New Zealand widens levy funding for infrastructure

New Zealand's Parliament has passed the Infrastructure Funding and Financing Amendment Bill, expanding the use of levy-backed financing for infrastructure linked to development.

The legislation changes the framework councils, developers and infrastructure providers use to fund projects such as roads, water networks and transport links. It aims to make the existing regime easier to use by cutting approval barriers and widening the types of projects that can be financed under the model.

Under the system, private investors fund infrastructure upfront and recover the cost over time through levies on properties that benefit from the work. Ministers say the approach reduces pressure on council balance sheets, which has limited local authorities' ability to support housing growth even when developers are ready to build.

Housing Minister Chris Bishop said the changes sit within the government's wider housing growth agenda, particularly the strand focused on infrastructure funding and financing.

"Fixing the basics and building the future for New Zealand requires us to tackle the barriers that have prevented the delivery of new homes and projects that will grow the economy, improve living standards and create jobs," Bishop said.

He said the government's Going for Housing Growth programme has three pillars: land supply, infrastructure finance, and stronger financial incentives for councils to support housing development.

The amendment is intended to address low take-up of the original Infrastructure Funding and Financing Act. Ministers said the legislation had been harder to use in practice than intended, with complexity, cost and administrative hurdles restricting adoption. Only three levies have been authorised under the Act so far.

Bishop said the revised law would simplify the process and broaden the project base.

"Pillar Two addresses a key obstacle to housing growth: developers are often ready to build new homes, but councils lack the borrowing capacity to deliver the roads, water and other essential infrastructure needed to support them.

"Instead of relying on council borrowing, the Infrastructure Funding and Financing Act allows infrastructure to be financed by private investors and repaid over time through levies on the properties that directly benefit from it.

"The Act was inspired by the successful Milldale development north of Auckland, where this model unlocked the infrastructure needed to support thousands of new homes for Kiwi families.

"However, the Act has fallen short of its potential and proven too difficult to use in practice. Unnecessary complexity, cost and bureaucratic hurdles have limited uptake, with only three levies authorised under the Act to date.

"The changes passed today will make the Act faster, simpler and more practical by removing unnecessary barriers, streamlining the levy approval process and broadening the range of infrastructure projects that can be funded under this model.

"This includes transport projects delivered by the New Zealand Transport Agency and KiwiRail, as well as water services infrastructure delivered through the new water organisations."

Broader scope

One of the more significant operational changes is the expanded list of eligible projects. Transport schemes delivered by the New Zealand Transport Agency and KiwiRail can now be financed through the levy model, alongside water services infrastructure delivered by the new water organisations.

The bill also allows levy revenue to cover ongoing operational and maintenance costs, rather than limiting charges to initial capital expenditure. Ministers argued this should make projects more attractive to backers and encourage planners to consider full lifetime costs at the design stage.

Parliamentary Under-Secretary Simon Court said that change would alter the economics of future schemes.

"Allowing ongoing operational and maintenance costs to be recovered through levy revenue incentivises a whole-of-life design focus that will maximise value for money and make the model more attractive for future projects," Court said.

Approval process

Another change affects the role of councils and other infrastructure authorities in the approval chain. The government said those bodies will no longer be able to hold up proposals unnecessarily when applications meet the statutory requirements.

The adjustment is intended to give developers greater certainty over timing and lower the risk that infrastructure funding arrangements stall after planning has advanced. In practical terms, it may reduce one of the obstacles that has slowed projects in areas where housing demand is rising but public borrowing capacity is constrained.

Councils have faced growing pressure to finance infrastructure for expanding communities while managing debt limits and service obligations. The levy-backed model offers a way to shift part of that burden away from municipal borrowing, while still tying repayment to the households or properties that benefit from the new infrastructure.

The government has linked the approach to the Milldale development north of Auckland, where ministers said the model helped unlock infrastructure for thousands of homes. The example has featured in official efforts to show how private finance can bridge infrastructure gaps that might otherwise delay residential construction.

The amendment bill forms part of a broader policy effort to increase housing supply and better align infrastructure delivery with urban expansion. Alongside planning reforms and incentives for councils, the financing changes are intended to reduce bottlenecks that have held back development even where land and market demand are available.

"The bill also means councils and other infrastructure authorities will no longer be able to unnecessarily hold up proposals that meet the requirements of the Act. That will give developers greater certainty, reduce delays and help get more infrastructure projects underway.

"With these improvements, the Infrastructure Funding and Financing Act is now a much more practical option for councils, developers and infrastructure providers looking to get infrastructure projects off the ground. We encourage the sector to make full use of it.

"By making it easier to deliver the roads, water infrastructure and transport links our growing communities need, these changes will enable more homes to be built, support the economy and ensure growth pays for growth."