The Government is progressing a new development levies system it says will improve infrastructure funding for housing and urban growth across New Zealand, with several changes confirmed following consultation with councils and developers.
The updated proposals include changes to how levy areas will operate, requiring the Crown to pay development levies, independent regulation through the Commerce Commission, and a revised timetable for implementing the new system.
“New Zealand has struggled for decades to build infrastructure at the same pace as our towns and cities have grown,” said Housing Minister, Chris Bishop.
“We can free up land for housing, but if the infrastructure isn’t there to support development, projects will still struggle to get off the ground and communities rightly worry about additional pressure on existing roads, pipes and local services.
“The development levies system is a once-in-a-generation improvement to infrastructure funding. We consulted extensively on how the new system should work, and we have listened to feedback. Today we are confirming several changes to the proposals and the next steps for implementation.”
Local Government Minister, Simon Watts says one of the significant changes following consultation is how levy areas will operate.
“Councils strongly supported moving from development contributions to development levies, but developers raised legitimate concerns about over-charging, cross-subsidisation and the need for greater consistency and predictability,” he said.
“Under the revised approach, councils will be required to establish separate levy areas where there are substantial differences in forecast infrastructure costs.
“This is a change from the approach we consulted on, which would have allowed broader levy areas alongside high-cost overlays.
“It means charges will better reflect differences in the cost of servicing development in different locations, while still giving councils the flexibility they need to plan infrastructure over the longer term.”
The Government has also confirmed that core Crown agencies, as well as Crown entities, will be required to pay development levies.
“Under the current development contributions regime Crown entities, such as Kāinga Ora and the New Zealand Transport Agency, pay development contributions but core Crown agencies, including the Ministry of Defence, Ministry of Justice and Department of Corrections, do not,” Mr Bishop says.
“That inconsistency will end under the new system. If the Crown builds a new school, hospital or other facility that creates additional demand on local roads, water networks and other infrastructure, it is reasonable that it pays its fair share.
“Growth should pay for growth, regardless of whether that growth is being driven by private development or the Crown.”
The Commerce Commission will be the independent regulator of the new development levies system, with the Government providing $30 million through Budget 2026 to establish the regulatory function between 2026 and 2030.
“The Commerce Commission will establish nationally consistent methodologies for calculating levies, set information disclosure requirements, monitor the operation of the system and have a compliance and enforcement role,” said Commerce and Consumer Affairs Minister, Cameron Brewer.
“Independent regulation will help build confidence in the new system by ensuring councils and developers are working from clear and consistent rules.
“Councils will retain the ability to respond to local circumstances, while developers and ratepayers will have much clearer information about how charges have been calculated and confidence that the system is independently overseen.”
The Local Government (Infrastructure Funding) Amendment Bill will be introduced in the first quarter of 2027, with further opportunities for councils, developers and the public to have their say through the select committee process and consultation on the detailed levy calculation methodologies and disclosure requirements.
Councils and water organisations will have flexibility over when they implement development levies after the Commerce Commission has issued the required calculation methodology, through to 2030.
Development levies will replace the current development contributions system and allow councils and water organisations greater flexibility to recover the forecast cost of providing infrastructure capacity for growth across defined areas.
Levies will apply to infrastructure including water supply, wastewater, stormwater, transport, reserves and community infrastructure.
“Under the current system, councils can struggle to recover the full cost of infrastructure needed for growth, particularly where infrastructure has not yet been individually planned and costed,” Mr Watts says.
“When that happens, existing ratepayers can be left carrying the shortfall.
“The new system will put councils in a much better position to plan ahead and recover an appropriate share of the long-term infrastructure costs associated with growth.
“At the same time, developers need confidence that charges are fair, predictable and based on clear rules. The new system will provide greater national consistency, transparency and independent oversight.”
Mr Bishop says the reforms are a critical part of unlocking housing growth.
“The Government launched its Going for Housing Growth programme to fix the underlying problems that have made it too difficult and expensive to build enough homes in New Zealand.
“We are freeing up more land for development, improving the way infrastructure is funded and financed, and giving councils stronger incentives to support housing growth.
“Infrastructure funding has too often become a handbrake on development. These reforms will give councils better tools to fund growth, give developers greater certainty about what they will be expected to contribute, and reduce the risk that existing ratepayers are left paying for the cost of new development.
“Creating a more predictable system for housing growth, with the infrastructure to support it, is an important step in fixing the basics and building the future.”
