A new $1 billion Housing Infrastructure Fund has been announced by the Government to accelerate the supply of new housing where it is needed most, including Tauranga.

The contestable fund will be open to applications from councils in the highest growth areas - currently Christchurch, Queenstown, Tauranga, Hamilton and Auckland.

Finance Minister Bill English said the Housing Infrastructure Fund would help bring forward the new roads and water infrastructure needed for new housing where financing was a constraint.

"The Government will invest up front to ensure the infrastructure is in place. But councils will have to repay the investment or buy back the assets once houses have been built and development contributions paid."


Housing Minister Nick Smith said the fund would be available only for substantial new infrastructure investments that supported more new housing, not to replace existing infrastructure.

"To access the fund, local councils must outline how many new houses will be built, where they will be built and when they will be available. Ideally, they will have agreements with developers on these issues.

"Funding may also have other conditions attached, such as faster processing of resource consents. All of this will require close collaboration between central and local government."

Mr English said infrastructure, and its financing in particular, was one of the three key constraints to building more houses - alongside land supply and consenting requirements.

"Councils have strict debt limits which means some lack the headroom to invest in infrastructure now and then wait for future development contributions to recover the costs. The fund will help provide more infrastructure sooner by aligning the cost to councils with the timing of revenue from development contributions."

Depending on the number and timing of applications, it would require the Government to temporarily borrow up to $1 billion, which would increase net debt until it is repaid.

Dr Smith said the Government was also considering establishing Urban Development Authorities to help further speed up the supply of new housing.

The authorities would have streamlined powers to override barriers to large-scale development, including potentially taking responsibility for planning and consenting and other powers.

"These changes are just the latest steps in the Government's ongoing, comprehensive programme to increase the supply and affordability of housing," Dr Smith said.

"They will complement the work of the Housing Accords and Special Housing Areas, our social housing build, our emergency housing programme, the expanded HomeStart Scheme for first home buyers, the development of surplus Crown land, the National Policy Statement, RMA reform and the extra tax measures we took last year.

"We are making good progress in facilitating increased investment in housing with a record $11.4 billion of residential building work underway this year. This initiative to support councils with infrastructure provision is the next logical step in this programme."