costings for infrastructure projects have identified a funding shortfall with an increase in rates recommended as a result.

A draft planning scheme amendment has been prepared for consideration by the Minister of Planning to exhibit.

Current development and community infrastructure levies in the 26 charge areas of Torquay/Jan Juc average $4,183 per lot/dwelling with the community levy at $1,150 per lot/dwelling.