Shared financial risk will get more homes built faster
The innovative funding that will enable the construction of up to 9,000 new homes at Wainui just north of Auckland, is an example of new models that need to be more widely used to fund critical infrastructure, says the Employers and Manufacturers Association (EMA).
Auckland Council, Crown Infrastructure Partners and the private sector’s Fulton Hogan Land Development announced the new Government Special Purpose Vehicle (SPV) partnership this morning. It includes $91 million of Government funding for roading and wastewater infrastructure needed before the 9000 homes can be built.
EMA chief executive Kim Campbell says, "Partnerships like these are especially useful for ‘greenfields’ type developments - building from scratch on vacant land - because the finance risk is shared.
"It also enables private investment in these developments which is also partially repaid through a rates contribution. 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.
"People opt in to pay the extra rates which are known upfront, to seed the development. The property owners are used to paying higher rates and are prepared to continue to pay those rates, even after the upfront contribution to infrastructure is repaid. This model is unusual in New Zealand but in relatively common use overseas and enable faster construction in new developments.
"Councils also benefit from the growth, as they pick up the extra rates when the repayment period is over so they have an incentive to encourage growth in their areas. They also have to borrow less to fund critical infrastructure needed to support those new developments.
"This same model could be used in other parts of Auckland or other fast-growth regions such as Tauranga and Queenstown where development is required to cope with rapid population increases.
"While this funding model is new to New Zealand, similar schemes are widely and successfully used overseas for example in both the UK and the US," Mr Campbell says.