Development levies
The Government is proposing to replace the current development contributions system with a new development levy system as part of its “Going for Housing Growth” programme.
The intention is to make it easier and more consistent for councils to recover the cost of infrastructure needed to support growth, such as water services, transport, reserves, and community facilities.
In simple terms, this means the cost of new infrastructure required for development would fall more on those that create the demand for those services (ie developers). As the development levy system is intended to allow Councils to more accurately recover these costs, this should make it less likely that Councils will under-collect levies and have to rely on rates to make up any shortfall.
The draft legislation also proposes independent regulatory oversight, likely by the Commerce Commission, to help ensure levies are set using a fair and transparent methodology.
What’s different from the current system
Under the current development contributions approach, councils can only charge for specific, identified infrastructure projects that support a development. This requires councils to define exact projects and costs in advance.
The proposed development levy system takes a broader approach. Charges would be set across a defined levy area (for example, a whole town, urban area, or district) based on the overall cost of providing enough infrastructure capacity for growth.
This is intended to:
- Provide more certainty about funding over time
- Give councils more flexibility to move funding between projects as priorities change
- Create a more predictable system for developers
However, it also relies on good growth forecasting, which introduces new challenges and risks that councils will need to carefully manage.
How levy areas would work
Each infrastructure service (such as drinking water, wastewater, stormwater, transport, reserves, and community facilities) would have one or more levy areas.
In some cases, a levy area would cover an entire district or urban community. Where there are distinct communities using different infrastructure networks, councils could establish separate levy areas.
Developers building within a levy area would pay a share of the cost of growth-related infrastructure for that area.
If development occurs outside areas planned for growth, higher levies may apply to reflect the additional cost of extending services to those locations.
What this means for councils
From a council perspective, development levies are intended to improve our ability to fund infrastructure in step with growth.
They should help reduce financial risk when development occurs in unexpected locations and provide more flexibility in how infrastructure funding is allocated over time.
Councils would need to adopt new levy policies and apply a nationally defined methodology when setting charges, alongside regulatory oversight to support consistency and fairness.
When this could happen
Public consultation on the draft legislation has now closed.
The Government expects to introduce a Bill in mid-2026, with the new system potentially coming into force in early 2027. A three-year transition period is proposed, meaning councils that choose to implement development levies would have until 2030 to adopt levy policies and begin charging levies. Some councils could begin charging levies from around 2028, once policies are in place.
Find out more
Public submissions on the draft legislation closed on 20 February 2026. More information about the proposal and next steps is available on the Department of Internal Affairs | Te Tari Taiwhenua website.
You can read Council’s submission on the proposals here:
Horowhenua District Council - Submission on exposure draft of the Infrastructure Funding and Financing Amendment Act(PDF, 329KB)
Horowhenua District Council - Submission on Local Govt Act - Development Levies Exposure(PDF, 578KB)
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