Under the Local Government Act, councils are required to implement a Development Contributions Policy to help fund growth-related infrastructure. As the cost of growth continues to climb, many councils across Aotearoa are relying more heavily on development contributions (DCs) to finance future expansion.

But while DCs can support growth, they also risk stifling it – shaping the future of our cities and towns in the process.

Introduced in 2002, DCs were designed to help councils recover infrastructure costs by charging developers upfront for projects supporting growth areas. But the link between the fees collected and the infrastructure delivered has weakened. Developers – and by extension, homebuyers – often pay for infrastructure located far from their projects or decades from delivery.

The result? An unpredictable landscape that deters investment and undermines trust in the planning system.

Incentives that work

Some councils are using development contributions (DCs) strategically to spur growth. In Southland, DCs have been under general remission since 2015 to encourage regional development.

Hamilton City Council offered a full remission in 2023 for buildings over six storeys in the city centre to drive intensification. In Christchurch, 100 per cent DC rebates introduced in 2014 within the Four Avenues helped breathe life back into the quake-damaged CBD.

By 2020, the scheme had supported more than 1,100 new homes and rebated $13.5 million – demonstrating the impact of targeted incentives.

Costs that deter

Contrast this with Auckland’s Drury, where a 289 per cent increase in DCs in 2023 pushed fees per home to over $100,000.

Framed as part of a long-range infrastructure plan, the hike sparked criticism over fairness and feasibility.

Developers who bought land based on earlier fees now face huge, unexpected costs – with no certainty on when infrastructure will be delivered. While the council claims it won’t affect housing prices, those costs inevitably flow through to the buyer.

Symptom of a bigger problem

The issue isn’t just how DCs are calculated. Councils are underfunded and politically constrained in raising rates, so many have no choice but to look for alternative funding measures. In this environment, DCs become a convenient but flawed fix.

The government’s proposed shift to a development levy system signals a potential turning point. While not a silver bullet, we hope it is a step towards a smarter funding model that prioritises consistency, accountability, and strategic investment.

Crucially, the introduction of an independent regulator – a recommendation of Property Council New Zealand – could bring the national oversight the system so badly needs.

A regulator would ensure that levies are applied fairly, calculated using standardised methodologies, and reinvested into infrastructure that directly supports the areas generating the fees.

Ring-fencing contributions is another vital change. Fees collected in one suburb should no longer be used to fund infrastructure elsewhere. This change aims to restore trust in the system by ensuring contributions are fairly invested in the communities that generate them.

Certainty over cheapness

Let’s be clear: a new system won’t necessarily make development cheaper – but it will offer greater predictability. For developers, certainty is as important as price. Advance notice of levy increases, phased rollouts, and alignment with national priorities would help create a more stable, investment-ready environment.

In time, higher infrastructure costs could be absorbed through lower land values – but only if the system is applied consistently and transparently across the country.

With the local Government (Infrastructure Funding) Bill expected later this year, now is the time to pause and reset. Councils should align their policies with national reform – not push ahead with inconsistent, piecemeal policies.

We need a system that delivers certainty, consistency, and transparency. One where levies fund the communities they come from, and where both councils and developers can plan with confidence.

New Zealand has an opportunity to get growth right. Let’s not waste it.

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Property Council New Zealand is the one organisation that collectively champions property. We bring together members from all corners of the property ecosystem to advocate for reduced red tape that enables development, encourages investment, and supports our communities to thrive.