New Zealand wasn’t very clever when it came to how infrastructure at new housing developments was funded, he said.
At present, developers would have to pay all the costs for services inside a new subdivision, with the costs passed on to home buyers.
“It gets added on to the price of the house and paid off over time as you pay the mortgage off, with expensive commercial bank interest rates.”
The impact of this was to pump up the cost of new houses by as much as $100,000 and have that cost capitalised into the market value of all homes nearby.
Twyford said a smarter way of paying for that infrastructure would be by local government borrowing for it, at cheaper rates than mortgage rates.
Home owners would then pay it back through a targeted rate over 30 years, spreading the cost over the lifetime of the infrastructure.
I think this is an issue worth considering. Should infrastructure for new homes be funded by way of up front developer levies, or by targeted rates on the properties?
I think there is a case for more of it to be funded by targeted rates.