The Government plans to guarantee the sale of units in private housing developments that are struggling to secure financing under a new underwrite scheme, Housing Minister Chris Bishop has announced.
Developers generally need to sell a certain number of homes before a bank will greenlight financing for the project. This has become increasingly difficult with interest rates high and the housing market depressed.
Bishop said the Government will commit to buying enough units to help a developer meet the bank’s presale requirement and begin construction. It will only go through with the purchase if the developer was unable to find another buyer in the future.
The scheme looks to be a reheated version of a Labour Government plan which was sketched out in 2020, during the initial covid downturn, but was never actually implemented.
Interest.co.nz’s report at the time described it as a “less prescriptive replica of KiwiBuild” as it used the same underwrite structure but without requiring units be sold to first home buyers.
It would have used public money to buy any unsold units in a development at a price set below the market rate.
Credit conditions improved throughout 2020 and the Government decided there wasn't an urgent need for the $350 million programme. However, the Ministry for Urban Development and Housing told a Parliamentary committee it still saw a role for the scheme.
Under the Coalition’s design, the ministry’s officials will decide which projects get approved based on the level of risk involved and the need for housing in the area.
It has been described as a time-limited scheme but no time limit has been set. It will need to move quickly as developers have already been under pressure for multiple years and interest rates are forecast to fall fast.
Bishop said the lead time for building houses was typically 18 months or more, so it would take “at least that long for the residential development sector to gear back up as market conditions improve”.
“The timing is right for this kind of support, because interest rates are still high and building consent rates low,” he said in a press release. “This also has the benefit of ensuring there are houses ready to go for buyers who enter the market as interest rates drop.”
Chris Penk, the Minister for Building and Construction, said eligible projects must have at least 30 homes and the developer must have a proven track record of delivery.
However, there will be no price cap or eligible buyer restrictions. This means the underwrite could theoretically be used to support the construction of luxury housing, or properties that may be sold to investors.
It is targeted at the five largest cities but will be available everywhere. Penk said the number of homes supported will depend on economic conditions and demand from developers.
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Malcolm McCracken, an urban planner who has advised the Government on housing policy, said the policy “could be positive, though [it] may have come too late”.
“The last underwrite scheme, Kiwibuild, did not achieve the ambitious scale intended but probably did help more homes be built … and at little cost,” he wrote on Twitter.
Kieran McAnulty, the Labour Party’s housing spokesperson, said the Coalition had created unnecessary uncertainty by scrapping one scheme, only to replace it with another.
“Over the last few months, thousands of construction workers have lost their jobs. Maintaining a Government underwrite throughout this period would have helped some of them keep their jobs,” he said in a statement.
Michael Reddell, an independent economic commentator, said the Government was providing free insurance to big companies without making a robust case for intervention.
He said “capitalise the gains and socialise the losses” used to be an exaggerated insult used by the left, not an explicit policy of the centre-right coalition.
Bishop told reporters there was a risk to taxpayers, as the Government was providing a guarantee, but there would be guardrails to ensure only quality projects get support.
“We need to be upfront and honest about that. We think on balance, the risks can be mitigated to a large extent,” he said.
“Also, it's the right thing to do at this point in the construction cycle … In fact, I've heard this morning that someone's already shown a strong and keen interest, so it's a good thing.”
Interest.co.nz also heard from a property developer that planned to apply for the scheme.
It has a construction project ready to go, with most of the necessary presales, but has struggled to clear the final hurdle. In a case like that, the Government may only need to underwrite one or two units to get a much larger project underway.
Bishop said the scheme wouldn’t be in place forever and Cabinet would make decisions about when to “turn it on and off” depending on demand and construction activity.
77 Comments
So the Government that has abandoned all building of state housing substitutes a rehash of KiwiBuild. That's the last thing we need.
https://archive.ph/s8Kjd
What we do need is a government that will build, own, and manage 100,000 homes for secure, lifetime, income-moderated rent by all who want them.
https://www.publichousingfutures.com/keep-building-public-housing
no we don't -- we need a government that will support our fantastic NGO sector to own and manage such properties - where specialist providers in Intellectual Disability, Mental Health and disability provide the longer term sustainable and supported housing options -- and other specialist providers in Homelessness, AOD, domestic violence and other crisis situations provide shorter term transitional housing with supports to move into independent accommodation at a suitable moment in time
Currently a huge issue is the number of people living in KaingaOra properties - for life - who do not need this support but are simply never going to be moved on - Long term social housing should only be for those with long term significant challenges such as ID that wont change -- leaving a large chunk of stock to manage crisis situations - sadly they are full of people who have in fact been disadvantaged by being allowed to stay in subsidised property and have no motivation to get educated , improve their work skills and employment option and have now become long-term benificaries as a result
Ah - that makes sense. Pissed off that his development down in Takanini didn't get accepted as a new development area by KO so wanted to short circuit to ministers…
There has to be due process otherwise all we have is corruption which is not a path NZ should be heading down.
He probably still has a good chance with a panel, although no done deal. Big flooding issues, which he nonetheless sees as resolvable.
Up to 4 panel members. One must be nominated by council, and one iwi rep. Bishop will want two government appointments on the panel to give Meehan the best shot.
It will be interesting. I think he will probably get it, as regional economic benefits are elevated above the RMA in the bill ( likely to be passed in 3-4 weeks time)
"It would have used public money to buy any unsold units in a development at a price set below the market rate."
