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Helping ease our housing crisis

Should Council partner to provide housing for first home buyers or sell the land?

THIS PROJECT WILL NOT BE FUNDED BY RATES

What’s the problem?

Taupō District has a severe housing shortage, and we know people are turning down skilled jobs in Taupō because they can’t find somewhere to live. These people have the ability to service a mortgage but even for working families, the large deposit needed just to get on the property ladder in the Taupō District is massive.

We don’t want to just be a district of retirees and holiday home owners - we need to keep attracting skilled employees who can help keep our district’s services and businesses running. They also make a valuable contribution to our clubs, schools and communities.

Council owns an area of land to the east and south of Richmond Heights. The plan has been to sell this land over time and use the money to pay back debt.

But we have an opportunity to sell some more of this land to a development partner who would build and sell some decent, high-quality homes that aren’t million-dollar houses and holiday homes.

It’s important to note that the money needed to kick-start this project would not come from rates but from Council’s strategic property reserve and from our development partners. After the initial kick-start, profits can be reinvested to provide further first home buyer housing.

This project would build on the work that we began in our Annual Plan 2023/24 to look at options for providing housing for working families and first home buyers.

Proposed option

Partnering to provide quality first home options to working families

Artist’s impression of how the proposed houses might look.

What is proposed

We’re proposing to do some development with construction partners to produce new, quality, attractive houses to buy that are similar to the market homes in this area – but are smaller and more affordable for everyday people who would then be able to service a mortgage.

We expect our construction development partner to be able to deliver around 42 attractive, quality homes at a relatively low market price which would be suitable for first home buyers by late 2025 or 2026. There would be an eligibility assessment process which Council would determine at a later date. The remaining homes (about 65 percent) would sit outside of the Council’s affordability criteria and be made available to the general market to purchase.

The development partners would build the homes and manage the sales and marketing of completed homes. Council becomes the enabler of this development but is not the developer nor is it carrying all the typical development risk.

This option has been developed to ensure there is not any pressure put on rates and limited impact on council debt due to the fact that we are using reserves from previous sales of Council’s strategic property to service this debt. Revenue from this project will be used to fund any future stages of the development, as Council’s strategic property sales are ringfenced to protect Council’s strategic asset base.

✔️ Helps attract skilled workers to Taupō District.
✔️ Realises Council’s housing aspirations at minimum risk to Council.
✔️ Guaranteed sale with a committed sale price for full market valuation with regular pricing reset.
✔️ Partnering with an experienced developer reduces risk to Council. The development partner will be responsible for building, funding, marketing, home sales and delivery of first home buyer outcomes as per the proposed agreement.
✔️ Council maintains control over the scale and design of the development.
✔️ Remaining homes will be sold at market rates.
❌ No competition with other builders. Limited price competitiveness for homes options with multiple parties.
❌ No ability for individuals to purchase land and build their own home.
❌ Requires further investment into the second part of this project before the returns are realised from the first part.
❌ Potential risk comes with any land development such as this and includes weather, unforeseen cost escalation, planning and regulatory risks and uncertainty around timing of sales and completion.

  • Expect sales revenue of approximately $53 million over 10 years, which is used to pay back project debt and fund future housing projects.
  • We will repay all $14.9 million of debt from this project by the end of Year 3 (2027/28) under this option.
  • This debt would be raised in the preceding three years.

  • No rates impact.
  • Initial debt repayments are covered by Council’s strategic property reserve.
  • Going forward, project will be self-funding from Council returns.

  • 2025: Earthworks and civil works completed, section titles issued
  • Late 2025: House construction begins

Alternative option

Sell residential land on the open market without requiring quality first home buyer options

Council would sell all its land on the open market at the appropriate time to the highest bidder, without requiring quality first home buyer options. For clarity, any gains would not be used to subsidise rates as any strategic property sales go back into the strategic property reserve to fund future asset purchases, ensuring Council’s strategic property assets do not deplete.

✔️ Could sell land blocks, without further investment in the land.
✔️ A future higher section sale price might be achieved.
❌ Is inconsistent with the objectives of Council’s Housing Strategy.
❌ Potential to lose a willing development partner.
❌ Costs to revisit the project could rise, including external advisor fees, planning, intellectual property, building costs, etc.
❌ First home buyers and working families have limited housing options.
❌ Employers continue to struggle to attract skilled workers.
❌ Once the land is sold, options for Council to help ease the housing crisis are severely limited.
❌ Timing of any section sales would likely be slower. If land is sold in blocks, we could make less money.
❌ Potential risk comes with any land development such as this and includes weather, unforeseen cost escalation, planning and regulatory risks and uncertainty around timing of sales and completion.

  • No cost or debt impact.
  • Net sales revenue will be used to pay down property related debt.
  • We will repay $13.9 million of debt in year three (2027/28).
  • This debt would be raised in the preceding three years however we would then have to borrow again to fund the next stage of land development.
  • This debt would be repaid from 2029 to 2031.

No rates impact – land sales go back into Council’s strategic property reserve.

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