Land value based rates
Conor Hill says let's change to Land Value based rates
Mayoral candidate Conor Hill is calling for a change to rates that would make it more expensive for landowners to ‘bank’ land that could be used for housing. And he’s taking aim at Justin Lester, asking why he has not followed through on his plans to incentivise ‘landbankers’ to release sections consented for housing development more quickly.
Hill says a change to the way rates are calculated would be an easy change for Council to make, and could help unlock more city fringe land to be developed for housing: “Basing rates off land value would lead to more housing and better land use. Our current rating system rewards bad land use – like car yards along main roads in the city.
“Right now, rates are based off capital value – the value of the buildings and the land - which means there is less desire to build more. We’ve got it backwards - people who don’t develop land are rewarded by paying low rates to Council, because the rates are based on the capital value of the property. I want to change this, and set rates based on land value to encourage more new homes and discourage land bankers and central car yards.”
He acknowledges it’s not a new idea: “It's a move the Productivity Commission has repeatedly recommended, in it’s Better urban planning report and again in it’s Using land for housing report.”
He’s questioning why this step hasn’t been taken by the Council already. “It's been two years since Justin Lester said ‘we will look at every available option – including financial incentives or penalties – to ensure our city has the pipeline of new homes it needs’. But nothing has changed since then. Wellington's house prices are fast approaching Auckland's. The number of people on the social housing register has almost doubled. The basic human right to a home is not available to all in our city.”
The switch between capital and land value rating is an easy enough one for a council to do. If I am mayor in October, I will be looking to incentivise homes and building over car yards and land banking by making this change. I encourage Justin Lester to remember his rousing rhetoric, and do the same.”
Notes to editors
- The Lester quote comes from this article
- The Productivity Commission Using land for housing report can be found here. P. 88 says"A good case appears to exist for setting general rates on the basis of land value rather than capital value, to encourage the development and the efficient use of land."
- The Productivity Commission Better Urban Planning report can be found here. P.6 says "The base of all rates on property values should move over time to (unimproved) land value. This will enhance efficiency, generally improve equity, and prompt more banked land to be put on the market."
Effect of the change:
- Average size home on average value section - rates won’t change much
- People who benefit – many of those who live in town-houses, apartments and units.
- Land-bankers + CBD car yards rates are likely to go up – which means it’s more expensive to hold on to it and may encourage you to put more sections on to the market, decrease the cost of sections, which decreases the end price of the finished home
- Land banking is more likely with capital value rating - for example when Hamilton looked at changing the other way, a 1.5 hectare section paid 18,000 in rates for land value but would pay only 8,500 at capital. A townhouse would go the other way - going from having rates of 1,100 to rates of over 2,000. Good development is discouraged and land banking encouraged by this. - Productivity commission Using land for housing p. 83
- Low value use like central car yards is discouraged by land value rating.
- If you only build low rise in the cbd your capital rates remain low. If you build up, your capital rates for the entire development increase. So why would a developer build more homes?