Development contributions will not be removed or capped as a
result of the government review following the Productivity
Commission inquiry into housing affordability.
But they will be given a legislative nip and tuck in the
Government's next Local Government Reform Bill, expected to be
introduced later this year.
We run quickly through the proposed changes.
Development contributions can be charged by local councils to
recoup some of the capital costs of providing infrastructure
services to support new property developments. They can only be
charged on growth-related infrastructure investment – not on
quality upgrades, maintenance or operational costs.
Currently they average $14,000 per section but can be as high as
$64,000 and are a source of frustration to property developers
because it is often unclear how the charges are calculated and to
what they can legitimately be applied. There is also limited
ability to challenge the reasonableness of the amounts charged.
New purpose statement
A new purpose statement will be incorporated into the Local
Government Act (LGA) to explain that "development contribution
provisions exist to help territorial authorities recover a fair,
equitable and proportionate portion of the capital costs of
infrastructure that is required to service growth".
This will be supported by six principles to guide territorial
authorities in the application of development contributions - need,
efficiency, equity, accountability, transparency and certainty.
Tighter definition of infrastructure
The LGA lists three types of infrastructure – network,
reserves and community.
The "community infrastructure" definition will be
narrowed to the types of infrastructure that service local
neighbourhood needs – e.g. community and neighbourhood halls,
play equipment on reserves, and public toilets. Amenities which are
not on the list because they serve wider populations (e.g. art
galleries, aquatic centres, botanic gardens) would have to be
funded from rates, user-charges or other revenue sources.
Councils will no longer be able to charge development
contributions for reserves on commercial and industrial
developments where these do not result in the creation of new
The provisions relating to network infrastructure –
roading and the three waters – will be unchanged.
Councils will be required to provide more detail regarding the
content of their development contribution policies. This must
include: a schedule of the projects that contributions are being
charged for; the expected cost of each project, and the proportion
of that cost that is being funded from development
Encouraging more private provision through development
Although the LGA provides for these arrangements now, it enables
rather than encourages them. The amended Act will provide a
specific framework for councils and private developers to enter
binding agreements. Such agreements must specify the parties to the
agreement, the land to which the agreement relates and the details
of the infrastructure to be provided or funded by each party.
They may also contain information regarding the timing and
phasing of the infrastructure build, the ownership, vesting and
maintenance of that infrastructure, the means through which
disputes will be resolved, the transfer of land between the
territorial authority and the developer, the nature and amount of
any monies payable and how the agreement will be enforced against
Local authorities will not be able to require a developer to
provide infrastructure of a type, nature or scale greater than
would have been provided for through development contributions,
unless the developer volunteers to do this. Neither can a
territorial authority refuse a building consent on the basis that a
development agreement has not been entered into.
New objection process
Developers will have a new right of objection to development
contribution charges. Objections will be heard by independent
"development contribution commissioners" whose decisions
will be binding on both parties. There will be no right of appeal
except through judicial review. The details of this process will be
worked through as the legislation goes through the House, so could
be an issue for submission to the select committee.
Chapman Tripp's earlier commentary on the review is
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Be aware that most modern subdivisions now include land covenants which are registered against the titles.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).