Local Government New Zealand is calling on the Government to remove the financial disincentives for councils to consent more housing.

“In this year’s Budget, we urge the Government to follow through on its coalition promise to consider sharing the GST paid on new builds,” LGNZ President Rehette Stoltz says.

“Growth comes at a cost for communities, who have to pay for infrastructure up front. All of the benefits of growth currently go to central government in the form of GST, new income tax and business taxes.

“The Government’s announcement on the fuel response this week signals that the cost of fuel is expected to remain high for some time. These are the sorts of additional cost pressures that councils are grappling with while maintaining services and building critical infrastructure communities expect.

“The coalition agreement between National and ACT committed this government to introduce financial incentives for councils, including considering sharing GST on new builds. Two Budget rounds have passed and we’re yet to see it happen.”

Infometrics Chief Executive and Principal Economist Brad Olsen says the Government must consider the pressure the local government sector is under as part of this year’s Budget priorities.

“Local government is not spared from any of the challenges that central government and wider society are facing, including the cost of living and increased costs due to the fuel crisis,” Olsen says.

“Sharing the GST on new builds with councils would allow more growth-related funding to be directed immediately back into the infrastructure needed in local communities, relieve some of that pressure and avoid increased rates for households.

“New Zealand has one of the most centralised tax systems in the world, with central government having access to almost 90 percent of all public funds and local government surviving on the rest, which comes predominantly in the form of rates.

“Meanwhile, local government has a responsibility to deliver and maintain 35% of all public infrastructure.”

“Although the Government has taken some important steps to support further infrastructure funding and financing, the current settings mean councils are required to pay for infrastructure up front. GST sharing on new builds would provide a more immediate link between delivering growth and paying for that growth.”

LGNZ and Infometrics estimate that Queenstown Lakes District alone could see $55.9 million returned to the region every year under this policy, assuming councils receive a 50% share of GST paid on the total build costs of residential newbuilds. Selwyn could expect $49 million and Tauranga $25.5 million.

“That money could deliver much-needed flood protection in vulnerable areas, roading and public transport infrastructure, or new public spaces. It would encourage councils to enable more housing, without existing ratepayers having to cover the infrastructure costs through higher rates,” Stoltz says.

“Changes to the structure of local government, like the Government’s recent Simplifying Local Government announcement, are not a silver bullet. Any future model of local government will still need sustainable ways to pay for the infrastructure and services their communities rely on.”

“With rates capping legislation on the horizon, GST sharing would give councils in highgrowth areas an additional tool to fund the infrastructure and services their communities need to keep up with demand,” Stoltz says.

Other Budget priorities for LGNZ include support for councils facing fuelrelated cost pressures and the implementation of the Ratepayers Assistance Scheme, which would give cost of living relief to thousands of households.

About LGNZ: 
LGNZ champions, connects and supports local government. We represent the national interest of councils across New Zealand to deliver more of what matters in their communities. LGNZ is involved in policy, reforms, programmes, and advocacy as well as providing advice, consultancy and training to councils and their staff.

Estimates of potential revenue through GST shared with councils are based on:

1. the estimated average build cost per residential consent in an individual TLA area over the 12 months to March 2026,
2. annual total residential consents number equal to the average of the last five years (up to March 2026), for each TLA,
3. 50% of GST paid on the build cost shared with council.

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