Developers say that new fees and charges will make housing in the Illawarra more unaffordable, as the region faces a construction slump.
Not-for-profit affordable housing providers are calling for the fees to be waived entirely or in part, with the charges contributing to up to a third of a cost of new builds.
Following the release of Sydney Water's charges for utility connections for new builds, development industry body UDIA NSW said that this would increase the cost of a new home by up to $16,000 in the Illawarra.
UDIA NSW CEO Steve Mann said the body was concerned the new charges would add additional costs on development in the midst of the state's housing crisis.
"UDIA has worked extensively with Government, IPART, Sydney Water and Hunter Water to ensure the new charges do not impact already perilous development feasibilities in affected areas and slow housing supply, at a time when we can least afford it," he said.
The fees Sydney Water can charge are determined by IPART, and a spokesperson for the utility, which services greater Sydney and the Illawarra, said the charges to developers avoided existing users covering the cost.
"Infrastructure contributions help Sydney Water recover the cost of connecting a new development to service growth and are calculated using a method set by IPART," the spokesperson said.
"Without a framework for infrastructure contributions, the additional cost of new growth is being recovered from existing customers, placing further pressure on water and wastewater prices, which inevitably hit customer bills."
The contributions are being introduced gradually from July 1, 2024, with contributions discounted by 75 per cent in 2024-25, 50 per cent in 2025-26 and full contributions paid from July 1, 2026.
For developers in the Illawarra, the additional water charges follow increases in developer contributions for new builds in the West Dapto urban release area.
Developers will have to pay $80,000 per dwelling under the draft plan to cover the cost of roads and utility infrastructure, as well as parks, community facilities and stormwater management.
Housing Trust CEO Michele Adair said these and other charges levied on developers would increase the cost of building affordable housing. Ms Adair said fees such as these, as well as stamp duty and land tax, could contribute up to 30 to 40 per cent of the cost of building and said the community housing industry had advocated for some or all fees to be waived for not-for-profit community housing providers.
"Any charges that are contributing or risk contributing to the cost of housing supply are jeopardising a private developer's ability to be able to contribute social and affordable housing."
The additional fees and charges come as the region is experiencing a slow down in the construction of new homes. Recent data shows construction figures are lagging behind approvals, and neither are at the housing target for the region.
The NSW government has moved to unlock the supply of new housing by increasing heights in existing areas and targeting transport hubs for increased density. Ms Adair said that while fees and charges were significant, ultimately it was the cost of land that determined whether more housing could be built.
"Private developers in Australia, in our region, have historically simply paid too much for land."
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