Wellington City Council considers sweeping rates changes

Wellington City Council will discuss a suite of changes to their rates system which - if put in place - could see winners and losers across the city.

The mayor said the council needed to investigate all possible options to encourage development and bolster the city's economy.

On Thursday, the council will decide on whether to move forward to public consultation on changing the rating base to Land Value (LV) from Capital Value (CV) based rates calculations in time for the 2027-37 Long-Term Plan.

Other proposed changes included a reduced rates differential for commercial, industrial and business properties as well as a proposal to extend the zone where owners of derelict or abandoned properties in the city are charged up to five times the residential rate.

He said there would always be trade offs in the council's efforts to control rates and reduce spending.

"We still have the job of building the city - that we make this a city that we attract people to.

"We want job growth and job creation. We have to have the right ingredients for all of that. It includes what we do with rates. It includes what we do with the way we spend money. All those things have to be brought to balance if we want to make a difference for Wellington and share that rates burden more fairly with everybody," Little said.

But Chair of Wellington City Council's Planning and Finance Committee, councillor Diane Calvert, said she's worried if people come out in support of the changes the city may not be in position to act.

"It's not just a matter of putting in some different figures and pressing a button. We have roughly 85,000 rating units and there's quite a bit of work involved. Have we got the capacity to deal with it amongst all the government reform that's going on and amalgamation talks?

"I am concerned that if we go ahead at this point in time then we won't have the capacity to deal with it in an adequate way and - if you get your billing wrong - that has major consequences," Calvert said.

Residential rates outstrip income growth

The growth in residential rates in the city had significantly outstripped the growth in ratepayers income over the last 13 years.

Since 2012 median residential rates had more than doubled - rising from $1,985 to $5,177 in 2025.

Meanwhile the median income for a household had grown from $88,000 to 2012 to $138,000 in 2025 - just over one and a half times - during that period.

The city's commercial rates were also some of the highest and least affordable in the country.

Commercial rates - amounting to 2.4% of capital values - well exceeded both Auckland and Christchurch at 0.09% of capital value.

Council investigates improvements to rating systems

During the last triennium plan council officers were asked to "investigate ways to improve the residential rating system and encourage housing development, including by considering options for a development levy and Land Value Rating."

Currently the CV rating base calculates rates for a property using a combination of land value and the value of any buildings on the property.

Common Ground Aotearoa has been calling for the change to LV-based ratings.

Director Pierson Palmer said switching to LV-based rates calculations would remove a barrier to construction and development in the capital.

"For every million dollars worth of development that we do in the city we charge around $8000 every year. This is compared to $6000 in Christchurch and $4000 in Auckland.

"So we've created this system where if you are a developer and you want to build you're getting penalised a lot more in our city. It lumps a big tax on the good things that we want to see in the city - new businesses and new buildings - and it subsidises empty lots.

"We've got this situation where there are lots of empty lots in town that are paying very low rates compared to the buildings next to them and there's no incentive for them to build higher," Palmer said.

Palmer said up to 60% of home owners would see a decrease in rates under the LV base.

"That mostly comes from sites that are being used efficiently so - in the downtown - that means apartment buildings [and] town houses but it also means residential properties that are further out of the city so single family homes out in Tawa and the eastern suburbs," Palmer said.

He said lower decile homes were likely to see decreases while high decile areas would be likely to face further increases.

While - in the central city - high density housing and commercial properties would be the winners of the shift.

"As you get into the city centre abandoned lots or surface level carparks will see big increases and then it's those apartment units and those high density commercial spaces that will see decreases," Palmer said.

Council officers estimated the change towards a land value based rating system would cost somewhere between $600,000 and $2 million to implement.

Officers recommended phasing in any transition to the LV system by gradually increasing the share of rates charged on land values over time.

But they noted that delaying a decision on the shift could allow the council to better understand the impact of the proposal once "other policy changes and major infrastructure investments" such as the potential rates cap, regional council amalgamation and introduction of the new Tiaki Wai water authority had come into place.

Changes to the general rates differential

Wellington City had some of the highest rates differentials for commercial, industrial and business properties charging 3.7 times residential rates in comparison with Auckland's differential of 2.39 and Christchurch's 2.22 differential rate.

A council report into the proposed changes noted that - since its introduction in 1976 - the differential had been driven by the large numbers of people commuting into the city where they supplemented businesses and benefited from council investment and infrastructure.

Thursday's meeting would debate proposals to reduce the differential to 3.4 or 3.25 or phase in a transition to 3.0 or 2.8 over the next four to five years.

The report said maintaining the current differential would provide no rates reduction to incentivise businesses in the city while dropping the differential lower than 3.25 - without phasing in the initiative - could risk an increase in residential rates to pay for the move.

Tiaki Wai exemption

Council officers said the expected investment into water infrastructure by Tiaki Wai would see rises in the capital values of water assets.

"The rates payable by Tiaki Wai could increase at a materially higher rate than those faced by other commercial ratepayers following the next revaluation cycle. This creates a risk of placing additional financial pressure on a critical infrastructure provider, which in turn would likely be passed onto ratepayers through water charges," officers wrote.

Their report proposed a separate differential category for Tiaki Wai to mitigate the impact of the new authority on ratepayers.

"This differential would initially be set at the same level as the commercial differential but could be adjusted over time to moderate the impact of large valuation changes, ensuring that rate increases are applied in a fair and proportionate manner, while maintaining transparency," officers wrote.

Changes to rates for vacant land and derelict buildings

The report also outlined a proposal to extend the zone inside the city where vacant or derelict buildings might be considered for a differential designed to encourage development of the sites.

It proposed including the Adelaide Road corridor, including areas around the Basin Reserve and up to the Regional Hospital.

But Calvert said she was sceptical of the over all impact of the proposal - which currently only related to about 0.02% percent of the city's rates revenue.

"Lack of development in the city is due to wider economic conditions and we really need to address those first before we address the rating on those because I think that's completely secondary to the economic situation the city and the country's in at the moment."