Home buyers will pay higher rates and water bills under a new $600 million scheme to address Auckland's housing crisis.

The Government today announced a new investment vehicle to bring forward construction of 23,300 new homes in the north and south of the city.

Prime Minister Bill English launched Crown Infrastructure Partners with $600m to fund transport and water infrastructure for big new housing developments which cash-strapped councils like Auckland Council cannot afford.

"This is the result of a lot of hard work by councils and central government in how to manage growth on a scale we haven't had to before [with] a new type of financing vehicle," English said.


The Government and private investors will recoup their investment by charging new residents a special targeted rate and higher water bills over a 20 to 30-year period.

Auckland Mayor Phil Goff, who negotiated the scheme with English, said it was premature to know how much the targeted rate and higher water bills would be, but it would have to take into account the cost of infrastructure and be reasonable for residents.

Auckland Council currently has a targeted rate costing residents $118 a year, which was introduced in 2015 to fund transport for three years while alternative funding sources were found.

Finance Minister Steven Joyce said the extra charges on residents would be offset by cheaper section prices.

"The important thing is you have to make it attractive to people, which is why you are doing it over a 20 to 30-year period," Joyce said.

He said the Government's ultra-fast broadband company, Crown Fibre Holdings, will be renamed Crown Infrastructure Partners, and bring its investment skills and experience to attract private investment to roading and water infrastructure.

The Government would take on the initial risk, but Joyce was confident private investors, Accident Compensation Corporation, the Super Fund and iwi were keen to come on board.

The initial development of $387m is for transport and water infrastructure in Drury South, Drury West, Paerata and Pukekohe for 17,8000 houses.


This will be followed by $200m of infrastructure for 5500 houses around Wainui, north of Auckland City.

The new investment vehicle comes two weeks after plans for 10,500 new homes in Auckland will get a $300m boost from the Government's $1 billion housing infrastructure fund.

The vehicle recognises the council is right up against its debt ceiling, which, if breached could lead to a credit rating downgrade, drive up borrowing costs and reduce investor confidence in Auckland Council.

The new scheme was widely welcomed by Goff, deputy mayor Bill Cashmore, whose Franklin ward will benefit significantly from the new investment vehicle, the Property Council, Infrastructure New Zealand - and Labour.

"What took you so long?" was the response from Labour's Auckland Issues spokesman Phil Twyford, saying the party had been promoting the idea of debt-funding infrastructure since 2015.

"National has spent nine years cynically blaming Auckland Council for the city's failure to manage its growth, but it has done very little to reform the planning system or turn on the tap for infrastructure finance," Twyford said.

Said Goff: "The new investment vehicle will provide capital from Government and the private sector which will not be debt on council's books. It will be funded through development contributions and targeted rates within the new housing developments."

Property Council chief executive Connal Townsend said the $1b housing infrastructure fund was a great initiative but did not address how some councils, ruled by strict debt ratios, could carry that debt on their balance sheets.

The move to co-invest $600m alongside local councils and private investors will start to remove the handbrake and provide a useful tool to address the country's housing crisis, he said.

"The Government's announcement today that it will set up Crown Infrastructure Partnerships to seed fund private investment in road and water infrastructure provides a means to dramatically increase housing supply," said Infrastructure New Zealand chief executive Stephen Selwood.

"Timely delivery of trunk infrastructure is a major constraint on developers' ability to deliver housing across New Zealand," he said.

Q & A
What is the new scheme?

A Government company, Crown Infrastructure Partners, will invest in transport and water infrastructure to bring forward housing developments in New Zealand.

How will it work?

Crown Infrastructure Auckland will start with $600m of Government money to invest in infrastructure in large housing developments in the north and south of Auckland. It will seek private investors, including the Super Fund and Accident Compensation Corporation, to invest in the scheme. Developers will still pay contributions towards infrastructure and council will continue to pay some of the costs.

How will investors get a return on their capital?

Residents of the new housing developments will pay a targeted rate and higher water bills over 20 to 30 years. The level of these charges has not been determined but it will have to be reasonable if people are to buy new houses.

Why don't councils pay the transport and water costs?

Many councils, including Auckland Council, are right up against their debt ceilings and cannot borrow more money. To do so could leading to a credit rating downgrade and higher borrowing and repayment costs.