When Housing Minister Phil Twyford spoke at the New Zealand Initiative’s retreat last week, I had only one regret about having invited him: Our event is held under Chatham House rules.
You see, under Chatham House rules you cannot report or attribute anything that is said at the conference. This is to facilitate a free exchange of views and ideas.
It was a pity because the Minister’s speech was the best political statement on urban development I ever heard. It was a shame for it to be the exclusive privilege of our attendees to listen to it.
So I was relieved Twyford chose to make his speech available online and published it on the Beehive’s website. The text is required reading for anyone seeking answers to New Zealand’s housing crisis.
Twyford copped serious flak for his struggling KiwiBuild programme – including from the Initiative. But when you read his speech, you can see that the rest of his housing policy is sufficiently ambitious and radical to solve our housing market without recourse to something like KiwiBuild.
The Minister’s analysis of the three big problems facing our property sector was spot on:
- A broken system for financing infrastructure
- A planning system based on urban containment
- The failure of governments until now, both local and central, to actively work with the private sector to enable urban growth and expansion.
Twyford first explained how councils cannot pay for the infrastructure to accommodate economic growth. Just as the Initiative has been pointing out for years, he emphasised the need to have growth pay for itself.
Following that, Twyford turned his attention to our planning system under the Resource Management Act (RMA). This had limited the ability of cities to grow either up or out. Again, we have been highlighting this for many years.
Twyford then stated that the Government aims to reform the RMA with a clear goal: “Our aim is to bring down urban land prices by flooding the market with development opportunities.”
Hallelujah! Amen to that.
Finally, Twyford explained the need for much better coordination between central and local government and other sectors. Again, we could not agree more.
I would also like to report that the Minister was just as convincing and ambitious in the Q&A session as he was in his now released speech.
Unfortunately, I am bound by Chatham House rules.
*Oliver Hartwich is the executive director of the NZ Initiative.
47 Comments
All sounds good in theory. Minister Twyford is a world expert on theory and rhetoric. With all the will he can muster and all the resources of government behind him he cant get his kiwibuild off the ground, enough said. So I will wait to see any results before I actually believe that anything material is about to happen.
33% more applications is a great thing if the overall number accepted is not allowed to spiral out of control as a proxy for real economic policy, as has been the wont of too many politicians in recent years. It allows NZ to be more selective rather than importing (for example) low-skilled hospitality workers under the banner of high-skilled immigration.
The key mover in this housing debate is not Phil Twyford but Jacinda Ardern.
Bill English was very keen to move on housing affordability (I didn't exactly agree with his policy prescription -too much out/not enough up for my liking) but he never got support from John Key -so the policy prescription was moot -it never happened. The rest of government did not swing in behind Bill English between 2008 and the end of 2016 when John Key retired and once Bill became caretaker PM it was too late.
The big question is will Jacinda prioritise Phil Twyford's policy prescription or will it drop down the agenda -behind responding to the Christchurch terrorist attack, behind the capital gains tax and behind the next 'event' that needs to be responded to with empathy and care.
Wellington still very much has a housing crisis. Rents are going up by $1000+/year -faster than government grants such as free tertiary education, winter energy payments and family tax credits and probably faster than wage increases. What are Labour's Wellington MPs doing about it -Grant Robertson, Kris Faafoi, Chris Hipkins, Greg O'Connor, Paul Eagle, Trevor Mallard... ? Will they support Phil Twyford's policy prescription?
A Housing and Urban Development Authority and a Special Purpose Vehicle could change the way Wellington builds housing and funds infrastructure. Will they support that change?
In a few hours of my spare time I came up with a plan using these tools that means Wellington could build 10,000 houses, over about a decade, at about $400,000 each, in a location that can access the region’s major employment markets, with 30 minutes or less travel time, using rapid transit.
https://medium.com/land-buildings-identity-and-values/can-a-eco-city-so…
What plan for Wellington and NZ are Cabinet MPs supporting and will Jacinda apply her 'political will' are the key questions in my mind?
Yes I did support SHA and the Unitary Plan, although at the time I criticised them for not going far and fast enough.
I have also advocated for new a type of intensification -hyperlocalism.
And I have advocated for NZ and Auckland to look at learning from Tokyo -in particular how Tokyo doesn't subsidise cars by giving them free spaces in congested city environments.
If NZ had congestion road pricing or better car parking management systems then we wouldn't sprawl so much -whether we had a RUB or not.
Phil Twyford's removing the RUB proposal -for the rationale reason of stopping the pressure cooker land price effect -is for the South Auckland to Hamilton growth corridor and is in conjunction with intensive spatial planning, it also includes higher speed rail connecting Auckland to Hamilton, reducing travel time to 1 hour. So it isn't automobile dependent sprawl like Auckland did from 1945 to the 2000s.
