Developers have warned Ashburton’s proposed development contribution changes could stall housing growth and trigger legal action.

Ashburton councillors need to weigh up how much and when to charge developers, but the developers have raised concerns that if they get it wrong, they could strangle growth.

Ashburton District Council is reviewing its Development and Financial Contributions Policy, which is proposing several changes to “ensure that growth pays for growth and ratepayers aren’t unfairly burdened”.

Development Contributions (DC) are paid by developers or property owners to councils to help cover the cost of additional infrastructure needed to support new homes.

Ashburton is proposing to increase its DC rates, adding a DC for roading, and to change the timing at which they are paid.

Ashburton is an outlier currently collecting development contributions when someone applies for building consent, which can be years after the subdivision is consented.

It is considering charging development contributions at the subdivision stage, which is what the majority of councils in New Zealand do.

The council is set to deliberate on the proposed changes to the policy on June 3 and has plenty to consider after a number of developers presented submissions at a recent hearing [on May 19].

During the hearing, real estate business owner Clark McLeod questioned if the changes were intended to be “a wealth tax on people that build new homes”.

He believed that “all rate payers pay equally in the tax, rather than burden it on new housing and put extra cost on economic growth”.

Developer Keiran Breakwell cautioned that “every dollar added to the cost of development that cannot be absorbed is either passed on to the end purchaser, making housing less affordable, or renders a project unviable altogether”.

“Increasing development contributions in a way that deters growth is not a solution to a funding shortfall.”

He didn’t support introducing a roading development contribution, suggesting the “financial case for a new contribution must be weighed against the real risk that it suppresses the development activity the council depends on to generate that revenue in the first place”.

He also warned of the consequences of increasing development costs to a point where growth is discouraged or "stifled altogether”.

“When developments proceed, the benefits flow across the entire Ashburton community in ways that extend well beyond council's balance sheet.”

Breakwell said the DCs should be collected at the sale of the land because requiring it at an “early stage of a subdivision passes on a huge burden to developers”.

He also threatened potential legal action as the changes could impact his Coniston Park subdivision development to the tune of $1.2m in holding costs.

The land was purchased five years ago based on calculations at the time and the council's current policy.

“We've essentially lost the value of that land.

“There is a possibility that if this proceeds as proposed, that Conniston Park may have no choice but to look at legal action against [the council] for this loss.”

McLeod said that, like Coniston Park, there are other developments underway.

He suggested delaying the changes beyond a five-year period because there are people who would be "unreasonably burdened with cost”.

Breakwell suggested the council “has a reputation of being anti-development” and needs to look to other areas.

“Selwyn’s a good example. Look at how they do things.”

That may be a case of being careful what you wish for, as Selwyn’s newly elected council is on a campaign to ensure growth pays for growth.

In its annual plan it is proposing a 25% increase in building consent fees to reduce the general rate subsidy.

It is also considering reviewing its own DC policy next year, which was only just reviewed in 2024.

A major loophole in the Selwyn’s DC policy cost the district an estimated $33.9m as developers rushed to pre-pay the fees on thousands of building lots at older, lower rates before fee increases in the 2024-2034 long-term plan came into effect.

Another factor is that the Government has started consultation on its development levies legislation, which is intended to replace development contributions.

By Jonathan Leask