02 May 2010
What the report says …
The Council of Australian Governments should review infrastructure charges (sometimes called developer charges) to ensure they appropriately price infrastructure provided in housing developments. In particular, the review should establish practical means to ensure that these charges are set appropriately to reflect the avoidable costs of development, necessary steps to improve the transparency of charging and any consequential reductions in regulations.
… where infrastructure charges are poorly administered – particularly where they are complex, non-transparent or set too high – they can discourage investment in housing, which can lower the overall supply of housing and raise its price.
When development approval is contingent on development charges of uncertain size, this can also add risk to projects and affect their viability. Where developer charges are set in an ad hoc fashion or are subject to unexpected changes, they can create uncertainty around new developments.
Where developer charges are set in an ad hoc fashion or are subject to unexpected changes, they can create uncertainty around new developments. If infrastructure charges are increased after a developer has bought land from its original owner, they cannot be factored in to the price previously paid for the raw land. In this case, the charge would lower the expected return from the development. In addition, general uncertainty about charging is likely to discourage development activity, which could reduce the overall supply of housing and increase the price of housing.
What the Urban Taskforce says …
The Henry report has vindicated developers by finding problems in the way that infrastructure charges are being imposed on new development.
This is the highest level recognition we’ve had that developer charges are undermining investment in new urban development.
