Supporting urban growth with improvements to infrastructure funding and financing tools

Published 28 Feb 25
The Government has released the second stage of the Going for Housing Growth programme (GfHG), with improvements to infrastructure funding and financing tools to help get more housing built.
Replacing development contributions with a development levy system
This is the most significant change being made. Shifting to development levies will provide councils with more flexibility to charge developers for the overall cost of growth infrastructure across an urban area – and ensure that ‘growth pays for growth’.
Councils will still be required to use identified infrastructure projects to calculate levies. However, councils will be able to adapt plans to respond to growth and use levy revenue to build the infrastructure needed to support housing and urban development.
Development levies will be subject to regulatory oversight and councils will need to ensure they’re setting appropriate charges.
Making changes to improve the Infrastructure Funding and Financing Act
The government is also making a number of amendments to improve the effectiveness of the IFF Act, particularly for developer-led projects. This includes broadening the scope of the IFF Act and simplifying the levy development and approvals process.
Improving the flexibility of targeted rates for growth infrastructure
In addition, the government is making changes to enable a council to set targeted rates that apply when a rating unit (for example, a separate property) is created at subdivision stage. This will allow councils to set targeted rates that apply only to new developments, or use targeted rates and development levies together where projects benefit existing residents and provide for housing growth.
As a package these changes will provide councils, developers and other infrastructure providers with a flexible funding and financing toolkit to respond to growth pressures and deliver infrastructure to land zoned for housing development. This is expected to reduce the current cross-subsidisation by ratepayers.
Councils will continue to have discretion about which tools they use in certain circumstances, but regulatory oversight will ensure councils are setting appropriate charges in line with a ‘growth pays for growth’ approach.
The legislation to implement these changes to infrastructure funding and financing tools is expected to be introduced in September 2025, with the aim of being enacted in mid-2026. There will be opportunities for public feedback as part of this process.
Read more about the proposed changes
Read the Pillar 2 announcement on the Beehive website(external link)