Central city needs the development rebate
The city council’s Central City Development Contributions Rebate policy has come under renewed attack as accusations fly that the scheme amounts to ‘‘socialism for the rich’’. Two-time mayoral candidate John Minto took aim at the rebates policy during last year’s campaign and has dusted off his crusade as the policy’s review collides with the financial imbroglio encircling the annual plan process.
Minto believes the remaining $7.1 million earmarked for the scheme would be better redeployed helping the council roll back its rates increase.
He’s damning the council for ‘‘allowing wealthy property developers to get their sticky fingers into ratepayer wallets before hard decisions about spending cuts elsewhere are made’’.
At first blush, Minto’s protestations may strike you as compelling, but dig a little a deeper and not only does he seem to be mistaken about the funding source for the rebates scheme, but I’d also question whether he really understands how this scheme works.
For starters, the ratepayer isn’t coughing up for this scheme out of the council’s operational budget. It is debt-funded from the capital budget.
So it’s not as if $7.1m in operational savings (or a
1.5 per cent rates decrease) would be achieved by aborting the scheme.
The cost of servicing the current total debt is
$870,000 per year, which equates to a 0.175 per cent impact on rates.
Since its inception in 2014, the scheme has rebated all development contributions for residential development within the Four Avenues.
Capped at $20m in forgone revenue from development contributions, $12.9m has now been clocked up, with 1175 residential units being developed as a result.
In 2015, a rebate scheme was also applied to new commercial developments in the central city, totalling $2.7m in rebates on development contributions. The commercial scheme has served its purpose and won’t be renewed.
However, the council is understandably anxious to continue offering support for residential development, as it strives to secure an inner-city residential population of 20,000 by 2028.
It’s a long and slow haul, with latest estimates putting the population at 6500, up from the postquake low of 5050 in 2014.
Super-sizing the residential population within the Four Aves is pivotal to the central city’s sustained vitality. Adding to the housing supply within the central city also boosts Christchurch’s rating base, so the council does stand to gain bigger revenue flows from rates and higher capital values, outweighing the debt-servicing costs.
The biggest misnomer is that only ‘‘wealthy property developers’’ are benefiting from this scheme, as Minto thunders.
As a huge proponent of more social housing and affordable housing, he may be surprised to learn that government agencies have qualified for the rebate, in the delivery of their projects, including social housing.
The developer doesn’t actually pocket the dosh. As Cr James Gough tells me, ‘‘Remitting a development cost simply makes central city housing more affordable and more competitively priced compared to non-central options.’’
The average rebate is $12-15,000 per residential unit, enabling the sale price of the average new dwelling to be sharpened from $510,000 to $495,000.
Gough was instrumental in installing the rebates policy. ‘‘I would be delighted if it was no longer needed. Once population levels are more encouraging, it will have served its purpose,’’ he says.
Grant Mackinnon is a well-respected developer who has been delivering central city apartments for the past 25 years.
His impassioned letter to councillors warns them that ‘‘stopping the scheme will put all previous work at risk of failure. Either we ramp up, or we stay like Timaru.’’
One Minto protestation that I do agree with is that many new central city dwellings are not boosting the residential population at all – purposefully marketed, purchased and siphoned off as commercial accommodation businesses.
Some 272 dwellings developed by Williams Corporation have benefited from the rebate, yet dozens of their units are permanently listed as whole-of-house accommodation on Airbnb. Frankly, they should reimburse the council.
Going forward, Cr Gough concurs.
He tells me staff have been directed to ‘‘develop a mechanism stipulating that if the dwelling is used for short-term accommodation purposes, the remitted development contributions would have to be repaid to council.’’
The scheme’s integrity is dependent on adding that requirement and enforcing it.
Supersizing the residential population within the Four Aves is pivotal to the central city’s sustained vitality.