A $5000 rates rebate for those building their first home or apartment in Wellington has been saved from the chopping block, despite many considering the policy to be a "fizzer".

Wellington City Council introduced the remission in 2018, but the uptake has been low with only 130 successful applications over two years.

The remission has been available to those building their first home or apartment in Wellington, or purchasing a newly built home or apartment off plans.

Council officers recommended axing the offer, noting the low uptake and that the remission alone did not drive the appetite for newbuilds.

"Affordability of new housing relies on multiple factors, such as market and regulatory conditions, interest rates, borrowing capacity or affordability of insurance," officers wrote in a report outlining the council's revised 2020/21 draft Annual Plan in response to Covid-19.

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They also noted the rates shortfall created by the remission was redistributed to the remaining residential ratepayers, some of whom would be more financially disadvantaged than the remission applicants.

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In a full Wellington City Council meeting today councillor Nicola Young called the rebate a "fizzer".

She understood it had mainly been used as an incentive by property developers and real estate agents.

"It didn't actually add to the number of houses at all."

Mayor Andy Foster said he always thought the policy was a "bit of a gimmick".

"It's clearly been shown to be ineffective and it's also discriminatory in terms of who benefits from it."

Wellington City Council issued a press release in May 2018 encouraging people to take advantage of the rebate after having only received 18 applications.

Former mayor Justin Lester pushed the rebate at the time, touting it as a way to help people into their own homes and to incentivise new construction in Wellington.

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"We know there are more out there and I encourage all those buying or building a first home to check if they are eligible," Lester said.

Despite the current pushback on the scheme, current councillor Fleur Fitzsimons hasn't let the rates rebate die.

She drafted an amendment to continue the commitment to the rates remission, which was narrowly passed at the council meeting today.

"We do have a housing crisis in Wellington and a supply shortage and we know that renters are being charged too much. This acts as some incentive to get people into their first home and to see increased housing supply in Wellington."

Fitzsimons also pointed out these new home owners would become ratepayers for the rest of the time they live in Wellington.

Councillors Nicola Young, Sarah Free, Malcolm Sparrow, Jenny Condie, Simon Woolf, Diane Calvert and Mayor Andy Foster voted against the move.

Condie said the effect of the amendment was to take the idea of axing the rates rebate out of the draft annual plan document, and she would have preferred people have their say on it before making a decision.