By Bernard Hickey
Finance Minister Bill English has signalled the Government is preparing to ramp its programme of building new houses on Housing New Zealand land in Auckland, suggesting up to 30,000 medium-density and medium-priced houses could be built in the coming decade.
Speaking on the eve of the release of a report from an Inquiry by Labour, Green and Maori Party MPs on homelessness, English told the NZ Herald the Government was on the verge of significant announcements about intervening in the private housing market in Auckland by building tens of thousands of new houses for on-sale to private buyers.
"The Government will be a provider for the next 10 years of significant numbers of medium-density, medium-priced housing into the Auckland market," English told Audrey Young in an interview.
"Over the next six months, you'll also see a growing understanding of the size of the Government building programme and that will have an effect on the market," he said, pointing out the Auckland Unitary Plan created room for up to 69,000 houses on Housing NZ land that currently has 30,000 houses.
"And we are going to do it," he was quoted as saying.
The building programme would renew existing Housing NZ state homes, "but it will generate an extra 30,000 houses."
English's comments are in tune with comments made in late September by new Housing NZ CEO Andrew McKenzie (reported here on Interest) that around 30,000 new homes could be built on Housing NZ land in Auckland.
McKenzie told a construction industry forum on September 22 Housing New Zealand land in Auckland could be used to add 30,000 homes to the housing supply as the Unitary Plan allowed more intensification.
"We've also been asked to look at availability and supply. We own a huge amount of land that tends to be under-utilised, so what can we get out of intensification? The Minister has already talked about the fact that there's now capacity for effectively another 30,000 homes on the land that we own in Auckland alone," he said then.
"So there is a role that we have around improving and increasing the level of supply, and obviously affordability is a really important element to that," he said, pointing out household incomes in Auckland of around NZ$82,000 per year meant there were currently few homes that were affordable.
"If you do the maths and work out how much you can put into housing you get a very small number you can afford, even with today's interest rates to service on a mortgage," he said.
"We've said we're going to be part of the thinking and the action that the Government takes around affordable housing."
English's comments are also in tune with the Government's September 22 announcement that Housing NZ's Hobsonville Land Company would redevelop land in Northcote that currently has 300 Housing NZ homes so that there were 400 Housing NZ homes and a further 600-800 homes to be sold as a mix of affordable and market housing. The first homes in the NZ$750 million project will be completed in June 2017 and the entire redevelopment is expected to be completed by 2021.
English suggests house building and debt reduction instead of tax cuts
Elsewhere, English told RNZ after visiting Washington last week for IMF meetings that he wanted to stick to the Government's plan of reducing debt and that economies globally could not rely anymore on central banks to generate growth.
"It confirms the importance of New Zealand sticking to the plan to get debt down," English told RNZ.
"Even if I'm a bit more optimistic about the risks in the global economy, there are still some quite significant risks there and if they eventuated we'd want to be in the position in the 3,5 or 7 years to be able to borrow more again if that was what was required, so we have to get debt down while the going is good," he said.
Asked if the Government was therefore still committed to plans for tax cuts before next year's election, he said: "We haven't made decisions about that."
"Before Christmas there'll be a new round of forecasts that will tell us whether there's much room in the Government Budget for tax cuts," he said.
"We do know that there are considerable expenses coming up, some related to growth like helping fund more housing and public transport in Auckland and some related to our intractable social problems like more money needed for more prison beds. So those are the things we have to do and we'll see what other room there is."
Political reaction
Labour Housing Spokesman Phil Twyford said the Government was again a "day late and a dollar short."
"The abject failure of their policy to deliver any kind of significant increase in houses that people can actually live in has dragged them kicking and screaming towards the idea of more Government intervention in building," Twyford was quoted as saying in the NZ Herald.
Green Co-Leader Metiria Turei questioned how affordable the homes would be.
“It looks like National may have finally discovered how to build houses, just in time for the election next year, but how many will actually be affordable?” Turei asked in a statement.
“When you look at what they did in places like Tamaki and Glen Innes, the Government sold state homes and replaced them with townhouses that cost over $1 million to buy," she said.
“Bill English needs to explain how affordable these homes will actually be, and how he plans to stop property speculators snapping them up. Affordable means three to four times a household’s income and until the Government accepts that, anything they do about housing affordability won’t have the substance to make an actual difference."
ACT Leader and Epsom MP David Seymour said the Government's plans would come at the cost of private housing developments.
