NSW Government development levy policy in tatters

01 September 2010

The NSW Government yesterday announced that it was abandoning key elements of the development levy policy released with much fanfare on 4 June 2010.

The much vaunted $20,000 a home “hard cap” has been increased to $30,000 in greenfield areas, allowing an extra $10,000 in local council infrastructure costs to be imposed on each new home.

The previously announced requirement that all local council development plans (including those under $20,000 a home) would be independently scrutinised by a tribunal has been scrapped. Only those plans that provide for infrastructure above the cap will be examined.

As a consequence, the policy now has almost no benefits for infill development. Most apartment levies would fall under the $20,000 a home cap. Under the (now discarded) 4 June policy even small infill levies would only have been able to fund “essential” infrastructure. The “essential” test was supposed to be an additional safeguard on top of the existing requirements for “reasonableness”, “nexus” and “apportionment”. This policy might have forced levies on apartments down. But now this promised “essential” test has been scrapped.

To try and prevent abuses by councils, those whose levies are below the relevant cap will be required to seek approval from the Planning Minister for an increase to a contribution plan. However, this will only lead to a review by the Department of Planning, not the Independent Pricing and Regulatory Tribunal.

There will be no cap at all in any areas where development applications for a quarter or more of the development envisaged by an existing plan have been lodged. The wording on this arrangement is unclear, so we will need to wait for a circular from the Department of Planning to understand the precise method of working out when this grandfathering provision applies. We are seeking such clarification.

The new policy allows developers to pay above the relevant cap if they agree to do so. The mechanism for reaching such an agreement and the safeguards are completely unclear at this time.

The Government has established a $50 million fund for “priority infrastructure projects” to assist local councils in approving housing developments in growth centres across NSW. The fund will exist for just two years. No long-term commitment to funding such infrastructure is built into the forward estimates. Of the fund, $20 million is a re-allocation of money identified for local councils in the last state budget and $30 million is new money.

The Independent Pricing and Regulatory Tribunal will still have a role to examine special rate variation requests from councils which have plans to fund “legitimate” infrastructure costs above the cap (previously such requests were to be limited to “essential” infrastructure).

There is also a promise that the government will now be “addressing State agency requirements for contributions plans”. We understand this to be a reference to requirements for riparian zones and the like.

The state government will also explore options to reduce councils land acquisition costs. We understand the government will consider further weakening of the rights of property owners to ask for their land to be acquired by a council, when a council has formally indicated that it intends to acquire land, in the future, for a public purpose.

The Department of Planning will write to local councils asking them to nominate greenfields areas within their boundaries to be covered by the higher $30,000 cap, and also to nominate the areas to be subject to the grandfathering provisions.

The government’s media release is available here. The NSW Opposition’s response is here. Our media release is here.