My understanding is that there will be very little land identified in the spatial plan outside the RUB, because there are very good reasons why the land currently outside the RUB is not developable to the south.
I also understand that they aren't looking at high speed train, so it will be a train trip of nearly 2 hours....hardly transformational. In fact, kind of pathetically tokenistic.
Read Phil's Speech Fritz. Lots of space for houses around train stations between Hamilton and Auckland.
"We are applying the Making Room for Growth approach. And recognising that transport infrastructure is the most powerful driver of urban form.
Road and rail investment, with planning rules that encourage development in transit corridors, can unleash a far more efficient and liveable urban form than the random splatter of housing subdivisions that has characterised much of recent urban growth.
And between these two powerful growth areas we are developing the case for modern rapid rail that would get you from Hamilton to the Britomart in an hour, effectively uniting these two labour markets"
The reason why the SHA did and never was going to work , which I pointed out at the time, was they did not increase the supply of developable land, in fact the opposite.
As inefficient as the RUB was , in theory it was a greater amount of developable land than the SHA, and all the SHA was reduce that down to smaller pockets (further limiting supply), thus supply further was reduced relative to demand.
Supply can only be called supply if its available to meet current demand. All the SHA's did was either increase the value of the SHA land with the owners holding out for more and/or was forced on them by the designation was different from the plans they had for the land, both current and long term, causing disagreement and delays between council and owners.
The end result being no more affordable sections were available, remembering it is not just about numbers per se, but about affordable numbers.
The big mistake they are making with the present plan is that it still has exclusions based only on arbitrary restrictions, which means it is not providing true free market land available at anyone time to prevent rentier land control. Land can still be land banked.
Further with a HDA command and control management ideology, land with either by design or bureaucratic slowness, be supplied out of sync. meaning supply will neither meet demand on both up and down the cycle. Land will either be in under supply(mainly) or over supply(which can be held back from release to the market), with only moments in time an equilibrium.
End result is still unaffordable land.
All that is really going to happen is the rentier profit the land owners use to get, will be captured further up the chain by Govt./council. The exact % will be negotiated between the landowner and Govt./council, with the end home owning purchaser only given enough of a break to make their present situation look better, yet still far short of what they could have - if they only knew.
That sounds like passing the buck. Twyford needs to do the work to give Ardern the platform.
At the moment, the agencies under his watch are a shambles, and he’s made some poor calls.
They need to replace him, although I am not sure with whom. Pretty average bunch of MPs under Ardern!
What bad calls has Phil Twyford made? I can only think of one and a half.
Firstly the KiwiBuild buying off the plan policy was over-egged. Phil has put his hand up and admitted this.
And secondly Phil should have made this speech last year so that the housing and urban development legislative programme, such as creating the Housing and Urban Development Authority could have passed late last year or early this year. This delay has incurred a political cost -one that only Phil Twyford seems to be incurring -KiwiBuild has started with reduced credibility.
This second mistake should be shared by Cabinet and the PM because they collectively determine the government's priorities.
KiwiBuild being a dysfunctional organisation -already having lost one boss is not Phil's responsibility. Hiring and firing of civil servants is done by department CEO's not Ministers.
Bad calls? (apart from the one on the plane) I'd be here all night listing them. You've mentioned a couple.
Cancelling the SHA legislation is another one.
Let's see what he and Parker come out with in terms of planning / RMA changes this year. I'll be startled if it is anything meaningful, and I'll be more than startled if he achieves his key ambition of getting rid of the RUB,
Their flagship planning changes are due to be consulted on in June. Let's see then if Twyford's revolution is real or not. By the way, anyone who has dealt with or worked within government knows that there is often a strong relationship between the competence and credibility of a minister and functionality of their ministries.
... for many years the powers that be ( local nimbies , councils , the nations government , RMA ) have squelched innovation in house building ... limiting us to either a stand-a-lone single level dwelling in a green leafy suburb ... or to a standardized apartment in a tilt slab concrete tower block ...
We desperately need to re-open the avenues for outside the box thinking on housing designs , shared living , different materials , multilevels , tree houses , stacked shipping containers , pole houses , basement living , tunnels , innovative financing structures , you name it ...
... the same old / same old model isn't working .... and it's freaking boring .... where's the pizzazz , NZ !
Oliver knows the true cause of the housing crisis. His position is in stark contrast to simple minded folk that want to tax property until it somehow becomes cheaper.