“Bill English has stated how many houses the Government will build, but not how many will be built in total. Why? Because he knows that the Government’s program will suck land and resources out of the private sector, making little net difference to housing supply. Like all those National housing policies before it, this policy will have a bigger impact on the headlines than the housing market,” said Seymour.
“Government home building would cause a substitution effect where potential private development would just instead be undertaken by the state. This would mean no increase in the actual number of houses built in New Zealand, while also transferring investment risk away from private companies and onto taxpayers," he said.
(Updated with political reaction)
78 Comments
Why does the Auckland council sort out low-cost housing through 99 year leasehold for medium income families ?
It works in numerous countries like the UK , Singapore , Canada and elsewhere .
The ground rent should be based on the cost of capital (around 3% per annum for Auckland Council ) to buy bulk land and put in services
The model works , I can assure you .
I'm fairly sure that Singapore has significantly higher density than Auckland with almost non existent social housing.
They also have much lower corporate tax rates (hence why a lot of our earthquake re-insurance is routed through Singapore) which encourage well paying corporate institutions to setup their headquarters there and pay tax there ( 2% of 150 billion is better than 28% of 0.001 billion ). On top of this they have almost no unemployment benefit liability (because of the massive shortage of workers whom the multi-nationals want & government policies). This allows for a phenomenal government surplus which the government can direct into HDB housing for sale to middle class families on a massive scale the likes of which NZ could never hope to achieve.
Add to that the fact that most Singaporeans know how to leave windows open to ventilate houses meaning that mold is virtually non-existent and the perception of quality starts to appear.
Not everyone can afford air conditioning. The "poor" use fans and leave windows open all day to keep cool. While you were there presumably you would have watched some of the local TV shows such as "Under one roof" or "PCK Private Ltd" you would notice that in episodes where they are trying to keep cool it usually focuses on a ceiling fan in the lounge as opposed to an air conditioning unit. Having said that It has been years since I spent any length of time in Singapore.
I'm fairly sure that Singapore has significantly higher density than Auckland with almost non existent social housing. --> very true. High rise buildings with very high density. But everyone here (even the poor) needs land.
This allows for a phenomenal government surplus which the government can direct into HDB housing for sale to middle class families on a massive scale the likes of which NZ could never hope to achieve. --> do not miss the greater point about political will, manifested in compulsory land acquisition (especially back in the 1960s and 70s) at below market rates.
They also have much lower corporate tax rates (hence why a lot of our earthquake re-insurance is routed through Singapore) which encourage well paying corporate institutions to setup their headquarters there and pay tax there ( 2% of 150 billion is better than 28% of 0.001 billion ). --> someone gets it. Clearly, it is something NZ doesn't agree with (and complain when headquarters are located and revenues funneled there) and some, like the IRD, clamor about the "untaxed" cash economy. Why does this happen? Are taxes too high and is tax collection too expensive?
Why does the Auckland council sort out low-cost housing through 99 year leasehold for medium income families ?
It works in numerous countries like the UK , Singapore , Canada and elsewhere .
The ground rent should be based on the cost of capital (around 3% per annum for Auckland Council ) to buy bulk land and put in services
The model works , I can assure you .
Still no action on demand - speculators and non resident buyer. Election year aprroaching and housing crisis has become too hot to handle and this action is also not to help FHB but to take cover for not taking any action on demand side.
As mentioned so many times that supply by in itself will not help and wonder what vested interest prevents this egoistic arrogant government from.........
Local council election though different that national election should be a warning for Chon Kee government.
As long as foreign demand continues, none of this will make a blind bit of difference. And yet again, the free market has completely failed and we get to pay for it. While we will always need govt involvement in housing, it would never reach these proportions with regulation that favours the people of the country. Foreigners should NEVER have been allowed to skew the market as they have
... you are right , there never was " a free market " in the case of NZ housing ; so it's silly to say that it " failed " ....
We cannot have " affordable housing " when the underlying land cost is exorbitant ... when wealthy foreigners can buy and lock up as much of our property market as they wish to , without ever bothering to even set foot in this country .... and when bureaucratic regulations and GST add unnecessary burdens onto the cost of construction ....
.... " free market ? " .... ha ha deee haaaaaaaa !!!
Again, that is not the notional free market failing.
That is a policy failure.
I'll agree that the distribution of resources is not optimal in the wider social scope of things. However they have been optimally allocated, relative to the constraints. The notion of a free market is never at fault, only the attempts to manipulate it.
