Most people don’t like paying rates. I do – so long as I think I am getting good value for money. I love that portion of my rates going to Hamilton Gardens, the river walkways, and libraries. I’m proud to show visitors around the lake and enjoy evenings out at our live theatres. But nobody wants to pay rates twice.
Yet this is what happens with SUIPs, a nasty little acronym that council recently discovered. It stands for Separately Used or Inhabited Part of a rating unit, which is rather misleading, because HCC’s definition specifically includes un-Used and un-Inhabited parts. In lay terms, a rating unit is a property or section.
Because council rates originated as a land tax, there was one rates bill per certificate of title, not per house. A block of ten flats on one title would only be charged once.
At first glance, that may seem unfair and the owner is getting off lightly. But as rates were based on property value, ten flats still paid ten times as much as one flat by itself. Of course, it was never quite that simple as the property value is made up of the base land value and the capital value (often called ‘improvements’) the owner has invested in the buildings.
One could argue that it is unfair to charge an owner just for spending more on a building. An alternative argument is that focusing solely on land value makes expensive Central Business District land uncompetitive with the likes of The Base and Chartwell Square. This particular debate has been going on in Hamilton for twenty years. In reality, there is no truly fair way to charge rates.
Then along came the Uniform Annual General Charge (UAGC), which is covered by the Local Government (Rating) Act. Instead of assessing rates just on the property value, the UAGC is an additional fixed fee charged on each property. HCC chose an arbitrary figure of $500. It could be argued that this is fair because everyone pays the same and it lessens the disparity between land and capital value rates. Or it could be argued that it is unfair because poor people in low value property are affected disproportionately by fixed charges. You can’t please all the people all the time.
Back to the example of the ten flats on one title. Is it fair to that the property only pays one fixed fee? The Act allows councils to use SUIPs to treat the title (or rating unit) as ten separate parts, and each is charged the fixed fee. In principle, it seems fair. In practice, there is a whole bunch of problems.
The Act leaves it up to councils to define SUIPs for themselves, and in a simple world, it would be easy to recognise a separate flat. But what about a sleep-out for the teenagers? Of course not! They are part of the family. So then is a granny flat a SUIP or not? It might be self-contained, but Granny is part of the family also. Maybe we go with family units. Nope. That doesn’t work in a typical student flat of unrelated people. Is the guest bedroom a SUIP? The home office could be a commercial SUIP, or is it a study for kid’s homework? Is the workbench in the garage a commercial SUIP, or is it for hobbies and home maintenance?
For some unfathomable reason, planners in many councils across the country have been using kitchen sinks to define separate dwellings in District Plans, causing no end of trouble. I thought the Resource Management Act was about managing resources, not controlling people’s lives inside their own homes.
HCC has made the mistake of using the same idea for SUIPs. If Granny has a sink, you will get whacked with a second rates charge. If you take the sink out, then you save $500 per year, and Granny can fill her kettle from the bathroom basin. What has really changed?
The fancy kitchen with a scullery and a second butler’s sink rightly isn’t a SUIP while a bedroom with an ensuite apparently is for renters and isn’t for homeowners. Every motel room with a kitchenette is a SUIP, but a hotel room without a kitchenette is not. The sad case has been a charity-run emergency hostel for homeless getting crippled with SUIP charges. Perhaps they could have claimed the sinks were laundry tubs. Without doubt, there are some SUIPs that should be paying extra, but the current system needs a serious rethink.