Auckland Council examining 360% to 660% Drury development fee rise to cover growth costs

Drury, where contributions could spiral 660 per cent. Photo / Chris Tarpey

Auckland Council is looking at 360 per cent to 660 per cent fee rises for Drury developers to fund infrastructure needed in the greenfields area where a city the size of Napier is planned.

Council financial policy manager Andrew Duncan said Drury developers now paid development contributions of $11,000 to $18,300 per new residence.

But under a proposal due to be discussed next week, those could rise 360 per cent to 660 per cent to $84,500 per residence.

"If we add the projects we've committed to for 10 years, that will take the price to about $34,500/residence. But if we add the $2.1 billion of investment the council intends to make in Drury for transport, parks and community beyond 2031, the price will go to $84,500/residence," Duncan said today.

"For Drury, we're looking at an additional 22,000 houses being added over the next 30 years, a city the size of Napier.

"We're looking at the investments we need for cumulative growth. Drury is the one that's the first to look at all investment required in the long term," he said.

Duncan stressed this was a proposal and the council's finance and performance committee, chaired by Desley Simpson, was not scheduled to meet until next Thursday to discuss it.

But it was only fair that developers made an appropriate contribution towards costs, he said.

"We might be replacing an old single-lane road with a new one to accommodate greater volumes of traffic, public transport and cycling. Part of that cost will be met by ratepayers. But there's a substantial share that benefits a new development and that's the cost we seek to recover from developers.

Drury needs council transport investment in arterial roads and integration to link it to the wider region, provide for internal connections and to the rail stations and rail network.

"This includes cycleways and provision for public transport. The area also needs investments in parks and community facilities. Some of this is to be provided in the next decade and the rest beyond 2031," Duncan said.

"It's fair that by including it in the policy now, developers pay the appropriate share. This is one of the key things we're asking the council to consider," he said.

Building Industry Federation chief executive Julien Leys said: "That is an incredible increase which will directly impact the cost of housing.

"We are very concerned because it comes at the worst possible time with rising building materials costs, longer lead times to get imported building products, increased labour costs, and congestion in transport and global freight logistics. DC increases of this magnitude will act as both a handbrake to further residential development and a disincentive for new home owners, who ultimately will pay the price," Leys said.

Duncan said the Unitary Plan had made room for growth but as it accelerates "but we need to look ahead in the infrastructure needed now and over the next 30 years.

"It's easier to address that as quickly as we can. The council has made a commitment to a big investment plan over the next 10 years out to 2031, but it's got financial constraints in that time period.

"We're not going to be able to build all the infrastructure we'd like to in the next decade. What we are looking at is bringing some of that future infrastructure into our contributions policy now in the investment priority areas," he said of the Drury proposal.

Development contribution rises throughout other parts of Auckland are also on the agenda.

Auranga subdivision residential development at west Drury. Photo / Chris Tarpey

"We can't add all the areas now. We need a lot of detailed work to support cost recovery in the DC policy," Duncan said.

"The cost increases across the whole city at this stage are based on the investment commitments within the 10-year budget. For Drury, we're looking beyond the 10-year horizon; the prices will be a lot higher."

At the moment, the weighted average development contribution is $23,900 per new residence but it varies across the city.

Under the new policy, the weighted average price would be $21,900.

"There's a small fall on average across Auckland," Duncan said.

The Drury charges were set to rise because costs were being recovered beyond a 10-year timeframe. The council would hold discussions with the community before a final decision was made, he said. It wanted to hear the views of the public, community and developers.

"The council won't make their final decision until December and the new policy would come into effect probably January 10," Duncan said.

The new development contributions could be charged from then.

"In the next stage, we'll look at other investment priority areas like the northwest- Red Hills, Westgate in that area."

Asked what reaction was expected from developers, he said: "I would expect they may be concerned at the level of price. I would hope they would be pleased with the council's support of the area and intention to provide infrastructure. The councillors will be looking forward to hearing their views."

Acting chief economist Shane Martin said Drury was just the first "but not the only area" for development contribution rises.

"There are other areas as well and one of them has to be first. You start somewhere, then you work your way through.

The market price of a house would not be impacted by development contribution rises but land prices would be affected, he forecasts.

"It's not to say that developers won't try to add costs on. They'd be foolish not to try. It's just a matter of whether they can or not," Martin said.

Duncan said 90 per cent of Drury land changed hands before 2019, before the time period where there was a 30 per cent increase in house prices.

The new development contributions would also apply to commercial, retail and industrial properties.

Charges for those developers would be based partly the creation of impervious areas and partly floor areas, Duncan said.

Oyster Capital, Fulton Hogan and Kiwi Property are seeking to rezone about 330ha in Drury from future urban to a mix of residential, business and open space zones.

Auckland Council has opposed the private plan changes on the grounds it cannot afford the estimated $1b needed to fund the infrastructure for the works to go ahead.