We need to build 30,000 dwellings a year in Auckland to just keep up. The private sector is building about 12-15,000 a year. So what's an extra 3,000 a year? The government needs to be more ambitious and commit building 15,000 a year or even 30,000 a year for the next 10 years. Also, why not build apartments? If this is done on a commercial footing then the government won't actually lose money, will make money, and there is no need to build communist concrete blocks.
Everyone was fairly happy there until a couple of years ago the ground rents went up to $40,000 - $70,000 p/a. They are big sections with big old houses on them. They need densifying to justify the ground rents. There must be some people happy to cough up as there are some flash houses on them. Again, it all comes down to affordability.
Let's not forget: The Bank of Mom and Dad - financiers of last resort?
More parents are taking advantage of record-low interest rates to refinance their properties and help their grown-up kids onto the housing ladder amid sky-rocketing house values. Digital Finance Analytics estimates the number of Aussies getting help from their parents has soared to more than half of first-home buyers from just 3 percent six years ago.
Australia's housing rally has favored baby-boomers and locked out youth, compounding an inter-generational shift of wealth. As the number of bank loans to first-time buyers dwindles, the average slice of cash handed to them by parents has almost quadrupled in the past six years, DFA says. The downside: a market that the Reserve Bank of Australia is already wary of may get further inflated.
First-time buyers are "being infected by the notion that property is about wealth building, rather than somewhere to live,” said Martin North, Principal at DFA. That “may be tested if interest rates rise later, or property prices fall from their current illogical stratospheric levels.” Read more
Are intergenerational 100 year mortgages about to appear, as they did in the lead up to the Japanese 1987 property bubble bust, and thereafter?
No we need a 99 year LEASEHOLD , for lower income families that will eliminate the backlog .
Simple rules:
Must be Citizen or have PR
Must be lessee or lessee family occupied ( no investors or speculators )
Rents on land capped at 3% to 5% of GV per annum
Available to families earning under $70 k per annum
Once you sign the lease you must submit plans within 12 months and build within 24 months ( no lease-banking)
No we need a 99 year LEASEHOLD , for lower income families that will eliminate the backlog .
Simple rules:
Must be Citizen or have PR
Must be lessee or lessee family occupied ( no investors or speculators )
Rents on land capped at 3% to 5% of GV per annum
Available to families earning under $70 k per annum
Once you sign the lease you must submit plans within 12 months and build within 24 months ( no lease-banking)
No we need a 99 year LEASEHOLD , for lower income families that will eliminate the backlog .
Simple rules:
Must be Citizen or have PR
Must be lessee or lessee family occupied ( no investors or speculators )
Rents on land capped at 3% to 5% of GV per annum
Available to families earning under $70 k per annum
Once you sign the lease you must submit plans within 12 months and build within 24 months ( no lease-banking)
I can import a car from anywhere as long as it meets Jap/EU/US standards. Cars are pretty cheap funnily enough.
However when it comes to housing NZ has to reinvent everything. BRANZ certification costs $70k for a simple product for example. The problem is market incentives.
1. Get rid of BRANZ and allow imports from approved standards thus hit Fletchers, James Hardie, Carters in the pocket
2. Tax land banking in some form but give every person the ability to hold a small amount of land tax-free
3. Name and shame individual builders mistakes. With the tenancy tribunal records for example I'm able to look up parties and see if they're reliable to rent from (or rent to).
Lets remind ourselves last time we heard this sort of talk before an election
Lets go back to 2007
Key: Speech to New Zealand Contractors Federation
Tuesday, 21 August 2007, 9:29 am
Speech: New Zealand National Party
John Key MP
Leader of the National Party
20 August 2007
Speech to Auckland branch
New Zealand Contractors Federation
"Conclusion
Over the past few years a consensus has developed in New Zealand. We are facing a severe home affordability and ownership crisis. The crisis has reached dangerous levels in recent years and looks set to get worse.
This is an issue that should concern all New Zealanders. It threatens a fundamental part of our culture, it threatens our communities and, ultimately, it threatens our economy.
The good news is that we can turn the situation around. We can deal with the fundamental issues driving the home affordability crisis. Not just with rinky-dink schemes, but with sound long-term solutions to an issue that has long-term implications for New Zealand’s economy and society.
National has a plan for doing this and we will be resolute in our commitment to the goal of ensuring more young Kiwis can aspire to buy their own home.
It’s a worthy goal and one I hope you will support us in achieving. Thank-you."
"Dangerous levels in 2007 "with house prices in auckland at 500k
Auckland prices now 1m .... what is the word best to describe a situation twice as bad as dangerous???