I will say though that the RMA doesn’t allocate land for development, district/regional/unitary plans prepared by councils do. The RMA sets the framework but isn’t prescriptive in this regard. Look at the zoning under Auckland’s unitary plan - there is PLENTY of greenfield land zoned for development e.g. Redhills out west and Wainui East further north. And then look at the future urban zoned (FUZ) greelfield land in yellow - there is HEAPS of it. I’m not convinced that more sprawl is the answer given plenty of land is already available, but fully agree with the infrastructure point. Higher density along rapid transit networks within the rural-urban boundary is what I want to see more of. And build up capacity in the construction sector.
Yes coloured zones on paper show plenty but that is just an illusion as to the real amount available, and in fact the system that makes this zoning is the reason it is an illusion.
For starters, by highlighting which land has been zoned, or by following the trend to what will be zoned next, enables landbanking, which gives a few a monopoly, allowing land to be restricted to achieve maximum non added value rentier prices. This means most of the land is not available to supply demand, not only at the volume needed, but also at the price needed.
Further any land the does get developed has to be linked into the last council monopoly infrastructure point, which is mainly immediate to the fringe. Again this means that any land, even meters beyond this point is not available for development.
And lastly, non landbanking owners, eg farmers and lifestyle block owners, may not want the land to be further developed regardless of what the colours on a piece of paper show.
The end result is that there is very little land available at an affordable price, regardless of whether the infrastructure is available or not.
The best jurisdictions overseas allow zonings (of lack of them), and private infrastructure systems that ensure land can be purchased on demand and be developed in almost real time resulting in houses that are warm, dry, healthy and affordable. IE that opposite of what we do in NZ.
What jurisdictions overseas?
A monopoly? “A market structure characterized by a single seller, selling a unique product in the market. In a monopoly market, the seller faces no competition”. Zoneing does not create a monopoly.
Cheap land out out in the whops isn’t so cheap when you realise how much it costs to service it with requisite infrastructure to unlock its development potential. Let alone the ongoing cost of travel to employment.
Germany, Switzerland and most southern and mid western states in the USA. All have a different system but with commodity that land cannot be gamed by landbankers.
The monopoly, or defacto monopolies ie the result is the same as if it was a monopoly, works in three ways,
1) the zoning confers a monopoly on that piece of land(each piece of land is unique with regard to its location),
2) a single large land banking owner (or other potential non motivated sellers like farmers) that owns the land immediately adjacent to the next service connection. Meaning nothing can be developed beyond them as the infrastructure has to go through them before anything else can get developed. One person can block, or delay further development.
3) Council has monopoly on consenting and supply of much of the infrastructure.
Having developed land in the 'Wops' in NZ and in other Jurisdictions, I know the costs and the only reason land is expensive both out and in, in NZ is because of our zoning methodology which is tied to our infrastructure and consenting ideology, which allows for huge non value added costs (Revenue to landbankers and council).
The price of land everywhere is set at the fringe, if you want it to be cheaper in the center, the relatively it has to be cheaper at the fringe.
Much of the infrastructure, especially wastewater, can be far easier, cheaper, and more environmentally supplied by STEP type systems, and their variants, by private entities.
Germany, Switzerland and the States all have zoning plans/legislation in one form or another. What about their systems enables land to be “purchased on demand and be developed in almost real time” in a way that is can’t be in NZ? I don’t actually know why you think that land can’t be purchased on demand in NZ. It can be purchased on demand, it is just expensive. And development happens in “real time” in NZ. What other time would it happen in?
A monopoly is when there is a single seller that operates without competition. If I want to sell a residentially zoned piece of property I will be competing against other sellers of residential property. I most certainly do not have a monopoly. The same applies to commercial, industrial and rural land. Please explain to me how zoning produces a singer seller of land in NZ that operates without competition. You should have another read of the definition of monopoly.
You have missed the point on my explanation on how land can be monopolized. I suggest you re read what I have already written.
Texas for example basically has no zoning (besides land that has already been excluded for other reasons like infrastructure corridor designations, and environmentally sensitive lands), which means it has a presumptive right to build.
This allows developers in theory to buy land rural land at the rural land price and arrange their own infrastructure. Councils role is just to facilitate this based on the development rules.
This then further allows developers to react immediately (ie developer real time) to market demand, and just as importantly, if demand is unforeseenably reduced, then their undeveloped land holding costs are based on the rural land price they paid, which also means it is probably still earning a rural income, ie it is cash flow neutral and therefore no holding costs.
