Buying a section in a new development north of Auckland will come with an 'infrastructure payment'; tagged onto rates bill

The Milldale development. Photo / Supplied

The owners of 9000 new homes north of Auckland will pay an "infrastructure payment" to bring forward roading and water work on the development.

The cost of the payment will be about $1000 per section for 35 years. It will be added to rate bills collected by Auckland Council.

Details of the new funding model were announced this morning by Transport and Urban Development Minister Phil Twyford and Auckland Mayor Phil Goff.

Milldale Housing development. Photo / Greg Bowker

A partnership will fund $91 million of roading and wastewater infrastructure to support the building of the 9000 homes at Wainui, north of Auckland.

The Government Special Purpose Vehicle (SPV) has been created in partnership with Auckland Council, Crown Infrastructure Partners and Fulton Hogan Land Development.

Twyford said the Milldale project demonstrates an approach to funding that allows private investment in new infrastructure with the debt sitting on a balance sheet that is neither the council's nor the Government's.

In July last year, Prime Minister Bill English unveiled the new financing model at Drury in South Auckland for people to buy cheaper homes in exchange for paying higher rates and water bills.

The scheme works by the Government and private investors paying the upfront cost of new transport and water infrastructure, which is recouped by charging new residents higher rates and water bills over a 20- to 30-year period.

The National Government announced a new investment vehicle, Crown Infrastructure Partners (CIP), to attract private sector investment and run the scheme.

It was to have Government seed funding of $600m to bring forward construction of 23,300 new homes in the north and south of the city.

It was set up to bring forward big new housing developments, which cash-strapped councils like Auckland cannot afford because it is right up against its debt ceiling.

Phil Goff. Photo / Greg Bowker

At the time, Twyford said Labour welcomed the CIP financing model and was keen to continue its work to create a pipeline of finance for developers.

"The Milldale project is an example of the innovative new approaches to financing infrastructure that the Government is developing through the Urban Growth Agenda. This funding model can be used in other high growth areas affected by the housing crisis to help more houses to be built more quickly," Twyford said today.

"One of the major roadblocks to our towns and cities growing is the lack of ready access to finance for the infrastructure that allows for new urban growth, for green or brownfields developments," he said.

Goff said a key priority for council was to address the shortage and unaffordability of houses in our city.

"We've zoned much more land for housing, but we need the infrastructure before we can build on it.

"Using Crown Infrastructure Partners to fund that infrastructure enables us to build roads, water and wastewater services without overburdening council with debt and exceeding our debt to revenue ratio.

"We can build more homes sooner and tackle the housing crisis quicker than would otherwise have been possible.

"This Project enables nearly 4000 new dwellings in Milldale and the infrastructure can support another 5000 dwellings in the surrounding areas as well. It's a big step towards meeting Auckland's housing needs."

Fulton Hogan Land Development has already started work on the Milldale development at Wainui, which will have nearly 4000 homes and businesses.

The infrastructure being funded will support the Milldale development and will also enable another 5000 homes to be built nearby, with $33.5m for this being provided by Auckland Council.

Crown Infrastructure Partners has secured long-term fixed-rate debt from the Accident Compensation Corporation. The SPV will be funding $48.9m towards the infrastructure, with the Crown contributing less than $4m.

The SPV funding will be repaid over time partly by Fulton Hogan Land Development and partly by section owners as an "infrastructure payment" collected with council rates bills.

The Milldale development will be a modern, contained urban development with green spaces and parks, a town centre, cycleways and walkways, and potentially education facilities, and will be connected to the Northern Busway.

Fulton Hogan Land Development in conjunction with a joint venture partner has previously developed Millwater, on the eastern side of the Northern Motorway and sees Milldale as the next evolution of this urban development.