‘Rate caps impeding LG’s ability to fund local infrastructure’

A federal agency has called for a conversation on developer contributions, saying financially constrained councils are using them to raise revenue.

In a new study published this week, the National Housing and Finance Investment Corporations (NHFIC) said developer contributions now account for 8-11 percent of total home construction costs in NSW, Victoria, and Queensland.

Contributions initially levied for essential housing-related infrastructure such as water and drainage were increasingly being used to fund social infrastructure like schools and hospitals, the paper added.

NHFIC chief executive Nathan Dal Bon said that as the cost of funding local infrastructure had shifted over time from state governments and local councils to new home buyers, contributions had also expanded in scope.

“[They] increasingly act as a tax on new housing, which can impede new housing supply and reduce housing affordability for buyers and renters,” he said.

The paper said greater transparency on how developer contributions are collected will build confidence in the system. Funds also need to be spent in a timely way, it added.

Responding to the paper, ALGA President Linda Scott said debt and municipal rates caps were constraining councils’ ability to fund good-quality local infrastructure.

“Local government is under sustained financial stress,” Cr Scott said.

“This is a result of the compounding impacts of growing responsibilities, rate pegging, and other financial constraints, cost-shifting from federal and state governments, and declining Commonwealth Financial Assistance Grants (in real terms).

“Councils rely on development contributions to fund new infrastructure to support population growth and new development.”

Cr Scott said local governments already work closely with the development sector and state and territory governments as part of well-established planning frameworks and infrastructure contributions systems.

She added that all Australian communities deserved appropriate community infrastructure.

“Good local parks, community centres, early education and care centres, health clinics, and sporting facilities are the things that transform a new housing development into a community,” Cr Scott said.

“They help build community cohesion and contribute to good mental health and wellbeing.”