Granny flats go consent free

Since earlier this month, you can build a granny flat up to 70 square metres on your property without needing a building or resource consent. The Building and Construction (Small Stand-alone Dwellings) Amendment Act, passed in October 2025, is now in effect. 

The government is projecting 13,000 new granny flats over the next decade. For property investors, this potentially opens up a whole new way to add rental income to existing holdings without the traditional consent headaches. But before you start measuring up the backyard, let’s run the actual numbers. 

What’s actually changed (and what hasn’t) 

The exemption removes two major friction points: you no longer need resource consent or building consent for qualifying granny flats. That’s potentially saving you $5,500 in consent fees and 6–12 weeks of waiting around for approvals. 

But “no consent” doesn’t mean “no rules.” Your granny flat still needs to:
• Be 70 square metres or less
• Have a simple, single-storey design
• Sit at least 2 metres from other buildings and boundaries
• Meet the full Building Code
• Be designed and built by Licensed Building Practitioners 

You’ll still need to get a Project Information Memorandum (PIM) from the council before starting and notify them again when you’re done. Councils can still charge development contributions through the PIM process. This isn’t a sundry item: development contributions in urban areas typically run at $17,000–$30,000, with rural residential at $4,000–$7,000. Plus, your rates will increase for the second dwelling. 

Construction math 

Building a granny flat isn’t cheap, consent-free or not. 

Current market rates sit at $3,000–$5,000 per square metre for custom builds. For a 70-square-metre unit, you’re looking at $200,000–$300,000 all-in, including site works, utility connections, and professional fees. 

Smaller prefab options come in cheaper: basic one-bedroom units start around $96,000–$120,000, with two-bedroom configurations at $130,000–$165,000. Though Trade Me offers plenty of cheaper pre-built options. These costs don’t include site prep, drainage, power, water connections, and those development contributions we mentioned. 

Then there’s the hidden costs: excavation, council PIMs, landscaping, fencing, professional fees for Licensed Building Practitioners. Budget an extra 5–10% for unforeseen expenses. 

Rental return calculation 

Here’s an example on a mid-range build:
Construction cost: $200,000 (60m² two-bedroom unit)
Development contributions: $25,000 (urban)
Site works and connections: $20,000
Total investment: $245,000 

Financing at current rates (~6.5%) on a $245,000 loan = roughly $480 per week in repayments. 

Market rents for granny flats typically hit $500–$600 weekly in urban areas. That’s a slim margin before you factor in increased rates, insurance, and maintenance. 

Yield: ($550/week × 52) / $245,000 = 11.7% gross rental yield. Not terrible on paper. But once you subtract increased rates, insurance, maintenance, and vacancies, your net yield drops considerably. 

Compare that to buying an existing rental property where Auckland gross yields currently average around 3.7–4.5%. The granny flat looks attractive from a pure yield perspective – if the numbers work for your specific site. 

Capital value implications 

Economist Ed McKnight at Opes Partners argues granny flats don’t work like a bathroom renovation, where you spend $10,000 and add $20,000 to the property value. 

Instead, a granny flat tends to add roughly what you spent building it. Spend $200,000, add maybe $200,000 in value. That’s because while you’ve added building, the main dwelling is now sharing the same piece of land. 

And there’s a buyer pool consideration: when you eventually sell, the granny flat limits your potential buyers. While some cultures value multi-generational living, plenty of buyers just want a standard single-family home. 

Where the opportunity actually sits 

The granny flat play makes most sense in specific scenarios:
• High-yield areas: If you’re in a location where rents genuinely hit $600+ weekly for a small unit, the numbers can stack up. Think university towns, tourist hotspots, or high-demand employment centres.
• Properties you already own mortgage-free or with significant equity: If you can build without taking on heavy debt, the rental income becomes pure cash flow rather than barely covering loan repayments.
• Family accommodation that eventually becomes rental: House aging parents or adult kids while they save deposits, then convert to rental income once they move on. You’ve solved a family housing problem and created an asset.
• Rural or lifestyle blocks: Where development contributions run $4,000–$7,000 rather than $25,000+, and you’ve got the space to build without compromising the main dwelling’s appeal. 

Traps 

Property investment coach Steve Goodey reckons the changes are “helpful, but not as transformational as the government made it seem.” The massive costs of water and power connections remain, which eat into your savings on consent fees. 

Sites in flood zones or with natural hazard overlays may still need full consent, meaning you don’t actually qualify for the exemption. Check this early before you commit money to design. 

Insurance and lending can be tricky. Some insurers and banks remain cautious about non-consented builds, even though these technically meet all Building Code requirements. Confirm with your providers upfront. 

And because there’s no council inspection during construction, you’re relying entirely on your licensed building practitioners to get it right. Substandard builds can haunt you for years. 

Run your own numbers 

The granny flat exemption removes red tape, which is genuinely useful. But it doesn’t remove construction costs, development contributions, or the fundamental question of whether the investment ROI actually beats your other options. 

For investors with the right property – decent-sized section, strong rental demand area, existing equity to deploy – adding a granny flat can deliver solid rental yields while potentially increasing capital value. The consent-free pathway makes it faster and slightly cheaper. 

But if you’re banking on this as a silver bullet for portfolio growth, you’ll be disappointed. At an estimated 13,000 units over a decade, we’re talking about 300 units annually in Auckland against current consenting rates of 40,000–50,000 new dwellings per year. This is incremental improvement, not transformation. 

Run your own numbers based on your specific site, local rental demand, construction costs, and borrowing capacity. The math either works or it doesn’t – and for many investors, it still won’t quite stack up compared to alternative ways of deploying $200,000+ of capital. 

Thinking about whether a granny flat makes sense for your investment property?
The Goodwins team can help you assess the opportunity in the context of your broader portfolio strategy.
Give us a call on 0800 GOODWINS.