Improved housing affordability
As Mayor my main key area of focus will be increasing the affordability and quality of housing and buildings in Wellington City. I want Council to put settings in place that support increased housing supply and encourage investment in better quality buildings, such as renovations to improve energy efficiency and resilience to earthquakes. By adopting policies that support housing development and investment, we can leverage growth to bring Council rates under control.
Wellington has high cost low quality housing for a number of reasons. For decades, Councils planning rules have hindered redevelopment and contributed to a large stock of old buildings. These are often extremely dilapidated, have poor energy efficiency and do not utilise space as efficiently as they could. At the same time, our challenging climate and terrain - along with earthquake risks, structural regulations and the cost of insurance - make it expensive to build new housing in Wellington. Many building owners have literally no viable options for development. They are stuck and so is housing affordability and quality in our city.
High rates in Wellington reflect both past failures and a lack of ambition. Poor decisions by previous Councils has created a massive infrastructure deficit, such as unfunded renewals of water infrastructure. The costs of addressing this infrastructure deficit are mostly fixed: They simply need to be shared across all ratepayers. While the costs of the infrastructure deficit have been mounting for decades, our population has stagnated – reducing the number of ratepayers who can help to pick up the tab for the mess that has been left by previous Councils.
Changes to zoning rules in the district plan last year significantly increased the amount of land available for development within the city. Over time, this will increase the supply of housing and support both affordability and quality – with the most dilapidated and inefficiently utilised buildings among the first to go
However, the way that rates and development contributions are charged by Wellington City Council currently acts as disincentive for building new housing. This is because:
Rates are charged based on the total capital value of the property, that is land plus improvements. This means if you choose to invest in your property, for example by renovating or developing, then your rates bill will eventually increase. Similarly, if you own land, then you can keep your rates bill low by not investing in improvements to your property.
Development contributions are charged for new development and act as a tax on new housing. In some places this is fair enough, as development imposes costs on Council, e.g. for new infrastructure. In some parts of Wellington, however, the additional costs of housing to Council is close to zero. In these places, development contributions should also be close to zero.
To reduce rates and improve housing outcomes, we must make it easier to develop in places that impose the lowest cost on Council. Building housing in these places grows the ratepayer base without increasing Council costs. Growing in this way shares our infrastructure deficit across more people, reducing the burden of rates imposed on individual ratepayers. In doing so, increased housing supply will drive rents down and quality up. It’s a win-win-win.
As Mayor, I will work to change the way Wellington sets rates and development contributions. My goal is to encourage development in places that are good for the city and good for ratepayers. To do so, I propose two bold steps:
First, I will advocate to switch the basis for setting Council rates to land value rather than capital value, This will support much-needed investment in our city and bring Wellington into line with how rates are set in many major cities in Australia with which we need to compete for people and businesses.
Second, I will advocate to replace developer contributions with targeted rates based on location-specific infrastructure capacity considerations. These rates will be high in places that impose high costs on Council, and vice versa (NB: This requires the passage of legislative amendments currently before parliament).
These changes are efficient: They will incentivise development in areas that have high land values, which will see more housing supply and lower rents. Typically, these locations will be more central, have access to existing Council-funded services, and be more accessible by active and public transport modes.
These changes are also fair. Where Council invests in infrastructure and services, like public transport, parks, and swimming pools, then the value of this investment is reflected in higher land values in surrounding properties. For this reason, it makes sense to set rates based on land values.
Character areas of the city can remain, although properties in these areas will be rated based on the value of the land they occupy. In contrast, rates and development contributions for more intensive housing typologies (such as apartments and townhouses) will tend to reduce.
Together, these changes to rates and development contributions will support:
Lower rates
Increased investment
More affordable and better-quality housing
Higher productivity, reduced congestion; and reduced carbon emissions.
The list of benefits is long and tangible. Ultimately, these changes will attract more people and businesses to live in our city; they will reduce the outflow of young people to Australia, and woo some back. By enabling Wellington to grow efficiently, we can ensure that our beautiful city gets bigger and better.
