Govt Unveils Infrastructure Funding Reforms to Accelerate Housing Development

Housing Minister Chris Bishop and Local Government Minister Simon Watts emphasize that these changes will create a more sustainable and efficient funding system to support urban growth.

The New Zealand Government has announced major reforms to infrastructure funding and financing, aiming to accelerate housing development and address the nation’s housing crisis. Housing Minister Chris Bishop and Local Government Minister Simon Watts emphasize that these changes will create a more sustainable and efficient funding system to support urban growth.

A New Approach to Housing Growth

“Fixing New Zealand’s housing crisis is crucial for lifting economic growth, boosting productivity, and improving living standards,” said Minister Bishop. “The Government’s Going for Housing Growth programme focuses on resolving the fundamental challenges of land supply, infrastructure, and growth incentives.”

The programme is structured into three key pillars:

1. Freeing up land for development by removing unnecessary planning barriers.
2. Enhancing infrastructure funding and financing to support sustainable growth.
3. Providing incentives for communities and councils to enable expansion.

“In July, we announced changes under Pillar 1 that will allow cities to grow both upwards and outwards more easily,” said Minister Bishop. “Now, we are tackling the critical issue of infrastructure funding under Pillar 2.”

The Need for Infrastructure Investment

New Zealand’s urban expansion has been constrained by outdated funding mechanisms, which have made it difficult for councils to recover the costs of essential infrastructure like water, transport, and community facilities. “You can’t build housing without the necessary infrastructure,” said Minister Watts. “The current system places an unfair burden on existing ratepayers or, worse, results in fewer houses being built at all.”

The Government aims to shift towards a system where growth pays for growth, ensuring that infrastructure investment keeps pace with demand. This approach will help lower land costs, reduce incentives for land banking, and create a more responsive housing market.

Key Changes to Infrastructure Funding and Financing

The Government is introducing five key reforms to improve the funding and financing toolkit for urban development:

1. Replacing Development Contributions with a Development Levy system – This new system will allow councils and infrastructure providers to recover costs from developers in a proportional manner over the long term. Levies will be calculated based on total growth-related capital expenditure and expected growth levels.
2. Introducing regulatory oversight of Development Levies – To ensure fairness and transparency, new regulations will limit local authorities’ discretion in setting levy methodologies and project cost allocations.
3. Expanding the flexibility of targeted rates – Councils will be allowed to set targeted rates specifically for new developments and combine them with levies where projects serve both existing residents and new growth.
4. Enhancing the Infrastructure Funding and Financing (IFF) Act – The Act will be refined to improve its effectiveness, particularly for developer-led projects, under the leadership of Parliamentary Under-Secretary Simon Court.
5. Broadening funding tools for major transport projects – The IFF Act will be extended to include cost recovery mechanisms for large-scale transport initiatives, such as those led by NZTA.

“These changes will modernize how we fund urban growth,” said Minister Watts. “By shifting to Development Levies, we provide certainty for developers and flexibility for councils, ensuring infrastructure is delivered efficiently.”

Next Steps and Implementation Timeline

The Government is now engaging with councils, developers, and other stakeholders to finalize the details of these reforms. Legislation will be introduced to Parliament in the second half of 2025, with the goal of enacting the new system by mid-2026. Full implementation is expected in 2027.

“These changes, alongside our Local Water Done Well reforms, will remove key constraints on infrastructure delivery and ensure that land zoned for housing is developed efficiently,” concluded Minister Bishop. “With these improvements, we are laying the groundwork for a more sustainable and responsive housing market.”