Rare consensus on development levies delivers a real win, just not yet

A rare moment of consensus

When councils, developers, builders and the government all agree on something in New Zealand infrastructure policy, it usually means the status quo has become genuinely indefensible. That is where the development contributions system has landed.

The government has confirmed it will scrap the existing development contributions regime and replace it with a new development levies system, with councils able to start charging from 2029 and required to do so from 2030. Housing Minister Chris Bishop, Local Government Minister Simon Watts and Commerce Minister Cameron Brewer confirmed the next steps on 16 September 2026. The reception was almost uniformly warm, which tells you how much everyone wanted the old system gone.

An $11 billion hole falling on ratepayers

The core problem is structural. Under the current framework councils can only charge developers a contribution toward infrastructure that is already planned and costed. The result is chronic under-recovery, because final costs blow past what was planned, and opaque charges that vary wildly between councils.

That has produced an $11 billion gap between planned growth-related capital spending and expected cost recovery across the decade to 2031. That shortfall lands on existing ratepayers. As the NZ Herald reported, the system is “rigid” and its pricing methodology “opaque and unwieldy”.

Property Council chief executive Leonie Freeman put it plainly: “Everybody involved had issues with the system. The main thing from many of the developers was the [lack of] transparency, and that money was not necessarily being spent in the area where it was collected.”

What the new regime actually changes

The reform fixes real things. Every council will use the same methodology, overseen by the Commerce Commission as independent regulator. Councils will be able to plan ahead and recover a fair share of long-term infrastructure costs rather than being trapped by already-costed projects.

Crucially, core Crown agencies including Defence, Justice and Corrections will pay levies for the first time, closing a long-resented loophole. LGNZ president Rehette Stoltz called it “the first acknowledgement that the government needs to help pay for their share of local infrastructure cost.”

Freeman welcomed the independent oversight: “if you’re paying a levy, there should be a clear connection between your development and the infrastructure you’re being asked to fund.”

The timeline is the problem

Here is where it gets uncomfortable. Legislation is not introduced until early 2027 and passed by end of that year. Councils can only start transitioning from 2029, with the old system disestablished in 2030. That leaves the broken model in place for another three to four years.

Auckland mayor Wayne Brown was blunt: “This change can’t come soon enough. 2030 is too long to wait for the new system and councils need these tools now.”

The sequence is telling. The government accelerated housing through fast-track planning before fixing the funding model, then scrambled to patch the immediate cost problem, and is now delivering the structural fix well after the pressure began. Bishop has insisted his fast-track charges are not a new tax, but the band-aid exists precisely because the permanent fix is years away.

What it means for anyone pricing a project now

For a developer costing a project in 2026, none of this helps yet. You are still working under the opaque, inconsistent regime the reform is meant to kill. Master Builders warned in a February 2026 submission that the current system is “increasingly opaque, unpredictable, and difficult to apply consistently, undermining development feasibility.” They flagged that levy liability must be fixed at a defined consenting stage, that mandatory notice periods are needed to stop price shocks, and that double charging during transition must be prevented.

There is also a gap the reform simply does not fill. As Brown noted, the changes “do nothing to help councils recover the operating costs that come with that growth. Either growth pays for all the costs of growth or it’s just a slogan.” Levies fund building the pipe, the road and the reserve. They do not fund maintaining them.

Freeman summed up the cost of the wait: “Property is a long game. Projects are planned, financed and delivered over many years, so uncertainty has a real cost.” The reform is the right one. The problem is that the certainty it promises arrives after most of the projects straining the system today are already built, sold, or stalled.

Sources

• ‘Can’t come soon enough’: Councils and developers welcome revamped levy for infrastructure (2026-09-17)
• Councils to be allowed to charge developers with new levy from 2029 (2026-09-16)
• Councils to be able to charge developers with new levy from 2029 (2026-09-16)
• Bishop says his fast-track charges are not new, not a tax, and certainly not a ‘new tax’ (2026-09-16)
• Next Steps Confirmed For Development Levy Reform (2026-09-16)
• Government says ratepayers have been footing $11b infrastructure bill, promises new levy (2026-09-16)
• Registered Master Builders Association submission on Development Levies System (2026-02)