Govt Advances Major Infrastructure Funding Reforms to Boost Housing Growth

Minister Bishop says the reforms work hand-in-hand with the Government’s broader planning changes.

 

The Government is pressing ahead with a major overhaul of the systems used to fund and finance infrastructure, aiming to enable faster housing development and support long-term urban growth across New Zealand. Housing Minister Chris Bishop, Local Government Minister Simon Watts, and Commerce and Consumer Affairs Minister Scott Simpson say the changes form a core part of the Government’s wider Going for Housing Growth programme, designed to tackle the structural barriers behind New Zealand’s housing crisis.

A New Approach to Unlock Housing Supply

Minister Bishop says the reforms work hand-in-hand with the Government’s broader planning changes.

“The Government’s changes will create a flexible funding and financing system to match a new, flexible planning system,” he said. “Our Going for Housing Growth programme focuses on fixing the fundamentals of our housing crisis: land supply, infrastructure, and incentives for growth.”

The programme is built around three central pillars:

• Pillar 1: Freeing up land for development by removing restrictive planning barriers

• Pillar 2: Improving infrastructure funding and financing to support urban growth

• Pillar 3: Providing incentives for councils and communities to support new housing

The latest announcements sit under Pillar 2, with reforms targeting the financial roadblocks that often slow or prevent development from scaling.

Key Legislative Reforms Underway

The Government confirmed three major steps:

1. Introduction of the Infrastructure Funding and Financing (IFF) Amendment Bill

2. Public consultation on the exposure draft of the Local Government (Infrastructure Funding) Amendment Bill, which replaces development contributions with a new development levies system

3. Cabinet’s in-principle decision for the Commerce Commission to become the independent regulator of development levies

These reforms aim to provide clearer investment signals, reduce administrative barriers, and give councils and developers more tools to deliver infrastructure essential for new housing.

Making the IFF Act Easier and More Effective

The IFF Amendment Bill seeks to strengthen the existing Infrastructure Funding and Financing Act by removing barriers that have limited its use since its enactment.

To date, only two IFF levies have been established — both proposed by local councils rather than developers. Bishop says this shows the Act has been under-utilised and needs to be made more practical.

Key improvements include:

• Simplifying the levy approval process

• Expanding the types of infrastructure eligible for funding, including transport projects delivered by NZTA or KiwiRail

• Allowing use of IFF levies for new water infrastructure delivered by upcoming water service entities

“These changes will make the Act more viable and flexible so councils and developers can get on with building the infrastructure our growing communities need,” Bishop said.

A New National System for Development Levies

Under the second major reform, the Government is releasing parts of the Local Government (Infrastructure Funding) Amendment Bill for public consultation. The Bill proposes replacing development contributions — widely used but often inconsistent — with a new nationwide development levies system.

Minister Watts says the new system will create clarity and fairness across regions, ensuring councils can properly recover infrastructure costs while giving developers more certainty.

Key features include:

• Ring-fenced levies for specific infrastructure services (water supply, wastewater, transport, etc.)

• Larger levy areas, covering broader geographic zones

• Optional additional charges for areas that are unusually expensive to service

• A standardised methodology for calculating growth-related infrastructure costs

• Provisions to support first-mover developers and help councils recover costs when infrastructure is owned by another organisation

The Government is seeking feedback not only on the exposure draft Bill, but also on technical regulations that will sit behind it.

Watts describes the reform as a “generational shift” in how New Zealand funds infrastructure and enables urban growth.

Long Consultation Timeline Ahead

Public submissions on the development levies system begin today and will run until February 2026, enabling detailed input from councils, developers, iwi, industry, and the public.

Following consultation, the Government intends to introduce the full, refined legislation to Parliament in mid-2026.

Commerce Commission to Provide Oversight

Cabinet has also agreed, in principle, to expand the role of the Commerce Commission, appointing it as the independent regulator for development levies.

Minister Simpson says the Commission is already well fitted for the role, having taken on economic regulation of water services — a system involving many of the same councils and water organisations.

Regulatory oversight will enhance transparency, fairness, and consistency in how levies are applied across the country.

Delivering Infrastructure for a Growing Nation

Taken together, the reforms are designed to give councils and developers a flexible, modern funding toolkit capable of addressing population growth and increasing housing supply at scale.

“Freeing up land is only part of the solution — we also need the tools to fund the infrastructure that makes new housing possible,” Bishop said. “These changes ensure both councils and developers can respond to growth pressures and help deliver the homes New Zealand desperately needs.”