KiwiBuild reset leaves little hope for young people

After KiwiBuild's failure tackling infrastructure problems to help NZ cities become denser seems like a total no brainer and truly affordable housing would naturally follow, Geoff Simmons says

5th Sep 19, 10:54am by Geoff Simmons

By Geoff Simmons*

Two years after coming into power, Labour have completed their transition into National Lite. After raising hopes with promises of transformative change, they have ended up retreating into the classic National play of looking like they are doing something without really doing much at all.

When they first came into Government it was hard to imagine what they had spent nine years in Opposition doing. Now it is hard to imagine what they have spent the past nine months in Government doing while working on this “reset”. There is nothing in this package that will bring house prices down, if anything it could push them higher.

Giving up on transformation?

We probably should have guessed that transformation was out the window back in April. Even the very watered down concept of a Capital Gains Tax excluding the family home didn’t make it past Cabinet. Our Prime Minister promptly took it off the table for the remainder of her career.

Now the KiwiBuild targets have gone the same way, a clear recognition that the policy has failed to deliver. In fact the targets were only driving even more perverse behaviour. They led to houses being built where there wasn’t demand; at least not demand from first home buyers at the going price.

The targets will be replaced by monthly reporting. Along with the diversion of some capital into rent to buy and the reduction in the underwrite - forcing developers to take more risk - it seems unlikely that the programme will ever reach the dizzying heights of 100,000 houses. More likely it will be allowed to fade out like a bad pop song.

A package National would be proud of

The desire to play Bob the Builder has been replaced by some policy that is extremely reminiscent of National’s attempts to help first home buyers into their own home. Labour have dropped the required deposit, allowed people to pool their first home grants and will bring in a rent to buy scheme. Despite this last policy being from the Green Party, none of these ideas would be rejected outright by a conservative voter. In fact many of these ideas have featured in past conservative housing proposals either here or overseas. That is because they all prop up the demand for housing, which in turn props up house prices.

Helping first home buyers is great politics. And there are hints of good policy too, particularly in that they encourage greater input from the community housing sector, which has largely been ignored by governments of all shades. However, without a substantial increase in the supply of housing, this attempt to bolster demand could simply fan the flames of an already overheated housing market. This has very much been the experience for rent to buy (or shared equity) schemes in places like London. Which brings us back to supply.

A new vision for our cities

KiwiBuild was supposed to solve the supply problem through direct Government action, but has clearly failed. Government should leave the building to the community housing sector by helping them scale up to provide not just social housing but at cost affordable rentals as well. I’ve written about how this could be done on interest.co.nz previously.

The Government should then turn its attention to removing the barriers to more building in general, especially in our biggest cities. Even if they are successful in removing these barriers through their National Policy Statements, local authorities are saying that they don’t have the money or incentive to build the required infrastructure which then will allow the houses to be built. Substantial reform of local body funding is needed to kickstart this process.

This is the opportunity for the Government to finally be bold and transformative. The cost of borrowing is at an all time low. A potential global economic slowdown looms. Climate change requires us to radically transform our cities. Tackling the infrastructure problems to help our cities become delightfully denser seems like a total no brainer. Truly affordable housing would naturally follow.

This “transformational” Government has failed to reform taxation and turn the tide on housing supply. The only question remaining is whether they are prepared to be bold when it really counts.

*Geoff Simmons is The Opportunities Party's leader.

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80 Comments

by rastus1 | 5th Sep 19, 10:58am 1567637931

yes totally predictable when voting for the incumbents. I voted TOP, not into all policy, but we need a disruptor, not more of the same old.

by Due Diligence | 5th Sep 19, 12:20pm 1567642819

Wasted vote. That said, I intend to waste my vote on ACT next year.

by rastus1 | 5th Sep 19, 12:47pm 1567644468

...one might say that the way the politicians are behaving all votes are wasted.

by Queequeg | 5th Sep 19, 12:48pm 1567644515

given the (low) quality policy coming from both sides of the political aisle it would seem everyone wasted their vote.

