The Government has outlined its plans to change the way councils charge for infrastructure developments, with a new levy system allowing councils to charge development levies from 2029.
Currently, developers pay a one-off development contributions (DCs) charge and it’s the main tool councils use to fund upfront, growth-related infrastructure costs for housing and commercial developments.
On Wednesday, Bishop announced the next steps for DCs to be replaced by a development levies system, calling it “a once-in-a-generation improvement” to infrastructure funding.
This has been in the works for a while with Bishop, in February 2025, sharing that the Government wanted to replace the way councils charge for infrastructure developments through a new levy system.
Councils will be able to charge development levies for six services: water supply, wastewater, stormwater, transport, reserves and community infrastructure.
Bishop wants a Bill on these changes to be put forward in the first quarter of 2027.
If it goes ahead, Councils will have discretion about moving to development levies between 2029 and 2030, and they’ll also have discretion to phase in any price increases.
It’s expected from 2029, the levies will start to be adopted and by mid-2030, DCs will be disestablished and the new system will fully be in place.
“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.”
Under the new system:
- The Commerce Commission will regulate how councils set levies and use revenue
- Levies will be based on the aggregate cost of infrastructure for growth across levy areas using a prescribed methodology put together by the Commerce Commission
- Councils can “flexibly invest” in infrastructure that best serve development and charges all development across the levy area
The Commerce Commission will be the independent regulator of the new system, with the Government providing $30 million in Budget 2026 to help it establish regulatory function between 2026 and 2030.
Core Crown and Crown entities will be pay development levies
Alongside this, the core Crown and Crown entities will be required to pay development levies.
Bishop said if the Crown built a new school, hospital or other facility that creates extra demand on roads, water networks and other infrastructure, it was 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.”
'New system will put councils in much better position'
Local Government Minister Simon Watts said: “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.”
“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,” he said.
On what these changes actually mean for ratepayers, Bishop told reporters: “It means there will be more land freed up for housing, but it means the land that is freed up for housing will actually be able to be serviced by infrastructure that is paid for by developers - properly paid for by developers and not cross-subsidised by other ratepayers.”
“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 ultimately move into new homes.”
Other aspects of the new system include bespoke levy assessments which is for development in places outside of the levy area or where infrastructure isn’t planned for many years. Also a council can reimburse first mover developers using levy revenue based on set conditions.
There would still be avenues for developers to appeal decisions with DCs commissioners being carried through to the new system.
'Charges will better reflect differences in the cost of servicing development in different locations'
Watts said one of the significant changes following consultation was 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.”
“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,” Watts said.
“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.”
Levies 'a one-off charge,' not a tax
Asked by reporters if this broke National’s promise of no new taxes, Bishop, who is also National's housing spokesperson, said this was not a tax and levies were a one-off charge. “They replace an existing system … The name is different and the essential intent is the same … It’s essentially a charge to cost recover infrastructure.”
Bishop said officials had briefed the Labour Party on the decisions that had been made.
This was done in 2025 so not recently, Bishop said, but he was happy to provide them with information.
“It’s completely in line with where they’ve previously indicated support.”
This change was about setting New Zealand up for success in the 2030s and beyond, he said.
“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.”
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