Developer real time, is the time (and cost) it takes a developer to buy the land and take the finished product to market without any of the bureaucratic hindrances that slowed the process down in recent decades. In a simple builder example, it used to take a builder 4 to 5 months from submission of consent to code of compliance, now its about double that time.. For land development this can be as short as 9 to 12 months.
This addition of extra costs for no extra benefit are known as non value added costs. Another name might be 'waste.'
You state, 'the land.., it is just expensive', as though the price is a given. The question you need to ask is, "why is the land expensive.' And the answer is as I have explained.
All in all, initial land input cost is less, plus supply can also match the demand (in developer real time), unlike NZ.
Texas most certainly does have zoning. Here is an example https://www.leandertx.gov/sites/default/files/fileattachments/planning/…
Zoning restrictions definitely reduce the supply of developable land, but you’re way off the mark by claiming it creates a monopoly. Regarding your previous points:
1) You claim that zoning “confers a monopoly on that piece of land(each piece of land is unique with regard to its location)”. Firstly, each piece of land is unique with regards to its location regardless of whether it is zoned or not. Secondly, sellers of land compete with other sellers of land - they simply don’t have a monopoly. Your argument is like saying that Skycity Hotel has a monopoly on hotel accommodation because no other hotel is exactly like theirs and they are the single purveyor of their particular accomodation.
2) “a single large land banking owner (or other potential non motivated sellers like farmers) that owns the land immediately adjacent to the next service connection. Meaning nothing can be developed beyond them as the infrastructure has to go through them before anything else can get developed. One person can block, or delay further development.” What does this have to do with zoning or a monopoly?
3) “Council has monopoly on consenting and supply of much of the infrastructure.” Now you’re just switching to a totally different point. First you say that zoning gives landowners a monopoly, now you muddy the water by throwing council control of infrastructure into the mix. What does this have to do with zoning?
I suggest you go to http://www.performanceurbanplanning.org/, scroll down and on the left you will see Texas Municipal Utility Districts (MUD) Info, and read the linked articles.
Since we are having trouble agreeing why the way we do things in NZ is a monopoly or is causing the effects the same as a monopoly, how about we turn this on its head and ask, 'what is a truly free market when it comes to buying land?
And your Leander map helps explain this. When I mean no zoning (relative to how we understand it in NZ), I mean the zoning is not designated by council prior to the developer choosing to use it for that particular purpose.
You can see on the map that the land outside the city boundary has no designation, which makes it rural land (zoned) by default.
The use once purchased as rural land is designated by the developer more by covenants rather than zonings, and the development is generally via a MUD, which at some future stage the council might take over by annexation into the city, and they rename the covenants as zonings.
On the map far right corner you can see the key for annexations. There is nothing stopping a council/city from being involved in urban planning/development but that is generally left to brownsfield developments in partnership with private developers.
In effect the developer is always buying land on the fringe at the rural land price, and any landowner who does not want to sell, or sell at the rural land price, is bypassed by the developer to an owner who does want to sell at the rural land price. therefore there is always land available at the rural land price for development.
Thus a developer can potential choose any piece of rural land (excluding that land already excluded for infrastructure corridors, protected soils etc.). And it is up to the developer to make that choice based on what he thinks the market wants, and they are responsible to supplying the infrastructure to service it. The land they buy could be on the city boundary or miles out.
As the price of all land is set at the fringe ie the raw rural land price, the cheaper this land is, so is the land relative going inwards. Thus years later when redeveloped/brownfields occurs on land within the city boundary, the price is still underpinned by the price of the land on the fringe, where ever that now is.
That is why sections are a quarter the price of NZ sections, and section and house prices are 3x medium income, not 6 to 10x as in NZ.
For a true free market for development to operate at the rural land price there needs to be available for development NOW approx. the equivalent of 30,000 sections, ie enough land that in theory could be developed and brought to the market in developer real time, ie 9 to 12 months.
Of course that amount of land is developed over time (driven by the market, not council), but it is a presumptive right to build, and is completely different to showing on a map designations for 30,000 sections over say 20 years, and then drip feeding those sections onto the market as land is rezoned from future residential to residential and as council supply infrastructure, ie a presumptive right to not build.
Part of what Phil T is proposing is a bastardized version of the Texas MUD system, while means it won't work because he says, through the UDA, they will release that land onto the market as they see fit, which includes not at the expensive of allowing land values to fall in the inner city.
I certainly don’t think that everyone who advocates for a CGT does so only because they think it will make property cheaper. I completely get the fairness argument, and after all, CGT wouldn’t just apply to property. I’m saying that plenty of people think that taxing property and property investment will help solve NZ’s housing issues, which it won’t.
