A special purpose vehicle (SPV) has been created in partnership with Auckland Council, Crown Infrastructure Partners and Fulton Hogan Land Development to fund $91m to support the construction of 9,000 homes at Wainui, north of Auckland.
Crown Infrastructure Partners has secured long-term fixed-rate debt from Accident Compensation Corporation. The SPV will be funding $48.9m towards the infrastructure, with the Crown contributing less than $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.
Minister of Housing and Urban Development Phil Twyford said 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. 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,” Twyford said.
Stephen Selwood, chief executive of Infrastructure New Zealand, welcomed the announcement as a “significant milestone” and called for the model to be expanded.
“If developers can access third party finance to bring forward bulk infrastructure investment, development can proceed at the pace and scale needed to deliver the productivity improvements critical to delivering enough homes to meet growth.”
Selwood noted this approach is standard practice in the US in enabling a flexible and responsive housing system.
“Legislation is needed to consolidate the model and allow it to be rolled out nationally. This legislation will need to be clear on where the risk and responsibility for repaying debt sits. The Milldale initiative relies on debt, but for the model to be successful in meeting ongoing housing demand, developers will need to be able to partner with investors repaid on the basis of risk taken.
He concludes: “If risk is disproportionately allocated to developers, then the model will not lead to the increase in developable land required.”