Housing Surge: Infrastructure Funding Reform

Hon Chris Bishop
Hon Simon Watts
Hon Scott Simpson

The Government is progressing its suite of reforms aimed at improving how infrastructure is funded and financed to support housing and urban growth across New Zealand, Housing Minister Chris Bishop, Local Government Minister Simon Watts, and Commerce and Consumer Affairs Minister Scott Simpson say.

"The Government's changes will create a flexible funding and financing system to match a new, flexible, planning system. Our Going for Housing Growth programme focuses on fixing the fundamentals of our housing crisis: land supply, infrastructure, and incentives for growth," Mr Bishop says.

Going for Housing Growth is split into three pillars:

Pillar 1: Freeing up land for development and removing unnecessary planning barriers,
Pillar 2: Improving infrastructure funding and financing to support urban growth, and
Pillar 3: Providing incentives for communities and councils to support growth.

"Today I am pleased to announce that under Pillar 2, the Government has:

Introduced the Infrastructure Funding and Financing (IFF) Amendment Bill to Parliament
Opened public consultation on an exposure draft of the Local Government (Infrastructure Funding) Amendment Bill, to replace development contributions with a development levies system, and
Agreed, in principle, to the Commerce Commission becoming the regulator for development levies - subject to further work to develop the details of this approach.

"These reforms are about enabling more housing to be built, faster. We know that freeing up land for development is only part of the solution - we also need better tools to fund the infrastructure that makes new housing possible.

"Public feedback is essential to ensure we get this right and the proposed legislation is fit for purpose.

Infrastructure Funding and Financing (IFF) Amendment Bill

"The IFF Amendment Bill will make it easier to use the Act by removing unnecessary barriers, simplifying the levy approval process, and broadening the scope of eligible infrastructure projects," Mr Bishop says.

"This includes transport projects delivered by the New Zealand Transport Agency or KiwiRail, and water services infrastructure delivered under new water organisations.

"Only two IFF Act levies have only been set up to date - and both times the levies were proposed by councils, not developers. We're making the Act more viable and flexible so councils and developers can get on with building the infrastructure our growing communities need."

Public consultation on the exposure draft of the Local Government (Infrastructure Funding) Amendment Bill

"We're also releasing an exposure draft of parts of the Local Government (Infrastructure Funding) Amendment Bill, which will replace development contributions with a new development levies system," Mr Watts says.

"This system will give councils greater flexibility to recover infrastructure costs and ensure consistency across the country.

Key features of the development levies system include:

Separate levies that are ring-fenced for each specific infrastructure service such as water supply, wastewater, and transport;
Specific 'levy areas', which are expected to cover pre-defined areas that are larger than most current development contributions catchments;
Discretion for councils to impose additional charges on top of base levies in specific locations that are particularly high-cost to service;
Developing a prescribed methodology that councils and infrastructure providers must follow to determine aggregate growth costs and standardised growth units; and
Consideration of different models of infrastructure delivery including support for first-mover developers and recovering council costs for infrastructure owned by another entity.

The consultation on the development levies system explains the underlying policy for the exposure draft bill and also seeks feedback on potential content for regulations.

"This is a generational shift in how New Zealand funds infrastructure and enables urban growth," says Mr Bishop.

"We want to hear from councils, developers, iwi and the public to make sure the system is fair, workable, and supports the housing growth New Zealand needs.

Public consultation begins today and runs through to February 2026. The Government intends to introduce further legislation in mid-2026, following the consultation period and feedback from the sector.

Regulatory oversight of development levies

In-principle decisions have also been made by Cabinet for the Commerce Commission to be the independent regulator for councils charging development levies, subject to further work.

"The Commerce Commission is already an established, independent economic regulator, and is well-placed to take on these new responsibilities," Mr Simpson says.

"The Commerce Commission has recently adopted regulatory duties in providing economic regulation for water services, covering similar regulated parties to the bodies that will charge development levies (councils and water organisations).

"This will help promote transparency and fairness in how levies are applied," Mr Watts says.

"As a package, these changes will provide councils and developers with a flexible funding and financing toolkit to respond to growth pressures and deliver infrastructure to land zoned for housing development," Mr Bishop says.

Notes to editor:

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