Auckland's Proposed DC's Are Overestimated by 70-80%

Auckland's Proposed DC's are Overestimated by 70-80%

UE recently completed an independent review of Auckland Council’s Draft Development Contributions Policy 2025.  Our assessment finds that proposed charges are significantly overestimated - by 70-80%.

Within the Development Contributions (DC) model, there are several key assumptions underpinning the calculations that raise questions about whether the 2025 development contribution prices are fair, equitable and proportionate.  These are summarised as follows:

Treatment of future costs and revenue:  The model increases future infrastructure costs to reflect cost escalation, inflation and land value increases, but does not increase the DC charges over time.  This creates a mismatch where early developers may pay more in real terms than later ones, leading to an estimated 50-60% overcharge in the short term.

Contingency allowances:  A contingency rate of 50% has been applied to infrastructure costs.  This is well above typical market allowances (often around 10%) and substantially increases estimated capital expenditure.

Land acquisition assumptions:  Land values are based on developed residential land.  In practice however, some infrastructure can be delivered on land acquired earlier in the planning process at lower rural or future urban prices.

Household growth forecasts:  The projected new households across greenfield and infill areas differ from recent trends.  Greenfield growth is assumed to be only 47% of the growth achieved over the past five years, while infill is overestimated by 155%.  This means greenfield areas may face charges around twice the actual cost, while infill areas may be charged significantly less than their fair share.

Adjusting for these and other factors, our assessment finds that DC prices may be overestimated by approximately 70-80%.

A flow-on implication is the potential effect on the price and type of housing delivered.  As DC’s rise, there will be a shift away from affordable to mid-high price homes, that are better placed to absorb the additional costs.  This will mean house prices continue to rise over time. 

A full copy of our assessment is available in the link below:

Auckland-Council-Development-Contributions-Policy-2025-Review.pdf