The numbers are moving in one direction
Rates arrears are climbing across New Zealand’s major centres, and the enforcement response has shifted from letters to legal mechanisms that reach directly into property financing.
Auckland Council reported 42,902 households in arrears at the start of the 2025/2026 financial year, representing 6.6% of all rateable properties, up from 5.4% in each of the prior two years. Wellington City Council had 7,825 ratepayers in arrears at the end of September 2025, or 9.3% of its ratepayer base, carrying a total debt of $39 million.
In regional New Zealand, the picture is sharper. Wairoa District Council’s arrears more than doubled in a single year, from $952,000 in 2023/24 to $2.17 million in 2024/25. Across all five Hawke’s Bay councils, total arrears exceeded $9 million. Wairoa District Council chief executive Matt Lawson attributed the spike to disaster recovery, noting residents are “struggling in the aftermath of Cyclone Gabrielle.”
Councils have found the mortgage lever
The escalation that matters for property owners is not the arrears themselves but the enforcement mechanism councils are now deploying. Under the Local Government (Ratings) Act, councils are collecting unpaid rates directly from property owners’ mortgages, pulling millions in the past 12 months.
This is not a theoretical power. It means a landlord or developer carrying multiple properties with rates arrears can have their financing arrangements disrupted without a court order for property sale. The mortgage deduction route is faster, cleaner, and harder to contest.
The Taxpayers’ Union’s Sam Warren put it bluntly: “We’ve seen some of the steepest rates increases in the last 30 years – and you want to kick them while their down?” He argued councils should “cut the waste and reduce the rates” rather than pursue debtors.
Rates are rising faster than the economy can absorb
The arrears problem exists because rates have outpaced incomes for years. Stats NZ data shows rates rose 8.8% year-on-year in the September 2025 quarter. For 2025/26, councils announced an average increase of 8.4%, with Hamilton City at 15.5% and Wellington at 12%.
Fincap reported a 38.7% increase in the proportion of debt listings where local government is the creditor between 2021 and 2024. David Verry from North Harbour Budgeting Services noted that while households were already stretched, “it was things like the rates bill that tipped them completely over the edge.”
A rate cap won’t fix the arithmetic
The government has signalled it is considering capping annual rates increases. In August 2025, Local Government Minister Simon Watts indicated a Cabinet paper would be taken before Christmas 2025. The politics are obvious. The financial logic is not.
S&P Global Ratings warned in March 2026 that rate caps “will erode the sector’s flexibility to raise revenues” and could “exacerbate leverage in the already highly indebted sector.” The agency estimated that councils’ discretionary spending could be as low as 10% of total expenditure, meaning cuts large enough to offset capped revenue would hit core services. S&P warned that weakening financial flexibility could pressure at least six council credit ratings.
Not a single one of New Zealand’s 78 local councils delivered a rate increase below 4% in 2024/2025. Of the 24 councils S&P rates directly, 18 project increases above 4% annually through to 2029.
What property owners actually face
The business story here is not about sympathy for struggling households. It is about a fixed cost line that is structurally rising, now backed by enforcement mechanisms that reach into mortgage accounts, with a government response that may cap future increases but will not reduce current obligations or accumulated arrears.
For commercial property owners and landlords, rates feed directly into outgoings. For developers holding undeveloped land, they compound holding costs. For retail landlords, they pass through to tenants already under pressure. And for anyone who falls behind, the council is no longer sending reminder letters. It is going to your bank.
The rebate scheme is not the answer. The maximum rebate is $805 against bills rising 8-12% annually, with strict income criteria that exclude most working households. The gap between what councils need and what ratepayers can bear is widening. Everyone still paying on time should understand they are subsidising the gap, and the subsidy is growing.
Sources
- RNZ: Thousands of households in arrears on council rates (2025-10-22)
- NZ Herald: Hawke’s Bay rates arrears concern in Wairoa as amount owing doubles in one year (2025-03-13)
- Scoop: Councils Going After Mortgages For Unpaid Rates, Collecting Millions (2025-04-28)
- RNZ: Councils expecting influx of rates help requests as households struggle with rising costs (2025-08-29)
- Interest.co.nz: Local councils face credit overhang, S&P Global Ratings says (2026-03-30)