by loveyourwork | 5th Sep 19, 1:46pm 1567648017

Only wasted votes I see is that for either National or Labour .. I voted TOP too, better than not voting at all.

by Due Diligence | 5th Sep 19, 2:17pm 1567649834

You'll find upon further reflection that voting for TOP in the last election was exactly the same as not voting at all. And for the sake of the country thank goodness for that.

by lastredact | 5th Sep 19, 3:31pm 1567654304

I voted TOP, but renounced my membership after the ongoing internal debacles since the last election. I'm prepared to give them a chance, but not looking likely for a 2020 vote from me Geoff....need some proof of stability and survival before I go there again. Nonethless, it'll be BAU for me i.e. not voting for any parties currently in the house. And Labour and National have NEVER given me any good reason to vote for them. They've just been mild variations on the same tedious and unproductive theme for at least a couple of decades now.

by xingmowang | 5th Sep 19, 11:01am 1567638061

The political system is the true culprit that stops anything beneficial to NZ people from happening.

by powerdownkiwi | 5th Sep 19, 11:14am 1567638894

Ah yes - that'll explain Hong Kong

by CourtJester | 5th Sep 19, 12:37pm 1567643854

Are you saying nothing beneficial to NZ people ever happens? What political system would change that?

by Ocelot | 5th Sep 19, 1:00pm 1567645227

Almost every other political system in the world is worse than what we have here right now. I guess it's our eternal vigilance (complaining) that helps to keep it on track. I do agree there are a lot of improvements we could see, but let's not throw the baby out with the bath water.

by meh | 5th Sep 19, 5:02pm 1567659753

What other political systems are there? Communism, monarchies, dictatorships, "democracies" are all still ruled by economics with different outcomes for the various participants depending on their level of standing in the pyramid scheme.

by frazz | 5th Sep 19, 2:20pm 1567650040

Yet to continue to live here X...watching and reporting back every month huh?

by lastredact | 5th Sep 19, 4:01pm 1567656069

There the good old-fashioned "National Socialist" dictatorship that guarantees some sort of results....just nothing overly good, but good enough if you don't mind the reduced freedoms, the extra corruption and you're not in a religious, social or ethnic group that gets destined for concentration camps. Sad to see that style of governing is still alive & well in the 21st century.

by Roger Witherspoon | 5th Sep 19, 11:17am 1567639070

Obviously, to combat climate change we need more people, more houses, more taxation, more regulation, less agriculture and absolutely no mining. Am I missing something, or is something messed up here?

by CourtJester | 5th Sep 19, 12:41pm 1567644090

I'm not entirely sure if your comment is sarcastic or not.
Sarcastic bit: "to combat climate change we need more people, more houses"
Maybe sarcastic, maybe not: "more taxation, absolutely no mining"
Can't be sarcastic, since it's factual: "more regulation, less agriculture".

by youngdumbandbroke | 5th Sep 19, 3:18pm 1567653517

If climate change is the biggest threat facing mankind, whens the price of beach bachs going to plummet? Wouldnt mind one in the coromandel or bay of islands

by powerdownkiwi | 5th Sep 19, 11:19am 1567639158

Simmons is smart enough to know this is a yesterday discussion. Come on Geoff - compact cities only work when you feed vast quantities of materials and energy into them. And the excrete entropic wastes. End story. How long does that last?

Try reading 'Creating regenerative cities' and maybe Catton's 'Overshoot'. Then be really disruptive.

by geoffsimmonz | 5th Sep 19, 2:53pm 1567652018

I'll give those a read. In the mean time I'll say TOP supports a broader definition of infrastructure which includes natural capital e.g. water infrastructure includes wetlands and rain gardens.

Regardless, density has to be better than sprawl.

by Doris | 5th Sep 19, 3:07pm 1567652840

Density is better than sprawl, but there's no doubt in my mind that NZ was a lot nicer with half a million less people (and 2 million less tourists), when a FHB could get a plain house on a good-sized section in an unfashionable suburb of Auckland for $300,000 and still get to work in 30 minutes.

by imhenry | 6th Sep 19, 6:52am 1567709525

That dream is long gone

by Dale Smith | 5th Sep 19, 3:13pm 1567653208

Yep density works for Hong Kong.

by Calaverite | 5th Sep 19, 11:27am 1567639665

Here here, what a complete and utter shambles.

