I thought it would be good to tackle these myths head on: “With house prices rising so quickly, aren’t Councils raking it in since residential rates are tied to property valuations?”
I hear this from a lot of people across the city, and I thought it would be useful to clarify.
I understand the confusion, but it’s not how local bodies manage budgets and set rates.
What we do each year is assess the costs of services and infrastructure and agree on the budget - it’s called ‘striking’ the rates. Your proportion of that cost is determined by your property’s rateable value as a proportion of the total rateable value of the city.
Think of it as a share of a pie. If your property has risen in line with the city average, your contribution via rates will remain the same as a proportion.
If you bought your home for $400,000 but it’s now valued at $600,000, your rates will not jump by 50 percent. This is because most other properties in the city will have risen in value at a similar pace. Your rates bill won’t change based on a reprised valuation unless it has increased above the city average. If your rateable value has grown at a lower rate compared to other ratepayers, your rates won’t go up in the same fashion.
The Council’s costs are not rising (or falling) in relationship to valuation, however bound together they are in people’s minds.
We also need to address the idea new residential developments represent a boost to Council coffers. Over time, of course, more homes do mean more rateable properties – but new developments also cost Councils in terms of new infrastructure, and new residents expect and demand services. That’s why growth councils like Porirua, Kāpiti and Tauranga face considerable cost-pressures, a challenge we are committed to navigating carefully and with a view to minimising impact on household rates.
8 Dec 2020
