The Government has released its exposure draft for a completely overhauled development levies system, the biggest rethink of how we fund growth infrastructure in over two decades. And naturally, in the development sector, the big question is:
Will this make it more expensive to build in New Zealand?
The honest answer: possibly.
But as always with infrastructure funding, the devil is in the detail—and this draft is packed with it.
The big shift: From project-by-project costs to levy areas
The headline change is the move from today’s highly granular DC system to a simpler, catchment-based model built around large levy areas.
Instead of charging based on the exact pipes, roads, and reserves that a development triggers, councils will now pool infrastructure costs across a whole levy area and most developments will pay the same base charge for each service.
This means:
- areas with historically low DCs—often brownfield or well-serviced suburbs—could see increased costs,
- while growth areas struggling with high per-unit charges may see relief as costs are spread more widely.
Although, the new system also allows ‘high-cost overlay’ levies to be charged on top of the base levy for areas where infrastructure costs are significantly higher.
The scheme is built on a set of consistent levy services – transport, water, wastewater, stormwater, reserves and community infrastructure – which will each have their own charge inside every levy area. That part isn’t new, but the way councils design those levy areas certainly is. Each area must be anchored around an “urban community,” but it can stretch into neighbouring suburbs or even rural edges if they depend on the same network. Auckland, because Auckland is Auckland, must split itself into multiple levy areas per service, while other councils will generally need to start with at least one main area and justify anything more complex.
The draft introduces one of the more promising improvements: standardised growth units and a consistent pricing methodology. Instead of councils inventing their own formulas, they will all be required to calculate leviable costs in the same three broad steps:
- identify eligible growth projects across the levy area,
- divide by expected growth units,
- and then apply any adjustments like external funding or credits.
On paper, this should mean fewer surprises but the catch is that forecasting growth accurately is notoriously difficult and estimating infrastructure capacity could easily become overinflated. This is why Property Council will be pushing hard for clear regulations around assumptions, methodology and audit requirements.
The draft allows for development agreements and bespoke levies, giving councils and developers the ability to cut tailored deals where projects sit outside levy areas or need infrastructure ahead of planned sequencing. These agreements also tie into a new first-mover reimbursement framework.
Hovering over all of this is the question of independent oversight. The Government has signalled, at least “in principle,” that the Commerce Commission would become the regulator. While the consultation paper stops short of fully committing, it does confirm that standardisation will be backed by regulation. Property Council strongly supports independent regulation, though we’ll be testing with members whether the Commerce Commission is the right agency to take on the role.
Consultation runs through to February 2026, legislation will be introduced mid-2026, and councils can start charging the new levies from 1 July 2028. The old development contributions system will hang on until 2030 to allow for transition, and any big levy increases will be phased in over three years.
To find out more detail and give your feedback, join our development levies taskforce or come along to our member workshop at 10 am on 15 December 2025. Contact Bella for more information.
Author | Bella Leddy
As an Advocacy Advisor, Bella supports the development of policy and advocacy initiatives that reflect the real-world experience of our members.
With a Bachelor of Laws and Politics from Otago University and previous experience as a policy intern at the Department of Internal Affairs, Bella brings both a sharp analytical mind and a genuine passion for public policy. She’s particularly energised by engaging with members to ensure our advocacy is grounded in industry insight and practical solutions.
Extroverted, thoughtful and service-focused, Bella thrives in roles that connect people and ideas. Outside the office, she channels her energy into teaching group fitness classes – including yoga, pilates and spin – and is always up for a good political yarn.
