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HIA welcomes confirmation that developer contributions add to house prices

The Housing Industry Association (HIA) is pleased to see clear confirmation in research released by the National Housing and Finance Investment Corporation (NHFIC) that the price of new homes is directly increased by the various developer charges being applied by local and state governments.

As identified in the NHFIC paper Developer Contributions: How should we pay for new local infrastructure, HIA agrees developer contributions for local infrastructure are inconsistent, lack transparency and have broadened in scope. This leads to additional costs on new homes and potentially slows down new housing supply.

“Over the last decade, the charges being applied through these development contribution schemes have become increasingly significant. This is partially due the large range of infrastructure now included and the gold plated standards being sought by local and state governments,” said HIA Chief Executive Industry Policy, Kristin Brookfield

“A conscious decision to shift the majority of the upfront costs onto new housing developments emerged in NSW almost two decades ago. While Sydney is the most expensive, other states have taken the same approach and we are starting to see costs increase in most other states.”

“It’s also a concern that state governments are now using this mechanism to add costs to new housing for infrastructure that clearly serves more people than just new home buyers each year.

“An up-front charge against a new development is the least efficient manner in which infrastructure costs should be recovered by governments.

“These levies are now so significant they are impeding orderly and affordable residential development from occurring and significantly add to the upfront costs of new homes.

“The Australian residential building industry contributes more than $36 billion in taxation revenue each year to federal, state and local governments in Australia. This equates to 11 to 12 per cent of the total revenue collected by all tiers of government.”

“In almost all instances the development contribution models are complex to calculate and to administer. They introduce an element of uncertainty into the development process. The consequence being protracted decision making leading to unnecessary holding costs for landowners and residential developers. Ultimately these costs must be passed onto the home buyer and end up being carried through for the life of the mortgage.

“HIA would support further research to assess the unintended impacts of high and poorly functioning development contribution systems nationally and the implications these taxes are having on new home buyers.”

Source: HIA

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