The Government has proposed a rates cap would limit annual council rate increases to between 2 and 4 percent, per capita, per year with a phased approach starting in January 2027 and full implementation by 2029.
The cap will apply to all sources of rates – general rates, targeted rates and uniform annual charges – but will exclude water charges and other non-rates revenue like fees and charges .Councils will not be able to increase rates beyond the upper end of the range, unless they have permission from a regulator appointed by central government.
However, Local Government Cost Index (LGCI), or the basket of goods purchased by councils, is significantly different to those purchased by households. Unlike businesses, councils have to remain a going concern to support community and business with essential services for everyday life.
Adverse weather events as we have experienced add to costs above CPI and LGCI and although we do our best to constrain costs it is always not possible.
Bitumen, bridges, and balustrades inflate faster than bananas, butter, and baking soda and our concern is that linking of rates increases to the general inflation rate will put Councils on the back foot and either require us to borrow at much higher rates to not reduce levels of service, or reduce our ability to fund the maintenance and replacement of assets over the longer term.
There is also the wider concern that much-needed projects such as the Rangiora Eastern Link may no longer be viable within this new limit.
Rates capping / Simplifying Local Government Resources:
Waimakariri District Council's View:
On February 3 2026 Council made a submission to DIA with our views on rates capping. Below are our introductory points as well as a link to the full submission document.
1.1. The Waimakariri District Council (the Council) thanks the Department of Internal Affairs (the Department) for the opportunity to provide feedback on the rates target model for New Zealand (‘the model’).
1.2. We support rates affordability and therefore a rates targeted model in principle. This is because we are committed to keeping rates to an affordable level for our community and have a proven track record of doing so. However, we do not support the model in its current form and have suggested recommendations to relevant inputs and methodology. Our view is that any cap should be viable, workable, and enable core services and functions to be provided while also providing opportunity for communities to have a say on the services and functions that are provided. We therefore have a strong interest in the model.
1.3. The Council also considers that a concurrent review of the Rating Act and methodology would aid decision making during this process. While taxation as a percentage of GDP has risen over time, local government’s share has stayed at around 2% of GDP. Such a review has been identified by numerous reports (notably the Shand and Future of Local Government reports) and needs to consider ways to more appropriately share the tax take across the country. For example, returning the GST paid on rates (essentially a tax on a tax) to councils would enable these funds to be reinvested in these communities instead of being used to subsidise projects outside of their areas, while also reducing the amounts required to be paid by ratepayers.
Next steps
This consultation runs through to February 2026, with further opportunities for engagement expected through the legislative process.
The system would begin from 1 January 2027, with the full regulatory framework operational by mid‑2029.