And the one comment he does make questioning the one element he thought of as a straw man is wrong. Taxes against land do reduce its value, because it's fixed in supply, taxes against land reduce its yield. Reduced yield means reduced value, and reduced incentives for speculation.
Phil Twyford spoke at the recent Co-Lab conference for prefabricated housing suppliers in Auckland, he acknowledged KiwiBuild mistakes but defends the plan.
https://www.stuff.co.nz/business/money/111267004/defiant-housing-minist…
Re building costs he said this.
"The country is getting closer to importing complete prefabricated houses, as well as seeing major local and overseas companies setting up giant house-building factories in New Zealand, Housing Minister Phil Twyford says."
And them Factories could usefully - my favourite jab - be staffed with the hundreds of Map-squigglers (Plannerz) and Consent-Holder-Upperers (Factory houses will Have to be multi-proof consented to stop this nonsense) soon to be unemployed if (should probably be IF - public sector unions may have summat to say here) PT's New Deal for Housing gets actual traction.
Plus, BRANZ and the other ridiculous local-certification monopolies will have to be dismantled to a large extent: a standard ISO lab rating on any imported material should be adopted overnight. After all, if a material has been shown to work in WA, Alaska, Scotland or Israel, why oh why do we need the local clods to duplicate that certification?
Really -show me a press statement or a policy document that explains National's affordable housing supply RMA reforms. I bet you can't because it doesn't exist. National had 9 years to come up with an affordable housing supply plan and they failed to deliver it. National, especially under Key, were full of bs and spin.
You realise there are multiple ways the RMA could be changed, right? And that Labour wasn't the only party that didn't support National's RMA change, right? And that's why National never managed to pass it? And that their changes were angled towards the top end of town, not towards the middle-lower needing cheaper housing, right?
National had a coalition of partners, enough to enact legislation. They failed to get their coalition to pass their legislation.
No need to rewrite history to suit. How can one support Bill English's earlier statements to the extent National would try to obstruct Labour's governance to prevent them from doing anything, then moan that Labour didn't step in to help National out when they were unable to manage their own coalition government?
(However, on a general level I'd much prefer if our politicians could cooperate more on enacting good policy. It's likely the propensity to try to squeeze through too much alongside the good policy that reduces this possibility on occasion.)
Kiwibuild cam about because Labour believes the old greedy landlords and developer myth and, therefore, the government needs to do the building themselves. However, given a year or so of absolute failure of Kiwibuild it it is good to hear that Mr. Twyford is starting to take action on limited supply. Local councils have consistently restricted supply; both land and, probably even more importantly, land use i.e. density. If this were to change then we will get land prices down.
What, Labour saying:
"It's their fault. Put us in charge and we'll sort them out"?
Each generation seems to fall for it, some never see the con. They get put in charge and make things worse.
National then say:
"See what a mess those incompetent Labour bods have made. Put us in charge and we'll sort everything out". So they get put in charge and sort out a few things, but mostly sit on their hands, ignoring the key issues of the day.
So it repeats.
What, I ask quietly, is the square metreage per NZ'er?
I suspect it's up on what it was in, say, 1945.
GBH is the one to 'get it' upthread, most of the rest is the tired old 'we are superior, above nature, we deserve to expand indefinitely, therefore it's a 'housing crisis'.
Actually, it's a population crisis, and the MSM avoidance of that point is having the same effect on the social narrative, as it would if they (the MSM) were purposely peddling porkies. This gets quite serious - if one challenges them (and I have) they contrive to bury the complaint - perhaps knowing deep down that they'd lose in an honest debate. Thus we are still blithering-on about 'land supply' on a planet - and in a country - overpopulated by our species which is using all land flat out, more and more in an unsustainable manner, as it is.
Sorry Oliver you completely missed what was missing in Twyford's speech. The fourth point of failure; the utter failure of government's to regulate and manage the existing property market. While the solutions he identifies will likely impact on the issue, None of the questions about the exisiting markets are addressed. Such as manipulation by the real estate industry and specuvestors, how many homes are held empty (land banking) and the costs of rentals. Twyford is still essentially in denial about a significant factor.
Well local government regularly makes up fictitious requirements to hold up building consents. That is a problem across all of the Councils. They don't want to talk to anyone, just talk down to people which is extremely disappointing to have to deal with. There is a big difference in the time and effort required to get something built when the Council is being helpful or being obstructive.
You could ask why it can take 6 months or more to get a consent when the local council is only allowed 20 working days at most. MBIE does not want to ask that question, and the Minister of Building and Construction won't answer any questions put to her.
If Phil Twyford was genuine and sincere then he would make both central and local government actually talk to the building industry. That is something that isn't happening.
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