This week’s Herald reported the plight of an Ōrewa family hit with a 72% rates hike – more than $10,000 a year. The jump arises from rezoning, with new subdivisions now creeping up to their boundary. Yet Watercare has decreed the wastewater connection will not arrive until 2031 – leaving the land stranded and unsaleable. 

The story reminds us why New Zealand’s housing is among the least affordable in the world – and why successive governments’ attempts to fix it have failed. 

Restrictive planning laws play a part. But at its heart, the problem is the way local infrastructure is funded – and the anti-growth incentives councils face. 

With population growth, central government’s tax take rises instantly. More people means more income tax, GST and company tax. Little wonder successive governments have favoured high immigration – it helps balance the Crown’s books. 

Councils, however, get nothing in real time from population growth. Yet they bear the brunt of the costs. New subdivisions require roads, public transport, parks – and, critically, water pipes – all funded by council (and council-owned organisations like Watercare) through rates or borrowings.  

But ratepayers do not want rate hikes, and growing councils bump up against debt limits. That creates every incentive to delay, down-spec or block growth – especially when the benefits of new ratepayers arrive years later. 

Since July, Watercare has been separated from Auckland Council’s balance sheet, removing borrowing as a constraint on Watercare’s growth. But the new framework still bears little resemblance to a profit-driven utility.  

Unlike Auckland’s privatised electricity distributor Vector, Watercare is prohibited from paying a dividend to its shareholder, Auckland Council. In contrast, Vector is incentivised to connect new homes because its shareholders require it to maximise profits – meaning it must strive to meet demand. 

The Ōrewa case fits a broader pattern where incentives dull the commercial drive to meet demand for new infrastructure. Without shareholder pressure to pay a dividend, Watercare has little incentive to meet demand quickly. The outcome is Soviet-style rationing. 

With the right incentives, we would see less rationing and more of Watercare's pipes turning up when needed. If Watercare could pay a dividend, Council would champion growth, rather than lose sleep over it. 

Until we change how we fund and finance local infrastructure, stories like the Ōrewa family’s will keep repeating. Land will be zoned for housing but locked up by infrastructure bottlenecks. 

The lesson is simple: if you want affordable houses, make growth pay.