DHBs were formerly required to pay back to the Government 6% of any capital funding they received, a policy which cost them millions of dollars annually.
Dr Clark said yesterday the Government would directly fund DHBs for some of their capital charge costs this financial year while Treasury reviewed the policy, which Dr Clark hinted he wanted scrapped.
"There is no doubt in my mind that it has had a perverse outcome and has inhibited hospitals from being built which should have been built over recent decades."
The policy change could save the SDHB several million dollars.
In 2017, the SDHB paid more than $5million dollars to the Government in capital charges.
With the new Dunedin Hospital project looming and possible major works at Wakari and Southland Hospitals, a decision to scrap capital charges would benefit the SDHB's balance sheet.
Canterbury DHB has the largest DHB deficit in the country, in large part due to capital change costs following construction of new hospital buildings.
SDHB chief executive Chris Fleming welcomed the announcement.
"Direct funding for capital charge costs for new facilities will help support our major redevelopment project, the new Dunedin Hospital."
Dr Clark said relief from capital charges would apply to major capital works which needed central government approval and would not cover general maintenance.
"The charge on the big new builds is where this will make an impact ... The $1.7billion we set aside for capital investment excludes the money for the Dunedin rebuild, so the hospital rebuild is on top of that capital amount."
Dr Clark said he expected the change to free up funds for DHBs to spend on services.
"There will be a small amount taken from it to fund deficits, but the majority in all cases will return to the DHB for service delivery."
Capital charges were introduced in the 1990s, and were intended to provide DHBs with an incentive to invest and manage capital assets wisely.
Capital charges used to be 8% of funding, but that was reduced to 7% in 2016 and cut again to 6% the following year.
DHBs are the only government department which pays them, and both Treasury and the Auditor-general have previously questioned the need for them, saying they could have unintended consequences on DHB spending decisions and result in them deferring building projects to save money.
Until February 2017, when the Government put a stop to the practice, DHBs often borrowed from the Crown to fund capital projects as the interest rate was lower than the capital charges direct funding would have incurred.
National health spokesman Michael Woodhouse called the announcement a "band aid" move.
"If the minister really wanted to see improved performance then he would be better off providing more funding like he said he would in Opposition."
