Nailing down building costs proves elusive

Queenstown's CBD. Photo: Getty Images
Queenstown's CBD. Photo: Getty Images
Many ideas have been floated to help solve the ills of Queenstown. The latest brainwave is for central government to share the GST paid on new builds with the district council. Mark Price gets out and about to find out how good the idea is. He returned declaring it was not unlike being the apprentice asked to fetch a left-handed screwdriver and a tin of tartan paint.

It seemed like a simple question; the question that always comes at the end of a Grand Designs build: How much did it cost?

But ask that about new builds in Queenstown, or New Zealand for that matter, and there is nothing but the sound of crickets.

No-one knows, as far as the Otago Daily Times can establish, how much is actually spent on new builds.

That might not have mattered in the past but the new government is considering a plan to base payments to local councils — so they can better afford infrastructure — on the GST of that unknown number.

Several years ago, the Queenstown Lakes District Council set out to introduce its own solution to its infrastructure problem — a visitor levy (or bed tax) — so tourists would pay a greater share of the district's costs.

The proposal was to charge short-term accommodation providers 8% based on their occupancy rates, providing the council with an estimated $373 million over 10 years.

In a poll of residents, 81% of respondents thought that was a great idea, and the Labour government was also on side.

But the plan went on hold because of the Covid pandemic and was then completely shut down by the new coalition government.

Before the election, Act campaigned on a 50-50 sharing with district councils of the GST paid on construction.

After the election, the coalition agreement between Act, National and New Zealand First changed the 50-50 scheme to a scheme where the government would share with councils "a portion" of goods and services tax (GST) collected on new residential builds.

So, now councils are looking at receiving an unknown portion of the unknown GST number.

The only number the QLDC has to work with is the "estimated value" of a new build submitted on consent forms by those planning to build — a total of $1,034,114,400 in the 12 months from April 2023 to March 2024.

Chris Bishop
Chris Bishop
That figure includes labour, which has no GST, and does not include such things as landscaping and driveways which would attract GST.

A building industry source said those planning to build tended to underestimate the estimated value on their consent forms because the higher the value the higher the council fees.

The QLDC said it had the ways and means to ensure the figures were "plausible".

However, the estimated value figure is a long way from being a reliable number on which to base a government payment scheme.

The ODT shopped around for other ways of accurately determining building costs.

Master Builders NZ came up with nothing and StatsNZ said it surveyed only those builds costing more than $2.4m, with a sampling of a small number below that amount.

As well, StatsNZ had no district breakdown.

Queenstown figures were part of "rest of South Island excluding Canterbury".

Asked where accurate figures might come from, Act housing building construction and infrastructure spokesman Cameron Luxton said initially there were "mechanisms by which local councils can determine the spend on a building project".

"Regardless with a significant new revenue stream on the table local councils would have plenty of incentive to obtain that data."

When pressed to describe the "mechanisms", Mr Luxton said it was expected StatsNZ would provide the figures.

Further complicating the infrastructure funding issue, Auckland Mayor Wayne Brown has called on the government to return the GST on rates.

Queenstown's most recent annual rate take was $104,410,000, which would include $15,661,500 of GST.

The government has ruled that one out but not Act's GST plan.

Housing Minister Chris Bishop told the ODT Act's plan was "part of the mix" as the government sets out to incentivise councils to deliver more housing and infrastructure.

The minister did not respond to a question about when the issue would be settled.

"I'll have more to say about this in the coming months."

And, as for that left-handed screwdriver ...

 

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