It's not rocket science, I see no reason why entry level family homes should be more than $300k. But that would mean crushing land prices, breaking up the building supply cartel, ripping up layers of council bureaucracy and leveraging the government's balance sheet, none of which either Labour or National have shown any inclination they want to do.

by Yvil | 5th Sep 19, 1:34pm 1567647243

"I see no reason why entry level family homes should be more than $300k"

Please go ahead, buy a piece of land in Auckland and build a family home for no more than $300k (including gst, consent fees, Architect & engineer fees, landscaping, all finishing materials, fixed appliances, plumbing fittings etc…). You will be a national hero if you can pull it off

by JimboJones | 5th Sep 19, 2:21pm 1567650076

I think by 'should' he means in a world where land wasn't overpriced and building wasn't stupidly regulated.
Also he didn't mention a new house - they should always be a premium.

by paashaas | 5th Sep 19, 5:19pm 1567660796

I think by "should" he means the world where pigs fly .

by Lapun | 5th Sep 19, 6:56pm 1567666607

They fly in some big cities - but in other countries.

by Dale Smith | 5th Sep 19, 3:05pm 1567652706

Calaverite is 100% correct, and gives their prerequisites as to what would need to happen. And there are plenty of real life examples where they exist and the price around that amount.

And you are 100% if you want to maintain the status quo.

by mikekirk29 | 5th Sep 19, 11:27am 1567639678

There are only 3 cities of any size and only one has terrible affordability for 3 bed dwellings: Auckland.
Christchurch problem is people leaving since 2011.
Box apartments are not the answer, control of immigration is.
Winston silent
result: stalemate. Or what Winston regards as stopping Labour doing anything too much like redistribution

by THE MAN 2 | 5th Sep 19, 11:57am 1567641425

MikeKirk, real estate agent, you need to be more informed if you are making statements.
There are more people living in ChCh now than before the quakes.
ChCh is continuing to grow and will become the city of choice for all!

by mikekirk29 | 5th Sep 19, 12:03pm 1567641828

Census your source is it?
Been published for Christchurch has it, this month?
if so, please quote the figures for 2011 and 2018.

by mikekirk29 | 5th Sep 19, 12:09pm 1567642168

Google states pop in 2011 was 367,500 and in 2017 estimated by Stats NZ was 381,500

So, you are right. My apologies

by Gummy Bear Hero | 5th Sep 19, 12:38pm 1567643899

.. there was a dip in the garden citys population in the 3 or 4 years after the quakes ... many moved to satellite town such as Rangoon , Pegasus and Rolleston ... but Chch is now at a new all time high in citizens ... and the number of cafes and bistros appears to have increased exponentially to cater for this ... YIPPPPEEEEEEE !

by Big_Saint | 5th Sep 19, 12:31pm 1567643496

Winston hasn’t been completely silent. Lies, lies and statistics

https://www.facebook.com/NZFirst/photos/a.654807404574852/2324494140939…
Should be the first photo.

by geoffsimmonz | 5th Sep 19, 2:55pm 1567652129

TOP supports controlling immigration also.

However that won't solve the problem. We already have excessive demand and an undersupply of housing. Prices need to come down. That takes tax and supply side changes also.

by Doris | 5th Sep 19, 3:04pm 1567652645

There's definitely a gap in the market for a sensible party campaigning on a platform of much lower immigration levels.

by Lapun | 5th Sep 19, 7:12pm 1567667527

It has to be a sensible party. Otherwise the stinking racist and xenophobic comments will wipe out the rational discussion. Given partnerships and refugees our immigration will always be higher than most OECD countries. A small country will always need genuine experts; eg a distant relative from the 3rd world is an experienced consulting electrical engineer who arrived after the Christchurch Earthquake there simply were not enough in NZ and it would take many years to produce more.
The level of immigration ought to be lower but the important discussion is what are our immigrants doing? Think of your last interactions with immigrants - were they doing low wage work?
So far TOP has been sensible about immigration.

by Fritz | 5th Sep 19, 4:09pm 1567656552

I'm so cynical on Labour now, that I might consider TOP if I was to vote at all....

by cmat | 5th Sep 19, 11:37am 1567640238

Agree with all this.

