Councils to be allowed to charge developers with new levy from 2029

The government has confirmed it will let councils charge development levies from 2029, as it seeks to change the system by which infrastructure growth is paid for.Currently, councils charge developers a 'contribution' to help cover the costs of growth.But the development contribution system has long been criticised as inconsistent and inflexible, and leading to ratepayers cross-subsidising the costs of growth elsewhere.Councils are also under-recovering the cost of growth, with the gap between planned growth-related capital expenditure and the anticipated cost recovery estimated to be as high as $11 billion from 2021 to 2031.Housing minister Chris Bishop said the development contribution system would not work under the government's planning changes, which were designed to be more flexible."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."Councils would be able to charge development levies for water supply, wastewater, stormwater, transport, reserves, and community infrastructure.They will be able to start charging the levies from 2029, but will have to from 2030.Bishop said the new system, while still "complicated," would mean less cross-subsidising."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 properly paid for by by developers, and not cross-subsidised by other ratepayers," he said."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."The government, if re-elected, intends to introduce the legislation in early 2027 and pass it by the end of the year.Feedback on an earlier exposure draft had shown a desire for more detail on the levy calculation methodology.As a result, the Commerce Commission would be tasked with developing the levy calculation methodology, and be given the regulatory oversight of the new system.The core Crown and Crown entities would also be required to pay the levies."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," Bishop said.Commerce and consumer affairs minister Cameron Brewer said the transition period took into account that councils had two cycles to work it out, under their 2027 and 2030 long-term plans.The new legislation would go through a full select committee process. Bishop said Labour had been briefed by officials in 2025, admitting it was not recent but what was being proposed now was in line with what Labour had previously indicated support for.The government is currently amending legislation so councils can adjust their development contributions for fast-track projects. This is meant as an interim measure, until the development levy legislation passes.Asked how the levies fit into National's 'no new taxes' promise, Bishop insisted they were not 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 the devil would be in the detail of the new system, but it mattered for a responsive supply of urban land for housing."That is the ultimate curse of New Zealand, or has been for so long, is that we are not short of land. There's only 5 million of us, 5 million and change. We have plenty of land. We have a landmass the size of the United Kingdom, but we have designed a planning system and an infrastructure system that has just driven up land prices and therefore house prices to insane levels," said."We've got to fix it, and that's what this government is doing."