Developer paid infrastructure charges are a commonly used mechanism for Australian municipalities to shift the funding of new urban infrastructure to private sector property developers. In a climate where housing affordability is a policy objective for many governments, a clear understanding of the impacts these charges have on the price of housing is imperative. This paper empirically examines the effect of infrastructure charges on housing affordability in Brisbane, Australia, applying a hedonic house price model to 4699 new and 25,053 existing house sales in Brisbane from 2005 to 2011. The findings of this research are consistent with international studies that support the proposition that infrastructure charges are over passed to home buyers. This study provides evidence of infrastructure charges being over passed to both new and existing home buyers in the order of around 400 %. These findings suggest that infrastructure charges are thus a significant contributor to increasing house prices and reduced housing affordability in Australia. By testing this flow-on effect to both new and existing homes, this research provides evidence in support of the proposition that not only are infrastructure charges over passed to new home buyers, but also to buyers of existing homes. Thus the price inflationary effect of infrastructure charges are being felt by all home buyers across the community, resulting in increased mortgage repayments of close to $1000 per month in Australia. These results are important as they inform governments on the outcomes of current infrastructure funding policies on housing affordability, providing the first empirical evidence of its kind in Australia.
Journal of Housing and the Built Environment – Springer Journals
Published: Oct 25, 2016
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