Parliament buildings are among Crown property listed as "non-rateable". Photo / Mark Mitchell
Calls are growing for the Government to pay rates on Crown land, with the Labour Party considering the idea as mayors step up pressure for reform.
Currently, much of the property owned by central Government, such as schools and hospitals, is exempt from paying rates.
The law has long been an irritation for those in local government, with estimates suggesting cash-strapped councils are missing out on more than $200 million annually due to the exemption.
Last week, Wellington Mayor Andrew Little announced he would lobby for changes to the Local Government Act to repeal the measure as part of his council’s triennium plan.
It follows Auckland Mayor Wayne Brown saying the Government is getting a “free ride”, with Auckland Council estimating $40m in foregone takings.
In Wellington, between $5m and $16.8m is thought to be uncollected because of the exemption, which, if taken, would lower the rates burden on households, Wellington City Council said.
Act leader David Seymour has long called for the Government to pay its share, a view he still holds “as a matter of basic fairness to local ratepayers”.
“Where Crown agencies own significant land and buildings, they should contribute to local infrastructure and services just like everyone else,” Seymour said in a statement.
“These facilities often compete alongside private organisations and ratepayers effectively subsidise the Crown’s footprint in their communities,” he said.
Now the Labour Party is mulling the idea, with local government spokesman Tangi Utikere saying the party will be considering campaigning on a change to the current rules.
“It’s an issue that has been raised many times, alongside a few other options. I can understand why, given the tight constraints that councils are being forced to operate under,” Utikere told the Herald.
“Given that it has been raised with me alongside of a number of other revenue options and the like, naturally we will be considering that,” he said.
“We have a Government at the moment who is very happy to load a whole pile of expectations and responsibilities on to the local government sector, but are not prepared to provide the revenue stream or the ability for councils to be able to do that, and rates-capping is a prime example of that.”
Utikere said any potential policy would have to consider different categories of Crown land, saying the party would outline its local government policy closer to the election.
A 2015 Productivity Commission report said the blanket rating exemption for properties owned by the Crown “does not appear to be justifiable”.
A potential change to make the land rateable would “make government agencies think harder about whether maintaining their holdings is in the public interest”, potentially allowing more land to be freed up for housing development, it said.
The Future for Local Government report, commissioned in 2021 by then Local Government Minister Nanaia Mahuta, recommended the Government pay rates on Crown property.
The review’s findings and recommendations were rejected by Simeon Brown in 2024, with the then Local Government Minister saying the review had become distracted by ideological issues.
Local Government New Zealand (LGNZ) president Rehette Stoltz said it was a matter of the Government paying its “fair share”.
LGNZ in 2024 put forward 25 funding measures the Government could implement to support the sector’s funding and financing issues. Among them was repealing the non-rateable status of Crown land, a policy the report said the current Government had “no appetite” to progress.
A change was listed by LGNZ as having a “high” earning potential for the sector, “particularly for areas with large amounts of current exempt land”.
“We are ready to engage on the detail of how this would be put into practice, should the policy progress in the future,” Stoltz said.
In response to the growing chorus of supporters for a change, current Local Government Minister Simon Watts said it was not something he was working on.
He said while Crown exemptions for rates apply to places like hospitals, education facilities and the conservation estate, it does contribute for other properties.
“The Crown pays rates on many of its properties, including the whole Kāinga Ora housing estate, administrative buildings occupied by the Crown, buildings for emergency and correctional services (police, the courts, corrections facilities, fire services) and defence properties,” Watts said.
“All properties, whether rateable or non-rateable, pay water, sewage and refuse collection charges.”
Ethan Manera is a Wellington-based journalist covering Wellington issues, local politics and business in the capital. He can be emailed at ethan.manera@nzme.co.nz.