04 Dec Developer Contributions
THIS IS AN IMPORTANT UPDATE FOR OUR VALUED CLIENTS ACROSS NEW SOUTH WALES REGARDING CONTRIBUTIONS
The concept of Developer Contributions (Local Contributions also now known as S7.11 & S7.12 levies) was first introduced in NSW in 1979 with the introduction of the Environmental Planning and Assessment Act but they weren’t widely utilised by Councils until 1993. Special Infrastructure Contributions (SIC) levied by the NSW Government were introduced in 2006 with the introduction of the North West and South West Growth Centres. Since that time the Contributions System has rightly been openly criticised for its complexity and ambiguity and industry calls to reform the system were finally answered earlier this year.
The NSW Productivity Commissioner has now completed the most comprehensive review of the Contributions System since its introduction with the Final Report now released. The Report makes 29 recommendations to reform contributions and our update summarises the most pertinent of the recommendations for our clients:
Certainty & Transparency
- A requirement for Contributions Plans to be developed concurrently through the rezoning process. This will be a welcome improvement for many of our clients who have suffered through the continuing delay to the Vineyard Contributions Plan as an example.
- A new standard template for Contributions Plans to provide consistency with all Plans to be available on the NSW Planning Portal.
- The Essential Works List to be applied to all Contributions Plans. This will mean that every Council will be able to levy for the same infrastructure.
- The introduction of a direct land contribution mechanism. In simple terms this is a statutory charge that is fixed to the land title and reflects all land within a Precinct required for infrastructure being reflected as an equitable apportionment to each individual land holding within a Precinct based on land area.
- Indexing the land component of contributions by a land value index. This change is designed to reflect the significant escalation of land prices when compared to more common indexation measures such as CPI.
- An increase in S7.12 levies from 1% to 3% and applied as a fixed rate according to typology (eg. proposed maximum of $10,000 for a dwelling house).
Special Infrastructure Contributions
- New SIC’s applied in the Greater Sydney, Central Coast, Hunter, and Illawarra-Shoalhaven regions as a fixed rate according to typology (eg. proposed $12,000 for a dwelling house in Greater Sydney). Existing SIC’s would continue to apply with the new arrangements only applying elsewhere.
- A new Transport Contribution for development within transport service catchments to be determined by TfNSW with a minimum charge of $5,000 per dwelling. We are already seeing this approach in the Aerotropolis with the additional ‘station levy’ imposed on land adjacent the proposed metro stations.
- A new Biodiversity Contribution for land that is biodiversity certified.
Metropolitan Water Services Developer Charges
- Absent from the industry since 2008 these charges seem set to return. Indications are that a charge of $2-3,000 in the Hunter Water and $5-12,000 in the Sydney Water service catchments could for apply to a new greenfield dwelling house from 1 July 2026.
- VPA’s to be restricted to infrastructure required for out-of-sequence development or to facilitate infrastructure that a development is contingent on and relies upon. This will end the practice of cash contributions and some of the more unusual works in kind being negotiated into VPA’s in the future.
The Role of IPART
- Standardised benchmark costs for infrastructure to be developed by IPART and applied to Contributions Plans.
- IPART to review Contributions Plans only where affected parties request a ‘by exception’ review. The terms of these requests are to be detailed in a future Practice Note.
Timing of Contributions Payments and Investment
- The Deferral of Contributions Payments to Occupation Certificate stage.
- Incentives for Councils to borrow to forward fund infrastructure capitalising on lower land costs and providing more certainty of delivery earlier in the life of the Contributions Plan.
The NSW Government must now review the recommendations with an objective to implement the reforms early next year. Even if only some of the recommendations are adopted they are set to significantly alter the development landscape and impact development feasibility even in the short term. This is one to watch in early 2021.
If you’d like to know more please contact our Planning Manager – Nathan Croft on 0419 845 089.
NATHAN CROFT | MANAGER – PLANNING & DEVELOPMENT STRATEGY | ORION CONSULTING