Developers using the Government’s Fast-track system could face higher infrastructure charges as councils are handed stronger powers to recover the cost of roads, water, wastewater and other services needed to support major new developments.
The Government is strengthening development contribution rules amid concerns that fast-tracked projects can move ahead of council infrastructure plans, potentially leaving ratepayers carrying costs associated with new growth.
Housing and Infrastructure Minister Chris Bishop and Local Government Minister Simon Watts say the changes are designed around a simple principle — growth should pay for growth.
Under existing rules, development contributions are generally locked in once a resource consent application is made.
The changes will allow councils to amend their development contribution policies after an eligible Fast-track application has been lodged, giving local authorities greater ability to recover infrastructure costs created by developments that were not anticipated when councils prepared their original growth plans.
Fast-track growth creating infrastructure pressure
The issue has become increasingly important as the Fast-track system accelerates housing, infrastructure, mining, quarrying, aquaculture and renewable energy developments around the country.
The Government said last month that 31 projects had already been approved through the system, representing billions of dollars of investment and potentially tens of thousands of jobs.
But approving a development does not make the infrastructure required to service it disappear.
New subdivisions can require additional roads, intersections, drinking water capacity, wastewater systems and other council infrastructure.
Problems can also emerge when a development is approved outside the sequence councils had planned for growth, or when it consumes infrastructure capacity originally intended to service development elsewhere.
The Government says councils have warned they cannot always effectively recover those additional costs under the current system.
Ratepayers versus developers
At the heart of the debate is who ultimately pays.
If development contributions do not cover the infrastructure costs generated by new growth, councils can face pressure to find the money elsewhere — potentially shifting part of the burden onto existing ratepayers.
That concern has been particularly prominent in Auckland, where debate has intensified over the potential infrastructure costs associated with large greenfield Fast-track developments.
Auckland Council estimates cited publicly have suggested ratepayer infrastructure exposure from the wider Fast-track pipeline could reach as high as $1.5 billion, although Bishop has disputed that figure.
The new rules are intended to give councils another mechanism to ensure developers make an appropriate contribution towards the infrastructure their projects require.
Councils can revisit the bill
Under the changes, councils will be able to amend development contribution policies where existing charges do not adequately reflect the infrastructure demands generated by an eligible Fast-track development.
Those amendments will need to be adopted within six months of Fast-track approval and published as soon as practicable.
The Government is also addressing developments that create costs across council boundaries.
Where one council collects contributions relating to infrastructure provided by another local authority, the relevant share will be able to be transferred between councils.
That could become increasingly important in fast-growing areas where housing, transport and water networks cross traditional local government boundaries.
Not every Fast-track project affected
There will be important exemptions.
Fast-track developments already approved when the changes take effect will not be captured.
Projects where a substantive application has already been lodged with the Environmental Protection Authority will also be excluded.
Developers and councils will remain able to negotiate development agreements, providing another avenue for determining who pays for infrastructure and potentially providing greater certainty before projects proceed.
Bigger reform coming in 2029
The changes are an interim measure rather than the Government’s final destination.
The existing development contributions regime is expected to eventually be replaced by a new Development Levies system, planned to become operational from 2029.
The Government wants infrastructure financing rules to become more flexible as it simultaneously liberalises planning and encourages significantly more housing and development.
For councils and ratepayers, however, the critical question will be whether those new tools genuinely prevent the costs of accelerated development being transferred onto communities that are already facing substantial rates increases and infrastructure deficits.
For iwi, hapū and Māori communities, there is another important dimension.
Fast-track developments can have significant consequences for whenua, housing, transport networks, water infrastructure and the future shape of rapidly growing communities.
As more developments move through the Fast-track system, the debate will therefore increasingly be about more than how quickly New Zealand can build.
It will also be about where growth happens, who benefits from it — and who ultimately pays for it.
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