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Auckland Needs to Step Up

11 December 2013

Auckland Needs to Step Up

Auckland Council should follow Wellington’s lead on removing barriers to development to help the city grow.

Under the Wellington City Council’s newly announced sustainability proposal, developers of ‘green’ rated buildings would see significant changes to their costs, helping promote and incentivise the construction of green buildings.

Development contributions levies would be reduced by around 20 per cent, including the removal of reserve contributions scrapped completely from commercial development – which would cut up-front costs of new-builds.

In addition, there will be a 50 per cent reduction in development contributions for significant ‘green’ rated buildings and the payment of a development contribution will be shifted from the front end of the development to when the property is actually occupied or sold. ‘Green’ rated buildings may also be exempted from the Downtown Levy and from the commercial sector targeted rates which would total around 25 per cent of rates relief during construction.

“All of these are excellent steps to give Wellington’s development sector the boost it needs as well as helping achieve sustainability outcomes – which is exactly what Auckland should be doing as the country’s biggest and most populous city,” says Miles Brown, Property Council Auckland branch president. “Auckland needs to take similar steps and seize the opportunity, especially with reports of the increase in construction that will be required to meet growing demand in commercial space over the next 20 years.”

There have been suggestions that by 2031 an extra half a million people will be forecast to live in the city – revealing the need for a large amount of additional office buildings, retail centres and residential apartments.

This demonstrates the vital need for Auckland Council to ensure the Unitary Plan adequately addresses the inevitability of the city’s growing population and properly encourages development.

In this respect, one of the most important issues to address in the Unitary Plan is the mandatory requirement for developments over a certain size to obtain ‘green’ ratings. These provisions, particularly in combination with other restrictions, have the potential to seriously hinder and dampen development.

For instance, it is essential that costs incurred by the industrial sector are kept to a minimum to ensure that Auckland remains competitive with places like the Waikato, Bay of Plenty and more increasingly Australia. A significant portion of the city’s labour market is employed in the industrial sector. Creating further compliance requirements under the Unitary Plan adds cost to the development of premises which will flow through to the industrial sector, increasing the risk of industrial activity and job opportunities leaving the region. Similarly, it is essential that development is encouraged to accommodate a growing employee population.

The Unitary Plan – as it stands – does not adequately consider the already high costs of development and construction in Auckland. In particular on the residential front due to high land costs margins are tight. While in the long term a future homeowner will get benefits from a Homestar rating, the decision to impose the additional costs on the developer will likely discourage the development from happening in the first place.

This must also be considered in the context of other Rules in the Plan which limit development, or increase development costs - such as the requirement for developers to provide 10% affordable housing, heritage restrictions and other requirements imposed by other overlays. The cumulative impact of all of these provisions will be to add significant costs to development and the price of a new home – having negative implications for the Council’s objectives of increasing density, encouraging development and addressing housing affordability.

Mr Brown says it is imperative for the Unitary Plan to send the right signals.

“Historic restrictions on land supply and the Global Financial Crisis have created a fragmented development industry. It is therefore important for the Unitary Plan to encourage developers to step up to the task of meeting growing demand by taking on risk and increasing their capacity for development. The ‘green’ rating scheme proposed under the Unitary Plan will increase costs and will lead to market distortions. Instead, Auckland Council should follow Wellington City’s lead and properly encourage green development through incentives which will facilitate both the increased supply of building stock and sustainability outcomes.”

About Property Council New Zealand
Property Council is New Zealand’s commercial property voice. Property Council represents New Zealand's office, industrial, retail, property funds and multi-unit residential property owners, investors and managers. Property Council’s branches throughout the country represent some of the largest commercial property portfolios in Auckland, Waikato, Bay of Plenty, Wellington, East Coast/Hawkes Bay and the South Island and Otago region, the value of which exceeds $30 billion.

ENDS

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