Then there is the government debt. 10bn when he took office and now its over 100billion. 10 times more debt that when he started.
Yes totally agree, with our Government relying on our GDP growth from the housing market is a recipe for disaster.
Look at what's happening to Vancouver now: http://www.huffingtonpost.ca/2016/09/02/vancouver-detached-home-price-c…
An average-priced detached home throughout Greater Vancouver now costs $1,470,265, compared to $1,764,682 in July.
Mid you their citizens and very happy about the property crash. ;)
It is a surprise that still there is no ban for overseas buyers! It is sad to see that houses are snapped and they sit empty. This is surely not right! Even if we build 15.000 houses - ....... then another 5000 will be empty?
Fix the root cause - foreign investors, multiple property investors etc.
You can get rid of foreign investors , speculators , land bankers, mulitple property owners and provide affordable housing for lower income households VERY easily
We need a 99 year LEASEHOLD , for lower income families that will eliminate the backlog .
Simple rules:
Must be Citizen or have PR ( NO foreigners )
Home Must be lessee or lessee family occupied ( no investors or speculators )
Rents on land capped at 3% to 5% of GV per annum ( to prevent the problems with leasehold land in NZ)
Available to families earning under $70 k per annum
Once you sign the lease you must submit plans within 12 months and build within 24 months ( no lease-banking)
QED ......Quite - Easily - Done.
It just needs planning and political will
Got to keep the Ponzi going at all costs.Can't afford to frighten the TBTF monster.
Lets use some public or on tic money to house all those pesky immigrants. Extra hospitals to provide procesures for elderly on the waiting lists can go hang. They won't need hip replacements while they sit in Akl traffic all day.
Supply? JK admitted just recently its all about demand when he pooed his pants at the thought of a VAN tax spoooking demand from foreigners and penniless students and causing an apocalypse in housing.
Here is Key's legacy
http://m.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11725892
Homelessness in New Zealand is reaching unprecedented levels and is increasingly affecting working families, an unofficial inquiry by Opposition parties has found.
Labour, Greens and the Maori Party released the results of their inquiry this morning after holding public hearings around the country.
The parties chose to hold their own inquiry after National blocked attempts to have a select committee look into the issue.
The parties concluded that the level of homelessness in New Zealand is "larger now than any other time in recent memory".
"The housing crisis is causing an extreme level of homelessness, particularly in Auckland, with families forces to live on the streets, in cars, and in garages."
Why is this guy living in a car when the government will give you a motel to live in (emergency housing) until they find you a state house? The government will not allow NZ'ers to be without a roof over their head yet this gentlemen for some reason finds himself living in a car. Not sure what his story is but something doesn't add up yet the media are happy to take photographs without asking the proper questions. With regards to your second comment about families living in the street, can you please show me 1 example of a family (with children) in NZ living on the street, just 1 please?
You are becoming tiresome with your denials of homelessness, it is NOT just living in a cardboard box in middle it road.
If you are bunked up in a rellie or friend's house because you cannot afford or find something for yourself - you are homeless
If you are bunked at a Marae in Mangere as you'd have to sleep in a car or on the street otherwise - you are homeless
If you in a motel temprarily, put there by WINZ - you are still homeless
If you sleeping in your car - you are homeless
I know you won't accept this but
You are homeless if you are renting but would rather buy, could buy if prices weren't so out of whack so have to live by onerous landlord rules, but that is my definition, I put it in here to balance your view of what homelessness is
Yep, it's a f%$$ing disgrace.
The govt has been asleep at the wheel for years, and is now only contemplating meaningful action for political reasons. Sad, but true.
Mind you, I guess late action is better than no action.
Credit to the opposition - their pressure on the issue has paid dividends. Successful opposition isn't just about winning elections....
Cynical expediency by English while completely ignoring the elephant in the room that is credit expansion.
Sure the demand side is supported by immigration but it's big driver is the relentless expansion of mortgage lending. It's pretty simple - more dollars chasing the same number of houses equals higher prices.
Supply side is useful in the long term but this is a crisis that needs fixing now.
Let some air out of this bubble by upping bank's capital ratios for residential housing. Just stop messing around at the margins.
Correct, Tom - credit expansion will be our undoing. Goff is promising $20b of new infrastructure spending (i.e. debt) on top of the $8b the Council has in debt now. When interest rates rise in the next cycle from the current 3-3.5% the Council is paying then we will see some real problems. Even if interest rates only go to 5% then Council interest payments alone will roughly equal their total current rates income (approx. $1.5b). Unbelievable!!!
