Consultation on Major Issues for Local Government
Consultation on Major Issues for Local Government
Tuesday 9 December, 2025
As local government continues to face a barrage of new policies and legislation from central government, elected members and officers may need to choose between holidays and preparing submissions on significant proposals for fundamental changes to their structure and operations.
The new policy releases over the last couple of weeks were anticipated but will still invoke a rush of activity in the lead up to the Christmas / New Year break.
We have previously reported on the proposal to re-set local government by replacing regional councillors with Combined Territories Boards, for which consultation closes on 20 February with initial submissions sought by 20 January 2026. Our note on Simplifying Local Government: A draft proposal can be read here.
The Government has since made two significant local government announcements.
Development Levies
On 26 November, the Minsters of Housing, Local Government, and Commerce and Consumer Affairs jointly announced reforms aimed at improving how infrastructure is funded and financed to support housing and urban growth across New Zealand. See the consultation document here - Going for Housing Growth: Supporting Growth Through a Development Levies System.
As previously signalled the government proposes to replace development contributions with a development levies system with levies calculated across levy zones based on long-term growth costs. Councils will be able to impose additional charges in specific locations that are particularly high cost to service, but a prescribed methodology will be developed that councils and infrastructure providers must follow to determine aggregate growth costs and standardised growth units.
The Commerce Commission will become the independent regulator for councils charging development levies.
Feedback is sought on a partial exposure draft of the Local Government (Infrastructure Funding) Amendment introducing these changes by 5 pm on Friday 20 February 2026.
Rates Cap
In another anticipated move the Minister of Local Government announced on 1 December 2025 that the Government had agreed to progress a rates cap to help councils keep rates increases under control and reduce pressure on household budgets. The range of increase is proposed to be 2 – 4% per year applicable to general rates, targeted rates, and uniform annual charges, but not to water charges or other non-rates revenue fees and charges. This is intended to ensure councils can maintain essential services while balancing the need for sustainable growth with keeping rates increases affordable.
In extreme circumstances such as a natural disaster councils will be able to apply to a government appointed regulator for a rates increase beyond the higher end of the range.
The full regulatory model will take not take effect until 1 July 2029. But from 2027 councils will be required to consider the impact of rates caps on their long-term plans and report on areas of financial performance, like the cost of wages and salaries, and council rates as a percentage of local house prices and estimates of local infrastructure deficits. The Minister has warned that councils that implement higher rates ahead of the cap’s introduction might be subject to government intervention under the ministerial powers in Part 10 of the Local Government Act.
Targeted consultation with stakeholders to finalise implementation, local considerations, and legal details has begun and runs to February 2026.
Comment
There has been widespread speculation about the effect that these proposals, and those previously announced or already in force relating to planning and the provision of water services, will have on the future of local government in New Zealand.
If you would like assistance with submissions on these matters our Tompkins Wake team would be happy to help, please get in touch with one of our experts below.