However, the picture accompanying this story is just so depressing.
Can we not have interesting facades?

Amsterdam manages dense living without looking like a 21st century Soviet ghetto.

by Fritz | 5th Sep 19, 12:17pm 1567642644

There's already an awful lot of opportunity in the Auckland Unitary Plan that is relatively untapped. I am working on a business initiative that responds to some of this opportunity.

by GV 27 | 5th Sep 19, 1:07pm 1567645660

There's a lot of opportunity in the plan, but does it happen near rapid transit or out in the wops relying on an already-congested motorway? Does it involve building over green spaces and school playing fields while inner city areas retain their character status and gold-plated transport links?

by waymad | 5th Sep 19, 12:30pm 1567643419

Geoff wants cities to become 'delightfully denser'. But the main obstacle is that Gubmints, central and local, have become 'expensively, ruinously denser'.

by Gummy Bear Hero | 5th Sep 19, 12:41pm 1567644112

Gummy wants a Gubmint who look at the supply side of the property market .. and address that . . Particularly the ruinously high price of sections. .

... any plan to assist more people into home ownership is barking mad when we have a supply problem..

by Dale Smith | 5th Sep 19, 3:10pm 1567653039

Haha, 'delightfully denser,' sums up their thinking.

by Foxglove. | 5th Sep 19, 6:24pm 1567664693

Yes denser alright, particularly behind the eyes & between the ears!

by The Rogue Pirate | 5th Sep 19, 12:55pm 1567644908

Simpler option reduce demand ie change the mass immigration policy.

by geoffsimmonz | 5th Sep 19, 2:56pm 1567652202

Agreed, that is our policy too, but isn't enough in isolation. Need tax and supply side changes too.

by Due Diligence | 5th Sep 19, 1:08pm 1567645697

Geoff, I dare you to write an honest article explaining in no uncertain terms your aspirations to introduce a broad-based annual tax on all major assets, both private and commercial, based on the imaginary income that those assets are earning. Would be particularly good if you could give some examples of the assets that will be taxed on an ongoing basis - private car, house, batch, business assets etc.

I get the impression that you are fully aware that the biggest threat to your election prospects is the voting public actually being made aware of how radical your tax proposal is. Cheers.

by Big_Saint | 5th Sep 19, 2:26pm 1567650367

Are you sure you’re not BLSH?

by Due Diligence | 5th Sep 19, 2:54pm 1567652084

Yes. That maniac had disdain for TOP second to none.

by Pragmatist | 5th Sep 19, 2:54pm 1567652040

The denials are comical aren't they. :)

by geoffsimmonz | 5th Sep 19, 2:59pm 1567652358

I've written several on this site. Check out the link in the article.

Let's be clear - you support taxing housing differently from other assets?

by Due Diligence | 5th Sep 19, 3:11pm 1567653073

I support taxing the income from all assets equally, and housing is no exception. Currently assets themselves are taxed at the equally low rate of 0%, which is the way it should be. Taxing all major business and private assets on an annual basis based on their value is an excellent way to discourage capital investment and entrepreneurship.

Geoff, be honest, you know the linked article doesn't go into detail about your proposed wealth tax/RFRM.

by GGP | 5th Sep 19, 3:38pm 1567654689

Not taxing assets just encourages you to hoard them. Taxing income gained from assets discourages you from actually generating income from those assets. Which is exactly the opposite of how it should be. Just buying capital and not generating any income from it is stupid and a waste of resources.

by Due Diligence | 5th Sep 19, 4:04pm 1567656296

Taxing assets encourages capital flight.

