Sharechat Logo

Govt considers special interest rates for property developers to build infrastructure

Thursday 28th June 2018

Text too small?

The government is looking at giving commercial property developers access to finance at low interest rates if they build vital infrastructure to support new homes, says housing and urban development minister Phil Twyford.

At the Local Government New Zealand Housing Symposium in Wellington this morning, Twyford said the current system for financing infrastructure is "utterly broken" and was slowing housing development, and said he hoped to give more information on how the scheme would work in the coming months.

"Councils in high-growth centres simply cannot continue to borrow to fund infrastructure, and actually nor should they," Twyford said. "Central government doesn't want to be writing cheques out every few months to fund the infrastructure for urban growth, and the current system puts an enormous pressure on developers to be the primary financing vehicle for the infrastructure that's needed to bring new land into supply."

The government has flagged changes to infrastructure funding under its urban growth agenda since last year, with Finance Minister Grant Robertson suggesting this could be done via infrastructure bonds serviced by a targeted rate in a speech last December. Local government has also been raising concerns about councils' debt ceilings for some time, with Auckland Council a particular cause for concern as it has hit its limit. Special purpose vehicles for debt were discussed by the last government to help the council maintain its AA credit rating.

Twyford said private developers who wanted to take on the risk of infrastructure development could be able to access long-term debt finance at the same rates the government can. The yield on the 10-year government bond was recently at 2.88 percent.

"It has to rest on a balance sheet somewhere, and it cannot be councils and it should not be central government," he said. "It's a new approach to financing infrastructure that will lift the burden off councils of having to be financing vehicles for infrastructure that's needed. If we get this right, it will turn on a tap of infrastructure finance for new development and will allow our cities to respond to demand and grow."

Twyford brought up infrastructure funding as one of four key policy failures which have furthered the housing crisis, alongside a tax system which encourages untaxed capital gains on property, restrictive urban planning which triggers land banking, and a lack of productivity and innovation in the construction industry.


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar falls after RBA governor flags potential rate cut
ASB reviews ownership of Aegis
Auckland Airport kicks off next phase of expansion
Cashed-up Plexure eyes acquisitions to accelerate growth as loss shrinks
Tower turns to 1H profit, lifts FY guidance
IRD should have doubled claim against Watson's Cullen Group - Professor
Investore FY profit falls 16% on smaller valuation gain, signals flat dividend for 2020
Synlait receives cease and desist letter regarding Pokeno plant
21st May 2019 Morning Report
NZ dollar steady ahead of central bank speeches

IRG See IRG research reports