Councils will be able to charge developers a new development levy from 2029, and the Government will make its own departments pay it too, Housing Minister Chris Bishop has confirmed. The change replaces the development contributions councils charge today, a system that has long been criticised as inconsistent and inflexible and that leaves existing ratepayers covering some of the cost of new subdivisions.
The decision was reported by RNZ on Wednesday 16 September, after Bishop, Local Government Minister Simon Watts and Commerce and Consumer Affairs Minister Cameron Brewer set out the final shape of the scheme following consultation with councils and developers. Councils may start charging levies from 2029 and must do so by 2030. The levies can cover water supply, wastewater, stormwater, transport, reserves and community infrastructure.
The size of the problem is large. RNZ reported that the gap between the growth-related infrastructure councils planned to build and the money they expected to recover from growth was estimated at as much as $11 billion between 2021 and 2031. When that money is not recovered from new development, it falls on the general rates bill.
“The new development levy system will make sure that growth pays for growth, and that the beneficiaries of new housing and the developers building that new housing are charged appropriately for the costs of that growth,” Bishop said.
He argued the current contributions system would not work alongside the Government’s more flexible planning rules. “So existing ratepayers will not end up paying more through their rates for infrastructure that should be properly paid for by developers and by the people who’ll ultimately move into new homes,” he told RNZ.
Three changes stand out from the version the Government consulted on. The first is how charging areas will be drawn. According to the ministers’ statement published by Inside Government, councils will now have to set up separate levy areas wherever forecast infrastructure costs differ substantially. The earlier proposal would have allowed broad levy areas with extra charges layered over high-cost spots.
“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,” Watts said.
The second change brings the Crown into line with everyone else. Crown entities such as KΔinga Ora and the New Zealand Transport Agency already pay development contributions, but core government departments including the Ministry of Defence, the Ministry of Justice and the Department of Corrections do not. Under the new system they will.
“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,” Bishop said. He told RNZ he expected that part of the package to be popular with councils. “I think that will land quite well with local government. They’ve been saying that for quite a while, and basically now we’ve agreed,” he said.
The third change hands the calculation rules to an independent referee. The Commerce Commission will regulate the system, with $30 million set aside in Budget 2026 to build that function between 2026 and 2030. RNZ reported that feedback on an earlier exposure draft of the law had asked for more detail on how levies would be calculated, which is why the commission will now write the methodology.
“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,” Brewer said.
The law itself is still some way off. The Local Government (Infrastructure Funding) Amendment Bill is due to be introduced in the first three months of 2027 and would go through a full select committee process. That timetable depends on the Government being returned at this year’s election. Bishop said Labour had been briefed by officials in 2025 and that the proposal was in line with what Labour had previously indicated it would support. The broad plan to replace development contributions with levies was first outlined by Bishop in February 2025 as part of the Going for Housing Growth programme.
With the election campaign under way, Bishop was asked how a new charge squared with National’s promise of no new taxes. He rejected the idea that the levy was a tax. “It just replaces an existing system we have called development contributions. So, whichever way you look at it, it’s not a new tax, it’s a levy, and it replaces something that is already there in the system. It’s just a better way of doing it,” he said.
In the meantime the Government is amending the law so councils can adjust development contributions for projects approved under the fast-track regime. That stopgap follows Auckland Council’s warning that fast-track homes could leave it with a $5 billion infrastructure bill.
The property industry welcomed the announcement. Property Council chief executive Leonie Freeman said certainty mattered for the sector. “For too long, development charges have been unpredictable, inconsistent and, in some cases, disconnected from the infrastructure they are supposed to fund. Today’s announcement is a significant step towards fixing that,” she said.
Freeman added a condition. “Growth should pay for growth, but the system also needs to be fair. That means independent oversight, the Crown paying its share, and developers having confidence that what they are charged bears a reasonable relationship to the infrastructure their development actually requires.”
For home buyers the practical effect is uncertain. A levy that reflects the real cost of servicing a section could make some greenfield developments more expensive, while spreading costs more fairly could ease pressure on rates in fast-growing towns. Bishop said the detail would decide whether it worked, but said the country had built a planning and infrastructure system that “has just driven up land prices and therefore house prices to insane levels”.
Housing and infrastructure funding are likely to feature in party pitches before the election. If you want to see how the parties line up on housing, tax and other issues, try our voting tool to find out which party best matches your views.
Should developers and new home buyers carry the full cost of the pipes and roads that serve new suburbs, or should some of it be shared across all ratepayers? Tell us what you think in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job π
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