The most fundamental economic issue currently faced by NZ is stubbornly low productivity. Capital investment is an important part of resolving this, and a broad-based perpetual tax on capital is an excellent way to achieve the opposite effect. The free market knows how money is best invested, not politicians like Geoff, so they should stay out of it instead of trying to interfere by using taxes to incentivise spending on assets that they deem desirable. Not to mention that taxing capital undermines basic principles of private property rights.

by GGP | 5th Sep 19, 4:15pm 1567656921

"The most fundamental economic issue currently faced by NZ is stubbornly low productivity"

Have you considered that the current tax system exacerbates this?

"Capital investment is an important part of resolving this, and a broad-based perpetual tax on capital is an excellent way to achieve the opposite effect"

What I'm seeing in New Zealand is capital investment going only into residential property, and only occasionally does that involve actually improving that property or, God forbid, developing it into something that could actually house a greater number of people.

If buying residential property meant that you had to pay a tax just for holding it, you would think twice about doing that. You would need to be sure that you could make something out of that property to help cover those tax payments. This might have the *awful* effect of getting you to actually improve the property in the ways I described in the previous paragraph. Even worse, it might get you not to invest in residential property at all but something that actually contributes to the economy!

"The free market knows how money is best invested, not politicians like Geoff, so they should stay out of it instead of trying to interfere by using taxes to incentivise spending on assets that they deem desirable"

I actually do believe in the free market. Unfortunately, there is nothing free about the current market. The incentives right now because of New Zealand's janky tax system are to use your capital to buy up land, sit on it, and then sell it for untaxed capital gains 10 years later.

"Not to mention that taxing capital undermines basic principles of private property rights."

Nope.

by hemihua | 5th Sep 19, 5:31pm 1567661505

Err assets are generally valued based on how much income they generate...

by Due Diligence | 5th Sep 19, 6:10pm 1567663836

by paashaas | 5th Sep 19, 5:25pm 1567661143

I think it is only part dishonesty from him ; the other , possibly more important part is lack of any detailed plan at all .. which is no surprise - the thing is self-contradictory and falls apart as soon as examined a bit closer.

by Yvil | 5th Sep 19, 1:25pm 1567646706

Great piece GS, you hit the nail squarely on the head

by my2c | 5th Sep 19, 1:36pm 1567647403

'This “transformational” Government has failed to reform taxation and turn the tide on housing supply'

What they bought $207M worth of useless houses with our tax money, that no one wanted. Surely that's transformational!

Your advocating CGT would have fixed this ? So more tax will solve the housing problems, I'll be giving you a NO vote.

by geoffsimmonz | 5th Sep 19, 2:57pm 1567652259

Nope, dont' support a CGT - check out the link provided in the piece.

by Kezza R | 5th Sep 19, 2:44pm 1567651464

Slay the cats, bomb the place with 1080.
Morgan had to take a back seat on this party because if his irrational views. We all know he's still forking out the dollars and calling the shots though. TOP is a sway the narrative, grab a few votes off the party they dont want to win machine, much like what Bob Jones did.

by Due Diligence | 5th Sep 19, 2:50pm 1567651804

"We all know he's still forking out the dollars and calling the shots though"

No doubt TOP wishes this was the case, but unfortunately for them it was a messy divorce and TOP aren't getting a cent from Gareth. They are close to insolvency, barely able to afford Geoff's modest salary, circling the drain.

by Milkyone | 5th Sep 19, 2:57pm 1567652251

"Help our cities become delightfully denser"

What if the people of NZ don't actually want that? Instead of forcing people into smaller and smaler homes, why don't we just try and keep the NZ population where it is, instead of growing?

The best part? This would be super easy! NZ birth rate is lower than replaceemnt level, so to keep population consistent, all we have to do is allow the correct number of immigrants in.

by CourtJester | 5th Sep 19, 3:48pm 1567655330

No one is forcing people to smaller homes, or denser housing. Actually, if you have a house in a higher density location, you can probably sell it and buy a bigger house in a small rural town and make a good profit.

by GGP | 5th Sep 19, 4:16pm 1567656961

Yeah, we should keep the NZ population completely fixed. However, to truly make it the best country possible, the people that should be allowed here shouldn't be determined by random luck of where you happened to be born.

