Source:Auckland Council Chief Economist
Increasing the contribution developers make for infrastructure to reflect the true cost of providing that infrastructure, rather than continued subsidies by existing general ratepayers, is unlikely to increase the cost of housing.
Developers in Auckland, particularly in greenfield areas, pay only a fraction of the cost of infrastructure to serve the new development through development contributions (DCs).
Setting the price paid by developers at a full cost-recovery level could unshackle infrastructure development from the limits of ratepayer funding, and reduce planning incentives to regulate land use.
In this paper, we examine the international evidence and the economic theory that suggests more accurate DCs are unlikely to result in higher house prices, but will be absorbed by land owners who currently receive windfall gains from general ratepayer-funded infrastructure.
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