Perception is politics. I would say this will knock the wind out of Labour's strategy to win votes by being 'the housing affordability party'. Because it just looks like Labour's initiative.
....And aside: And who will live in these so-called affordable developments? Is this a government slum project?
Perception is everything and the perception is that National Government is not interested in solving the housing crisis and they too know that supply by in itself will not help to solve anything. Need of the day is to act on demand side, now but as national government actually does not want the market to cool will not act (may be election year will force them) and as perception is important in politics will shout supply supply (hide behind supply) but today they stand exposed infact trust deficit is at the lowest for no one like to hear manipulative lies (unless one is benefitting by their manipulation that is speculators and overseas buyers)
Local body election is just the beginning.
The Arrogant are Wise in their own eyes, but the wise will recognize their lies.
Watch the last 2 mins of this: https://www.tvnz.co.nz/ondemand/q-and-a/09-10-2016/series-9-episode-31
Phil Goff in 1984 promising to fix the housing problem in Mt Roskill...
Has anyone "done the math" on that Northcote "affordable" housing development. Replace 300 (run down but restorable) homes with 1000 to 1200 for a gain of 700 to 900 basic smaller homes at a projected cost of $750 million. So around a $1,000,000 per extra dwelling and they (us?) own the land.
I thought affordable meant the median income JAFA could afford it. This is being touted as an example of solving the housing crisis, what am I missing?
This Government is totally working to protect the speculators and overseas buyers. Everything that they do and say is to protect the speculators and may be they are not wrong as their perception is that growing house price is a sign of prosperity and is a good problem in their own words.
Now it is up to the people of NZ to decide if ever growing house price good for average kiwi or good for speculators whom this government supports as being one of them are able to identify with them and think like them only.
the trouble is many of the labour MPs are investors in housing, just check the public list on the government website.
That is the problem a lot of our MPs are involved , some even have structured them so parliamentary services pay the rent or leases.
so they will do what it takes to keep it going
This is very good news. But as Labour say, it is a politically embarrassing U turn by the govt and essentially an admission that 'enabling the market' has not worked.
I totally disagree with Seymour. A lot of the 'activity' with private apartment schemes is speculative and won't be built. At least, with govt housing, we can be pretty sure it will be built.
Its right for this govt owned land to be used properly however if I was a property developer in Auckland I might think twice before starting new projects with govt adding to supply on a massive scale like this.
Leasehold should be looked at. I would have thought it was core national policy. Find a partner (china?) to build the properties, govt leases the land to the final owner. 100% positive cash-flow.
Some observations as one who works closely in and around the development sector:
- Apartment developments are struggling to stack up in terms of feasibility
- Bank lending on apartment development has slowed down big time
- A number of developers, many of them Chinese, have bidded land prices up and up, and paid stupid money in many cases, so that feasibility won't stack up despite trying on all sorts of nonsense... like telling council agencies they shouldn't have to stump up for their fair share of the cost for adjoining road / infrastructure upgrades
I would be surprised if some of these factors have not influenced the Govt's direction.
So, dazz, to address your point - I think apartment development would have been slowing anyway, regardless of the govt's approach. The govt will pick up the slack.
On the other hand, private sector interest in greenfield development is strong and this will keep plowing ahead.
So I think a good balance is coming to the market with govt filling the gaps in terms of intensification, and the market responding for greenfield.
What's missing? The private sector developing numerous 4-10 unit infill developments. There will be a lag on that until:
- The Unitary Plan is sorted out
- People start doing en masse prefab designs to get the build costs down : Mike Greer has hinted at this
Fully agree about the prefab/factory builds, Fritz. Its just looney tunes that we are still building houses in a manner that, apart from the materials involved, would not be totally unfamiliar to a Time Machine transplant from Elizabeth I's time.....
And before common taters start wittering on aboot the Lack of Labour, the Woeful state of Apprenticeships and other production constrictions, I have two words - er - one word and and one acronym:
Robots and CNC
To reinforce my point above:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=117…
I have been saying the same thing about Awkland...for years. Can only get worse.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11726546
people are getting sick of the traffic in Jaffa ville, and it is only going to get worse and worse.
with that will come loss of productivity and loss of life work balance.
I can see a lot more moving out to other places, maybe that is the master plan to repopulate the rest of NZ
Housing NZ broke by February - what a mess Smith, English & Key have on their hands https://www.tvnz.co.nz/one-news/new-zealand/housing-new-zealand-have-no…
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