Tuesday, November 19, 2013

Against subsidising developers

The New Zealand Initiative - formerly known as the Business Round Table - has a brilliant new plan to solve the housing crisis: subsidise developer's profits:

Think tank the NZ Initiative is proposing the taxpayer - rather than developers and home buyers - pay councils for providing water and sewerage services to new houses as part of a suite of measures to improve home affordability.


To tackle that, the think tank proposes replacing the development contributions levied by councils on developers to pay for water, sewerage and roads with a one-off "Housing Encouragement Grant" for every new house built in their area, provided the house meets minimum delivery deadlines from application to completion.

The think tank proposes the grant be benchmarked on the GST levied on the cost of building the house, which would mean a $60,000 grant for $400,000 house.

This is nothing more than a subsidy to developer's profits. Housing sprawl imposes real costs on the community, and the "polluter pays" principle says that those creating those costs - developers (and indirectly their customers) - should pay them. If this makes new housing developments less desirable than buying an existing house, then that's life. Developers should not be expecting the rest of the community to provide them with a free ride.

(Meanwhile, Public Address analyses the NZ Initiative's other great plan - private taxation by developers - and recognises it for what it is: feudalism)