Developer contributions reform coming to NSW

Sweeping changes have been proposed to NSW's infrastructure contributions system.

It follows a new report from the NSW Productivity Commission to be considered by the NSW Government Minister for Planning and Public Spaces Rob Stokes and Treasurer Dominic Perrottet.

They welcomed the report which lays out a roadmap for "the biggest shake-up to the contributions regime in three decades."

Stokes said he commissioned the review into the system to fix uncertainty of developer contributions, unlock new housing supply, deliver infrastructure and drive investment. 

“The development industry has been telling us for years that uncertainty surrounding infrastructure contributions was driving up house prices and slowing down progress,” Mr Stokes said.

“Those who complain about growth in Sydney often have the same gripe - too much housing, not enough infrastructure. This report recommends a complete shift in thinking, where land rezoning, infrastructure planning and funding is considered together at the start of the process.

 “If the changes in this new report are implemented, these barriers will be removed and development will be coordinated with the right infrastructure.”

Productivity Commissioner Peter Achterstraat’s comprehensive review of the system makes 29 recommendations, including:

•          Changing the funding mix for more efficient infrastructure delivery;
•          Linking council rates more closely with population growth;
•          Developing a digital tool for calculating infrastructure contributions;
•          Ensuring infrastructure contributions plans are in place upfront during the rezoning process;
•          Supporting better open space provision through a system for the direct land dedication following re-zoning;
•          Reforming state contributions so funding goes where infrastructure is required.

Perrottet said the long-term benefits of boosting productivity was vital for NSW and the state’s recovery from the economic impacts of COVID-19 

“This is ultimately about providing greater certainty for all parties, ensuring better infrastructure for the community and unlocking more than $12 billion for our economy.”

The Treasurer said $14.8 million was allocated in the recent 2020-21 NSW Budget for the development of a contributions calculator, which would make it easier to determine project development costs at the start of the process. 

The Government will now review the report’s recommendations and consult with industry to develop a formal Government response and roadmap for implementation by early 2021.

To read the report visit http://productivity.nsw.gov.au/infrastructure-contributions-review

The Urban Taskforce identified the key recommendations and outcomes in the report as: 

▪ removing the disincentive for councils to accept development and growth by allowing for the local government rate peg to reflect population growth

▪ ensuring charges can be properly factored into feasibility studies by requiring contributions plans be developed prior to rezoning

▪ introducing a direct land contribution obligation for landowners following rezoning to provide early and adequate funding for land

▪ managing costs and complexity of section 7.11 local contributions plans by using benchmark costs and focusing the role of the Independent Pricing and Regulatory Tribunal in reviewing plans

▪ removing barriers to construction and improving project feasibility by deferring payment of local contributions to the occupation certificate stage

▪ providing a simpler option for councils by increasing the maximum rate of section 7.12 fixed development consent levies to 3% in certain circumstances

▪ limiting the use of state and local planning agreements to direct delivery of works and supporting infrastructure for ‘out-of-sequence’ developments

▪ addressing insufficient and ad hoc section 7.24 special infrastructure contributions (State Government infrastructure levies) through implementation of modest and simple broad-based regional charges

▪ ensuring the beneficiaries of major transport investments contribute to the cost by implementing an additional state contribution for rezoned properties within station service

catchments

▪ taking pressure off household water bills by transitioning to cost reflective charges for water connections

▪ making the system easier to navigate and comply with by providing and maintaining clear and rationalised guidance and comprehensive digital tools

▪ being more transparent in reporting on how much money is collected and where it is spent.