What are rates?
Rates are the main way local councils fund themselves. If you own a property in New Zealand, you pay rates to your local council every year. If you rent, your landlord pays rates — and typically factors that into what they charge you.
Rates are not the same as taxes. You can't deduct them the way you might a business expense. They are a charge on your property, set by your local council, reviewed annually.
How are they calculated?
Most councils set rates based on the capital value of your property — what it would sell for on the open market. A higher-value property generally pays more rates. Some councils use land value instead, or a mix of both.
Councils also typically charge a fixed "general rate" that every ratepayer pays regardless of property value — a base charge for being connected to services.
On top of the general rate, many councils charge targeted rates for specific services: a water rate, a stormwater rate, a roading rate, or in Auckland, a regional fuel tax that feeds into transport funding.
Where does the money go?
It varies by council, but broadly:
Infrastructure is the biggest ticket — water, stormwater, wastewater, roads, footpaths. In many councils, pipes and roads alone account for more than half of all spending.
Community services — libraries, parks, sports facilities, pools, museums, community centres.
Regulatory functions — building consents, resource consents, dog control, health inspections.
Governance and administration — the cost of running the organisation: staff, management, elected members' salaries, IT systems, finance.
Debt servicing — councils borrow to fund capital projects and must pay interest on that debt.
Why do rates keep going up?
Rates have risen faster than inflation for decades, and the reasons are structural:
Ageing infrastructure. Most of NZ's water pipes, roads and stormwater systems were built in the 1950s to 1980s and are reaching the end of their lives. Replacing them is enormously expensive.
Deferred maintenance. For years, many councils kept rates low by not doing enough maintenance. That deferred cost is now arriving all at once.
Higher borrowing costs. Councils borrowed heavily for infrastructure, and rising interest rates have increased the cost of servicing that debt.
Population growth. Growing communities need new infrastructure — but new development doesn't always pay its full share of the cost upfront.
Regulatory requirements. New environmental standards (especially for drinking water and wastewater, following the Havelock North water contamination crisis in 2016) have imposed significant compliance costs on smaller councils.
Is the system fair?
This is a genuine debate.
On one hand, rates tie the cost of local services to local property — which has some logic, since infrastructure like roads and pipes directly services your property.
On the other hand, rates hit asset-rich but income-poor people hard. A retired person living in a house that has tripled in value may face rates bills they struggle to pay, even though their income hasn't grown. Rates rebates exist for low-income ratepayers, but not all eligible people claim them.
Some economists argue rates should be replaced or supplemented with other local funding tools — like a local income tax, or a larger share of GST. Others say the problem isn't how rates are collected, it's what councils spend the money on.