New plan to deliver economic recovery in NSW through Council spending and an efficient contributions scheme

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New plan to deliver economic recovery in NSW through Council spending and an efficient contributions scheme

UDIA NSW today welcomes the Productivity Commissioner’s Review of Infrastructure Contributions in NSW. The report details 29 recommendations to the Minister for Planning, Industry and Environment on the infrastructure levies paid by developers to support specific local infrastructure.

“We are looking at the biggest clean up to the infrastructure contributions system in 50 years. UDIA NSW has been advocating for this reform for the past five years to provide greater certainty and feasibility to the development industry,” said UDIA NSW CEO Steve Mann.

“The development industry is the economic bridge to recovery beyond COVID-19. Our industry has the second highest multiplier effect on the economy, providing jobs in NSW at a time when they are needed most.”

“We want to see Government acting swiftly on these changes. We need to move to implementation of key reform as soon as possible to deliver housing and jobs. UDIA strongly endorses the opportunity to deliver productivity gains and is keen to see these recommendations result in an infrastructure contributions scheme which is simple, certain and efficient.

One of the most significant changes is to split the cost of infrastructure, to land being dedicated at the time of rezoning and charged to the wholesale land vendor at the time of a transaction.

The requirement for infrastructure contributions plans to be exhibited concurrently with rezoning proposals will create a clear pathway to feasibility for development projects. However, UDIA is currently clarifying the implications to landowners of the rezoning levy payable at the earlier of the sale or development application.

“The reform of land dedication or cost to a wholesale land vendor based on rezoning and applied at the next transaction of the land places some of the cost burden on the parties directly benefiting from the rezoning and should reduce development contributions and the cost to new housing”.

Of the listed recommendations, the changes which affect Councils are the most positive signs for industry. UDIA NSW had previously identified over $2.65 billion of unspent infrastructure contributions which are locked in Council coffers across the Greater Sydney Megaregion.

UDIA NSW is pleased to see the Productivity Commissioner recommend “cultural change” towards financing infrastructure, including the establishment of a State fund and encouraging borrowing and pooling of funds.

This will mean that Councils won’t have to postpone delivery of infrastructure while pooled funds lay dormant. The changes to rate pegging, which will better support Councils through periods of population growth, are a welcome sign to industry that Councils are better provisioned for growth.

“These recommendations provide significant changes to Local and State Governments, which are being empowered to spend and provide much needed infrastructure on the ground for local communities more quickly.”

“The question remains as to whether Local Councils will come to the table and get on board with these recommendations.”

The industry will also benefit from the extension of the COVID-19 provisions for deferring payment of location contributions to the occupation certificate stage (previously, this was required at subdivision), which could result in up to an additional 24 months before developers have to pay their levies, freeing up capital for more investment in jobs and housing.

“Taxes, charges and levies account for one third of the cost of a new home. Affordability in NSW is still a major concern and the NSW planning system has contributed to this problem.”

UDIA NSW will be working closely with the Minister for Planning to raise some concerns around certain recommendations including:

  • the implication of rezoning levy and station-catchment levy, which should not be allowed to result in increased cost for new housing
  • to introduce a $5,000 per dwelling transport contribution on top of the Special Infrastructure Contribution (SIC)
  • a developer-focus on biodiversity measures rather than a broad-based approach • the reintroduction of water charges
  • affordable housing is still unresolved, UDIA believes affordable housing should not be delivered at the cost of new housing
  • s7.11 rates will need to be recapped and lowered to accommodate the additional charges from land dedication
  • the recommended $10k per dwelling is too high for our regional cities and will be to the detriment of regional economic development
  • exclusion of the Aerotropolis region from the SIC cap is concerning. UDIA NSW would like to see certainty extend across the new Western Parkland City