Next steps confirmed for development levy reform
The New Zealand Government confirmed reforms to development levies, introducing independent regulation, Crown agency contributions, and revised levy area structures to improve infrastructure funding for housing growth.
The Government will replace the existing development contributions system with a new development levies framework, following feedback from councils and developers. Housing Minister Chris Bishop, Local Government Minister Simon Watts, and Commerce Minister Cameron Brewer announced changes including independent regulation by the Commerce Commission and a requirement for Crown agencies to pay levies. The reforms aim to address long-standing infrastructure funding gaps that have constrained housing development and strained existing services. Consultation responses highlighted concerns over over-charging and inconsistency, prompting adjustments to the proposed levy area structures.
Councils will establish separate levy areas where infrastructure costs vary significantly, replacing the previous proposal of broad levy areas with high-cost overlays. This change responds to developer concerns about cross-subsidisation and unpredictability in charges. The revised approach ensures levies better reflect actual infrastructure servicing costs in different locations while maintaining council flexibility for long-term planning. The Government will introduce the Local Government (Infrastructure Funding) Amendment Bill in early 2027 for further public input.
Core Crown agencies, including the Ministry of Defence and Ministry of Justice, will now be required to pay development levies under the new system. Previously, only Crown entities like Kāinga Ora and NZTA contributed, creating inconsistency. The change ensures that Crown-led projects, such as schools or hospitals, contribute to local infrastructure demands they generate. Growth-related costs will now be shared regardless of whether development is driven by private or public sectors.
The Commerce Commission will regulate the new system with a $30 million allocation in Budget 2026, operating between 2026 and 2030. The regulator will set consistent levy calculation methodologies, enforce disclosure rules, and monitor compliance. Councils will implement levies after the Commerce Commission finalises methodologies, with flexibility to adopt the system up to 2030. Levies will cover infrastructure such as water supply, wastewater, stormwater, transport, reserves, and community facilities.