What I propose instead is that, every year, the entire population of NZ, plus anyone outside of NZ that wants to immigrate here, takes an IQ test. The top 5 million scorers then become the citizens of New Zealand. Everyone that scored below that has the choice of leaving or being executed.

This is, I think, the fairest way to keep New Zealand's population nice and low. That way, we can keep the 600 square meter yards that nobody ever steps foot on, plus those large empty fields of green that you don't pay attention to as you drive through them on the way to work.

by hemihua | 5th Sep 19, 6:31pm 1567665102

Yes! Noone wants to live on top of each other in apartments unless you're early 20's and want to live next door to the clubs or retired and want to live next to the supermarket. There's a reason apartments are mostly investor / rentals. Why is NZ sacrificing its quality of life in pursuit of 'growth'?

by kiwi_overseas | 5th Sep 19, 3:31pm 1567654273

1) Manage the immigration rate down to some sustainable that maximises gdp/capita & socioeconomic net present value growth

2) Remove the zoning & density restrictions in the RMA and go effects based only

3) Amalgamate all councils into unitary authorities

4) Sunset all council plans and covenants with a 10 year horizon and require all councils to work together to produce single national level plans that are effects based (urban growth, water, air etc)

by CourtJester | 5th Sep 19, 3:56pm 1567655812

Such complex metrics as *gdp/capita* would confuse the average voter. Let's keep it simple and measure success with plain old GDP.
The sad reality.

by kiwi_overseas | 5th Sep 19, 6:26pm 1567664806

But just using GDP alone is the problem.

High immigration rates drive increases in GDP

But they also drive down/flatten GDP / capita, cause dis-economies of scale, and unpaid for externalities.

Thats why we must focus of gdp/capita, and even more essentailly socioeconomic cost/benefits and net present value of those.

by Lapun | 5th Sep 19, 7:19pm 1567667971

The correct immigrants would boost GDP/capita not flatten it. Someone suggested an annual auction for Permanent Residency visas - that might work.

by Andrewj | 5th Sep 19, 3:44pm 1567655073

if you want cheap house put interest rates up.

by Yvil | 5th Sep 19, 3:59pm 1567655966

True, you'll also get cheap everything else, since people will lose their jobs en masse

by Andrewj | 5th Sep 19, 5:13pm 1567660394

there is no escape. We got here with easy credit and low interest rates.

by Noncents | 5th Sep 19, 4:16pm 1567656976

Not that simple. Even back in the 80s, with >20% rates. The house prices was still increasing.

Easy solution is to simply stick a Gang pad on each block. Significantly lowers the value of surrounding homes. It will also see an increase in Meth production and a correlating drop in price for that too. Double bonus for all the drop kicks. Cheap house, cheap drugs - they might finally be able to afford to feed their kids.

by Andrewj | 5th Sep 19, 4:58pm 1567659481

they were not when I lived in the 80's

by KH | 5th Sep 19, 4:13pm 1567656807

".....Reset leaves little hope for young people." Exactly right.
Nothing is going to work until house prices get back into sync with incomes. Simply house prices need to drop.
The way that will happen is going really hard about controlling population. It needs to be stable and reducing.
Cutting immigration drastically would do that, as well as increase incomes. Importing folk who need to be housed at the same time as using them to keep incomes low has been a disaster.

by PKchew | 5th Sep 19, 11:04pm 1567681480

I would say that Incomes need to increase!

by The_4th_estate | 7th Sep 19, 9:34am 1567805667

It has to be acknowledged with the mountain of evidence amassed over the decades that our little economy gets shocked into deep recession extremely easily so any alteration to policy settings do need to be done slowly but surely. You can't have repeats of the drastic policy changes of say richardsons 91 budgets or similar, which arguably caused more longterm damage than it repaired.