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Fund infrastructure differently - ASB

Auckland Council needs to consider new ways of funding infrastructure development in order to better address the city's housing supply shortage, a new report says.

Wednesday, June 7th 2017, 3:00PM

by Miriam Bell

ASB chief economist Nick Tuffley

It’s a matter of public record that Auckland is suffering from an under development of the infrastructure it desperately needs to keep up with its rapid pace of growth.

The chorus of voices weighing in on the issue include such heavy hitters as the IMF, the OECD and the Productivity Commission.

Yet while it’s widely accepted the city’s infrastructure problem has to be addressed, the process of doing so seems to have run aground.

But now ASB is offering up its suggestions for alternative funding methods to boost Auckland’s infrastructure development in its latest Home Economics report.

ASB chief economist Nick Tuffley said infrastructure provision is one of the biggest challenges councils face across the country, particularly in Auckland.

“Current infrastructure funding models have contributed to under-investment in housing-related infrastructure and exacerbated house prices.”

This is because the infrastructure funding models used in New Zealand tend to involve high upfront costs, uncertain future revenue streams, debt financing constraints and ratepayer resistance.

In Auckland, this has led to the council underinvesting in infrastructure and this, along with limitations on the supply of new developable land and strong population growth, has exacerbated the rise in land costs.

Tuffley said this suggests that councils, notably Auckland’s, need to be open to a broader range of funding methods than those they have relied on previously.

“In the report, we look at alternative funding methods and how they could be implemented to help alleviate house price pressures over the longer term.”

Suggested alternative funding models that could be employed include infrastructure bonds, value capture, public private partnerships, superannuation funds, infrastructure banks, and user charging.

But the report’s pick of these funding models is infrastructure bonds which could be administrated via Municipal Utility Districts (MUDs) – as is being done successfully in Texas.

This model would help to fund infrastructure provision in a fair and equitable manner and lower the entry barrier for developers which would enable more to undertake residential development, the report said.

“Core to new alternatives is the need to variously overcome the current disincentives to provide the infrastructure speedily and the need to finance infrastructure from much broader sources.”

Infrastructure bonds have previously been touted by a number of different sources.

Last year Labour’s housing spokesperson Phil Twyford proposed funding infrastructure by using bond financing paid back by targeted rates, on the property owners of new developments, over the life of the asset last year.

At the time, then Finance Minister Bill English said infrastructure bonds are an interesting and constructive idea.

Prominent Auckland developer David Whitburn has also long been a proponent of infrastructure bonds.

In his view, they would be a good alternative to the current model which just results in big costs for developers that are then passed on to house buyers.

Read more:

Challenges ahead for Govt build project 

Making a difference for housing supply 

Address Auckland infrastructure issues 

Reduce developer charges reduce housing costs

« Housing to be election battlegroundInner city apartment initiative for Capital »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.44 - - -
AIA - Go Home Loans 7.99 5.99 5.69 5.69
ANZ 7.89 6.59 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.99 5.69 5.69
ASB Bank 7.89 5.99 5.69 5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.40 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.94 - - -
BNZ - Rapid Repay 7.94 - - -
BNZ - Std 7.94 5.99 5.69 5.69
BNZ - TotalMoney 7.94 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.79 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 7.65 5.99 5.75 5.69
Co-operative Bank - Standard 7.65 6.49 6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.40 6.10 -
First Credit Union Standard 8.50 7.00 6.70 -
Heartland Bank - Online 7.49 ▼5.65 ▼5.55 ▼5.55
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC 7.49 5.99 5.65 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.75 6.89 6.59 6.49
Kiwibank - Offset 8.25 - - -
Kiwibank Special 7.75 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.44 ▼6.39 ▼6.09 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.99 6.95 6.29 6.29
SBS Bank Special - ▼6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.44 ▼5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.69 6.79 6.49 6.49
TSB Special 7.89 5.99 5.69 5.69
Unity ▼7.64 5.99 5.69 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.50 ▼6.19 ▼5.79 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 7.99 6.17 5.79 5.69

Last updated: 30 October 2024 9:36am

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