Last week, Watercare announced its decision to increase Infrastructure Growth Charges (IGCs) by 20 per cent from 1 July. Property Council has been saying this a lot lately, but the ICG increase is yet another cost to the property sector that could affect the viability of new development projects.
IGCs are one-off, per-unit charges paid by developers when new homes and developments connect to Auckland’s water and wastewater network. The charges are intended to fund growth-related infrastructure, including the reservoirs, pump stations, pipes and treatment facilities needed to support Auckland’s increasing population.
The 20 per cent IGC increase sits alongside Watercare’s broader pricing changes, including a 7.2 per cent increase in water supply and wastewater charges, affecting Auckland’s households and businesses. According to Watercare, the increases are necessary to help fund a $13.8 billion infrastructure programme over the10 years to 2035, as the city expands and demand on the network grows.
For wider context, the Watercare Charter, formed by Government and Auckland Council, sets regulatory minimums for increases to Watercare’s IGCs and other charges. The Watercare Charter provides interim measures following Watercare’s financial separation from Auckland Council in 2024, as it transitions to a new economic regulatory framework under the Commerce Commission, which takes effect in 2028 and promises greater transparency.
Consistent with the Watercare Charter, Watercare has been implementing the minimum IGC increases of 15.5% for 2026 and 20% for 2027. The regulatory minimum increase for 2028 is 11.2%.
What Property Council thinks
Property Council acknowledges the need for infrastructure investment and supports the principle that growth pays for growth. But the significant IGC increase comes at a difficult time for the sector. When the Watercare Charter was prepared, the Government and Auckland Council didn’t do extensive consultation or allow for any flexibility. It’s unlikely policymakers thought about the wider context for developers in 2026. On top of higher IGCs, rising costs of fuel, materials, labour, infrastructure charges (such as development contributions and utilities connection fees), insurance and Auckland Council’s rates are making it hard for new projects to stack up.
Last Friday, Property Council submitted feedback to the Commerce Commission (ComCom) on its proposals for monitoring the use of water services revenue across New Zealand. This follows our February submission on ComCom’s proposed Price-Quality Path for Watercare.Â
Our key message is that ComCom needs to ensure water services providers, including Watercare:
- provide clear disclosure of how charges are calculated
- demonstrate accountability for only recovering costs for infrastructure required to service new development, without double-dipping
- give certainty around future pricing to support developers to make long-term investment decisions
Along with these measures, Property Council is actively encouraging infrastructure providers to consider alternative mechanisms for funding, such as Special Purpose Vehicles and Public-Private Partnerships. Partnership arrangements can spread infrastructure costs out over time, rather than hitting developers with heavy up-front costs.
