Paying for Growth: A Theoretical and Empirical Examination of the Economics of Developer Charges (with particular application to New South Wales)

Abstract

In New South Wales, charges on developers have become increasingly popular as a means of financing local urban infrastructure. Other eastern states of Australia are poised to embrace this form of funding. Currently, a number of basic principles guide policy in pursuit of a widely accepted, but vaguely specified, understanding that the charges are a 'user pays' charge. Yet a clear statement as to exactly how the user pays objective is being achieved, on what theoretical grounds it is sanctioned, and what the theory implies about the methods of calculating charges, appears to be almost entirely absent from discussion. This study examines the theoretical basis on which user pays policies are advocated and attempts to formulate a model which is applicable to the context in which developer charges are levied. The study also evaluates the current practice of determining developer charges in New South Wales against guidelines derived from the theory.