Two key developments last week will reshape how infrastructure and development is funded in New Zealand.

The Local Government (System Improvements) Amendment Act received Royal Assent (see our article here), amending the Local Government Act 2002 (LGA) to give councils a new, purpose-built development contributions tool for fast-track developments.

At the same time, the Government confirmed the next steps for its development levy reform, with the Local Government (Infrastructure Funding) Amendment Bill to be introduced in the first quarter of 2027. Development levies will eventually replace development contributions, giving councils and water organisations greater flexibility to recover the forecast cost of growth infrastructure across defined levy areas, under independent regulation by the Commerce Commission. 

A bespoke development contributions regime for fast-track developments

The LGA amendments are intended to address the risk that fast-track developments can outpace a council's usual infrastructure planning cycle, and can spill across council boundaries, leaving councils under-recovering infrastructure costs under their existing development contributions policies.

Who does the new regime apply to?

All developments that are approved under the Fast-track Approvals Act 2024 after 19 September 2026 will be captured by the new regime, unless a panel has already issued a substantive decision granting resource consent approval, or issued a draft decision or draft conditions in relation to the approval, before that date. Those developments will continue to be subject to the old development contributions regime.

How the new regime works

Councils can now impose development contributions on a fast-track resource consent holder by amending an existing development contributions policy, or adopting a new one, within six months of a panel granting approval for a fast-track development.

Development contributions may be imposed if:

• the effect of the development (on its own or in combination with other developments) is to require new or additional assets, or assets of increased capacity; and

• as a consequence, one or more councils need to incur capital expenditure (or financing costs) to appropriately provide for reserves, network infrastructure, or community infrastructure.

The regime also includes a safeguard against double recovery: a development contribution cannot be imposed for infrastructure that a developer or third party:

• has already provided;

• has undertaken to provide (for example through conditions of consent in the substantive application process); or

• has agreed to provide funding for (for example, under a development agreement).

Councils are not required to consult with the developer or the wider public before adopting a development-specific development contributions policy but must notify the developer as soon as practicable after adopting it and make the policy publicly available. The usual reconsideration and objection processes will apply to development contributions imposed under the new regime, giving both councils and developers the same established mechanisms to resolve disputes as apply under the existing development contributions framework.

Cross-boundary developments get their own mechanism

Councils can also impose development contributions to fund infrastructure required in a district other than the one in which the development is located, where there is a "cross-boundary development" - defined as a development located within the district of one territorial authority but relating to community facilities provided by another, adjacent territorial authority. Where this applies, the two councils can agree that the "host" council collects the contribution and pays an agreed share to the "service provider" council. This is a new concept - nothing like it exists in the current development contributions regime. Objection rights are adjusted to match: where the cross-boundary rules apply, a developer can only object to the host council, not the service provider council.

Our thoughts

• The new regime gives councils a purpose-built mechanism to ensure that unanticipated infrastructure demand generated by fast-track developments is funded by way of development contributions, reducing the risk that councils are left to absorb unbudgeted costs to service growth.

• Because a council can adopt or amend its policy up to six months after approval is granted, without consulting the developer beforehand, developers may face previously unbudgeted-for costs, complicating financing and pre-sale arrangements that depend on a previously fixed cost base. This will be a particular concern for applicants whose projects are already well into the panel determination process. For new projects yet to enter the fast-track pipeline, we expect applicants will seek to factor in potential development contribution costs. However, such costs may be unknown until six months after the development is consented. To achieve more certainty, applicants may also look to enter development agreements or offer conditions of consent addressing infrastructure provision, rather than risk exposure to an uncertain development contribution requirement.

• Councils - many already stretched by existing planning, reporting, and transitional water services obligations - will need to assess what additional demands for infrastructure are generated by newly consented developments, and how the schedule of assets within the development contributions policy, and wider policy wording and schedule of charges, are updated in response. Aspects of the policy likely to require revision, in order to benefit from the Government’s changes, include:

  • Changing the policy wording about the “trigger” for assessing contributions. Most policies take the approach of requiring contributions on the first consent lodged for a development (which is typically a subdivision or land use consent). While the amendments will allow for the first (fast-track) consent to be assessed retrospectively under the updated DC policy, some councils may wish to consider deferring assessment even later, to the building consent stage, to allow more time to update their policy in response to fast track developments;

  • Updating the section 201A schedule of assets to include new projects or assets required as a result of the fast track development;

  • Potentially adding new (or expanding existing) contribution catchments to ensure that they cover the fast-track development land;

  • Recalculating the per unit contribution in the schedule of charges, to reflect changes to the schedule of assets.

• The new cross-boundary host authority/service provider mechanism is a new concept with no established practice to draw on, adding a further layer of uncertainty as the first cases test how it works in practice.

• There is an apparent gap for water organisations: the new pathway only applies to territorial authorities, meaning that a water organisation that has adopted its own development contributions policy or taken the relevant part of its council's policy as its initial policy cannot use the new development contributions mechanism. For water organisations that have not yet adopted a development contributions policy, this “gap” should be carefully considered. In order to attract the benefit of these new amendments, agreeing to rely on an extended council policy may be preferable to adopting a new / initial policy solely for water services - all of which are options under the Local Government (Water Services) Act 2025.

Get in touch

If you would like to discuss any of the above, and how the new regime may apply to you, get in touch with one of our experts.

Special thanks to Payge Swanson for her assistance in writing this article.