The council has started early discussions with the Treasury about government support for a $132 million programme to buy up 65 properties a year over an initial period of the next five years.
Under the approach being considered, the properties would be bought voluntarily on the open market, acquired gradually over decades and then used to enable the South Dunedin climate change adaptation strategy, now under development.
The buying-up of property could begin as early as next July.
Nidd Realty owner Joe Nidd has raised questions about what would happen to the value of properties in the areas the council wanted to buy up.
He said the problem was, once it was known which properties the council wanted to buy, purchasers would know the property had no future and the property might become effectively worthless.
He believed the council would have to come up with a purchase process that did not rely on market values, Mr Nidd said.
There should be "a formulation of fairness" — similar to that used in the EQC buyouts following the Christchurch earthquakes — and oversight by third parties to ensure fairness.
"People should certainly not be disadvantaged.
"I think it would be incredibly disingenuous for the council to announce what houses they wanted, watch them be devalued and then offer the owners a price based on that new perceived value.
"The value should be backdated to before there was any stigma attached to the property or devaluation as a result of the situation."
He called on the council to be more open about how it intended to value these properties.
On the flip side, he believed once the council started buying up the properties, the value of other properties unaffected by the buy-up would increase, Mr Nidd said.
"It will bring renewed confidence to purchasers who have been reluctant to purchase in South Dunedin, due to the lack of certainty about its future.
"There’s been some mixed messaging coming in over the years as to what direction the council intends to take with it.
"So if the council were to give some clear direction and show that they were prepared to invest in securing the future of the area, I think it would naturally have a positive effect on property values for people in the area."
He also believed it would be unlikely the council would make that kind of investment in the area without also investing in improving the area further.
"They’ve talked about a few different things in terms of green spaces and waterways, and any amenity value that’s added to that area is going to be good for the suburb overall."
Otago regional councillor Michael Laws has also expressed concerns about the initiative.
He believed it was moving too quickly and the ORC needed to have a discussion at governance level about what its role should be in the proposal, before it headed too far down any particular path.
"The real problem here is that a lot of work seems to be going off at the moment, without necessarily a governance framework behind it.
"I don’t want the ORC to get into the position where we are now going to become not only the joint policy maker, but also the joint funder of future mitigation strategies, because at that point, I don’t see that as a role of the ORC.
"If the ratepayers of North Otago, Central Otago and South Otago are going to be potentially visited for funding to buy out properties in South Dunedin, you need to put that on the table now.
"We do have a tendency for some of these things to take on a life of their own, and governance comes too late."
