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Sun December 16 2018

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New Zealand tests new way of funding infrastructure for housing

13 Nov Construction of a 9,000 homes in New Zealand is to be supported by infrastructure built using a NZ$91m (£48m) fund created by through a new mechanism.

Minister of housing and urban development Phil Twyford and Auckland mayor Phil Goff announced a partnership will fund the road and wastewater infrastructure to support the building of the homes at Wainui, north of Auckland.

A Government Special Purpose Vehicle (SPV) has been created in partnership with Auckland Council, Crown Infrastructure Partners and Fulton Hogan Land Development.

Twyford said that the Milldale project demonstrates an approach to funding that allows private investment in new infrastructure with the debt sitting on a balance sheet that is neither the council’s nor the government’s.

“The Milldale project is an example of the innovative new approaches to financing infrastructure that the Government is developing through the Urban Growth Agenda,” he said. “This funding model can be used in other high growth areas affected by the housing crisis to help more houses to be built more quickly.

“This could include private investment in infrastructure funded by a charge on the properties that benefit from the infrastructure. This new infrastructure funding model will result in a large number of homes being built much sooner than otherwise would have been the case. One of the major road blocks to our towns and cities growing is the lack of ready access to finance for the infrastructure that allows for new urban growth, for green or brownfields developments.”

Goff said: “We’ve zoned much more land for housing, but we need the infrastructure before we can build on it. Using Crown Infrastructure Partners to fund that infrastructure enables us to build roads, water and wastewater services without overburdening Council with debt and exceeding our debt to revenue ratio. We can build more homes sooner and tackle the housing crisis quicker than would otherwise have been possible.”

Fulton Hogan Land Development has already started work on the Milldale development at Wainui, which will have nearly 4,000 homes and businesses. The infrastructure being funded will support the Milldale development and will also enable another 5,000 homes to be built nearby, with NZ$33.5m funding for this being provided by Auckland Council.

Crown Infrastructure Partners has secured long-term fixed-rate debt from Accident Compensation Corporation. The SPV will be funding NZ$48.9m towards the infrastructure, with the Crown contributing less than NZ$4m.

The SPV funding will be repaid over time partly by Fulton Hogan Land Development and partly by section owners as an ‘infrastructure payment’ collected with Council rates bills. This new model of infrastructure financing means that long-term debt can be raised through the SPV to enable the building of large-scale infrastructure, which is needed to step up the rate houses being built, and to assist councils who are nearing their debt limits.

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