The government will push ahead with plans to cap annual council rates rises, limiting the increase per person to between two and four percent, Local Government Minister Simon Watts announced on Monday (December 1). 

The cap, which would apply to general rates, targeted rates and uniform annual charges but exclude water charges, is aimed at reining in steep increases some communities have faced in recent years.  

It would take effect gradually from 2027, with full enforcement by 2029. 

The minister said the model is designed to control costs for households while ensuring councils can still fund essential services such as roads, rubbish collection, libraries and parks. 

But Central Otago mayor Tamah Alley, speaking to national broadcaster RNZ, said that while the community would likely welcome tighter limits on rates, the cap would come with consequences. 

“It will work to reduce the rates rises. Will it work to provide the best services to our communities, to meet their wants and needs? Maybe, maybe not,” she told RNZ. 

Tamah said councils would face tougher choices. 

“It will mean that we are saying no to our communities more often and it will mean that we are deferring projects that they wanted to see go ahead, but that might be okay if it means that they’ve got more money in their back pocket.” 

She pushed back on the idea councils were “throwing money around willy nilly”, saying that was “not an accurate depiction” for many. 

Tamah also pointed to the long-term risks of maintaining artificially low rates. 

Central Otago once had what she described as a “self-imposed rates cap” of five percent through the 2010s. 

She said the limit ultimately led to an 18 percent rates jump once the council was forced to address deferred work. 

The government said councils would be able to apply to a regulator for permission to exceed the cap in extreme circumstances, which could include catching up on infrastructure deficits. 

The minister said the decision to introduce a cap on rates will protect “local government’s social license for the long term”. 

“Rates are taking up more of household bills, and some communities have faced double-digit increases year after year. This is unsustainable and is only adding to the cost of living for many Kiwis,” he said. 

“Ratepayers deserve councils that live within their means, focus on the basics and are accountable to their community.”