Rates could drop 4.4% for median household if council swaps rating system, advocates say

Thursday, 18 May 2023

There would be more incentive to redevelop underused lots in prime locations like the empty Reading Cinemas building if rates were based on land value, advocates say.

A new rating system could lower the rates bill for most households and increase housing development, say land value rating advocates.

Earlier this year, the Wellington City Council announced it would reconsider the basis of its rating system and look at whether land value rating is suitable for the city.

Data analysis from pro-land rating group Common Ground Aotearoa plugged in the council’s assessments of land value and capital value for every property in the city, to calculate what it would look like if the system changed but total rates revenue stayed the same.

Jesse Richardson’s analysis shows land value rating would lead to reduced rates for the majority of Wellington households. He hopes that if the policy works out in the capital, it could be a good example for the rest of the country.

“It’s rare that a policy comes along which is good for Wellington and is a rates cut,” he said.

If the council switched to a land value rating system today, the median-value household would be paying 4.4% less to the council.

For properties with lower values the benefits of land value rating would be even greater – for the median residential house worth less than $1 million, it would be a 10.8% rates cut.

There would be a rates cut for most houses with values of up to $1.6m.

Currently the council charges rates based on capital value, or the value of the land plus improvements like buildings. Building nothing leads to lower rates – so landowners have an economic incentive to sit on their land rather than developing.

Land value rating would reverse that, encouraging owners to develop high-value land in the central city.

Richardson’s analysis shows that at least $3.8 billion worth of land is being underused in Wellington, meaning the capital value of the land with improvements is the same or less than the land value alone.

Empty buildings like the Reading Cinema complex are a good example of underused land, where valuable land is being taken up by inefficient use. Land value rating would encourage more productive uses of land, he said.

“What we know from numerous examples of this policy being implemented is that it will reduce the rates burden on homeowners and businesses by organically growing our city.”

Councillor Nīkau Wi Neera said the opportunity to reconsider rates was a “fantastic opportunity to grow a compact, green capital city”.

It was a “no-brainer” to implement a policy which made land use more productive and lowered rates for working people.

Community organisations also threw their weight behind land value rating to help Wellington become a more compact, productive city.

Renters United president Geordie Rogers said land value rating would have benefits for renters, families and the wider Wellington community.

“In the middle of a housing crisis we need to be building houses, not keeping empty parking lots.”

Sean Hofman from Generation Zero said land value rating would incentivise high-density housing developments like apartment buildings, making housing more affordable and reducing carbon emissions from travel.

It was a “critical step in the path to building a liveable and greener city for everyone”, Hofman said.

The council is continuing investigation work on its rating policy review and is planning to consult the public later this year.