KEY POINTS:
A growth levy on developers has saved ratepayers $27 each a year without bumping up new house prices, says an economic study for Waitakere City Council.
The study says development contributions of $17 million yielded 1 per cent of Waitakere's rates requirement since their introduction in 2004.
Waitakere was one of four Auckland councils to adopt the new funding tool to recoup the costs of putting in extra infrastructure because of property developments.
This was supposed to reduce loan costs because previously only some of the costs of increased capital expenditure were collected and the rest fell on the ratepayers.
Contributions became a condition of getting resource consent.
Developers disputed the fairness of the level of payment and the way their share of growth costs was calculated.
They said the levy would have to be passed on to buyers, and Housing New Zealand said this would affect the provision of affordable housing to low-income groups.
Waitakere had the claims examined by the Covec economic consultancy for its current review of policies for the city 10-year plan.
Covec says it could not discern any effect on the city's housing supply and affordability.
Developers appeared to have passed on most, if not all, additional costs from levies though the effects on property prices were minor.
On the positive side, contributions led to average annual rates savings of $27 a household which would not have occurred otherwise.
This was based on a 25 per cent gain in all types of development levies over four years, which was modest compared with Waitakere's neighbours.
Its levies made up 5.4 per cent of median house prices before development contributions and went on to 6.7 per cent.
Waitakere's average development levies went up by $4000 to $19,765 a unit after contributions were introduced.
But the study found "weak evidence" of a link between falling housing supply and the introduction of contributions.
Building consents had halved for all four cities since the housing peak in September 2003.
The study says this was mainly because of a 10 per cent increase in interest rates.
A 10 per cent interest hike led to an 11 per cent drop in consent numbers compared with 3 per cent led by development contributions.
A developer who is completing a 16-site project at Massey said development contributions were coming out of developers' margins because the price wanted was governed by what the market would pay.
"Developers are paying for it now, but when times get better again then the end user is going to," said Steve Nicholson, of Landstar Group.
Under present market prices and low margins, developers could have trouble getting bank finance. This would stop purchases of land for new housing and affect availability.
HOW THEY COMPARE
Development levies as percentage of median house prices:
* Waitakere ... 6.7 per cent
* Auckland ... 7.7 per cent
* North Shore ... 7.8 per cent
* Manukau ... 8.1 per cent