Which means all property; sold and unsold, will then be valued at that final clearance price. This is what happened in the UK ~30 years ago. Developers sold basically 'at cost' to clear any unsold builds, and whoever had bought before that saw their property revalued to the lower floor price when it came time to on-sell or apply for finance.ie: If your neighbour's house sells for $100k less than anticipated current value, guess what yours is now worth....
Guy on talk back radio yesterday had this scenario with Du Val I think it was.
Talked into purchasing using kiwisaver, couldn't get bank loan so went to 2nd tier lender. Interests rates jumped, his to 11%, developer sold off last properties cheaper so his valuation dropped. Now under water paying 11%. No banks will touch him.
Made some very naive decisions and now paying for them. He was proportioning blame to others, none to himself. The bit where the bank wouldn't give you a loan and the developer was talking you into 2nd tier lender should have been ringing alarm bells at a full blown civil defence siren pitch fella.
All I could think of was scenes out of The Big Short. Might have to watch it for a 3rd time.
Don't underestimate the smoothness of the transition between talking to a developer and an affiliated second-tier lender, keeping in mind Du Val was in a very murky middle ground between an actual builder and simply and investment scheme.
Banks of course would never "endorse" or affiliate themselves with a developer. But second-tiers of course will, potentially even allowing package deals to be sold by the developer with lending baked in.
Yes, still dumb, but far easier to be hoodwinked when it's all made to look as easy as buying a vacuum cleaner on interest free.
The supported living house 3 houses down the road from my in-laws is very well run and the guys in there are very helpful, looking out for neighbours on their street and we've had no reason to believe that they're anything other than well engaged in the process of staying clean and turning their life around.
I've made friends with some of the guys who've been through the programme and they're genuine legends who are extremely grateful for that support and opportunity.
It's a stark contrast to the boot camps and lock em up and throw away the key mentality.
In talking with clinicians working on complex mental health, the best value (least cost to society) outcomes come helping people to live as least restrictive life as possible. There are of course sensible restrictions where necessary.
It's not all sunshine and roses. There's people coming out of the prison system whose attitudes or remaining faculties still preclude them from supported living that require more caution
Neither of them!
Just get sick of people making comments when they are totally factually incorrect!
Both of those building companies are very solvent and sound if these people making comments did their homework!
The company that is under statutory management was a different story and we knew that they were never going to float.
OMG, what is wrong with this Govt. It's young people, with a mortgage (or saving for a deposit) who need assistance. Any money they save (or accumulate) will be spent into the economy. These are the people we need and want to live and work NZ, have babies, have a 'life' and support NZ inc. I'm not one of them. My adult children are though. Directly bank-rolling developers....good grief.
The only way genuinely more affordable housing options will be available is if a government pumped shitloads of money into shared equity housing schemes. I hope Labour are developing policy in this space. They made some baby steps in this direction when they were in government.
Why not just lower the cost of land via tax and reduce demand via immigration?
Pumping money into shared equity sounds like higher house prices due to more money chasing the same houses even if those receiving the subsidy stump up less. Similarly, I don't think the accommodation supplement has made rents more affordable for those not receiving the subsidy.
I 100% agree re: land tax and immigration.
I don’t agree on shared equity. Programmes like the NZ Housing Foundation have strict income limits , this naturally limits the extent to which the prices can be bid up. And in actual fact if you ramped shared equity up, it might potentially have a dampening impact on the rest of the market. For example, rental demand would decrease (or at least not increase as much)
One of the best things labour did to improve affordability was to remove interest deductibility on existing homes (and there weren’t many good things to be sure). National’s objective to keep growing rental supply (as stated in the RIS reinstating the tax treatment) is a recipe for disaster. They always conveniently forget about the demand side factors in setting prices.
Agree April, the reversing of the bone thrown to FHB's in the general unfairness of taxation in the investor vs renter landscape was pretty petty.
I don't mind them increasing rental supply but, as you say, it will always be in vain if they ignore demand.
Maybe we're too harsh on Lab / Nat. I cannot even get traction with TOP on demand/immigration policy despite the fact it was their 'evidence-based' policy to reduce it in 2017.
Forcing investors to buy brand new builds simply pushed up rents, reduced the supply of cheap rentals, pushed low income tenants into poverty, and dumped 30,000 families on to the public housing waitlist and into emergency housing. But hey, lets just focus on the benefits for middle class house buyers eh?
Penalizing investors (haves) for the sake of those that have not (tenants) as under the last 6 years of Labour actually had the exact opporsite desired effect. Although tenants felt all powerful in the moment of "tax the greedy landlord till they have as little as us", it actually saw rents rise over 60%, 2.5x faster than under the previous National government, saw property prices rise 94% before a global recession which has still only seen property prices decline by 20% average of that, has seen mass evictions of less than desired tenants to the emergancy social housing wait list - now over 25,000 families waiting an average of 5 years to be housed when National took over from Labour. 6 years ago when Labour took over from National that list was sitting at just 4,000 families waiting an average of 2years.
And one thinks that both investors and their link between National are the problem lol Cue Tui ad here - Yeah right!
If you had instead incentivised FHB to build new housing (which is what Australia does) then you still get a supply of new houses, while investors then supply the older, cheaper housing as rentals. Instead FHB are told to buy older, cheaper housing which needs money to upgrade and maintain, while investors buy and rent out expensive new builds which tenants cant afford. I'm not sure why I am the only person who sees how dumb that strategy was.
while investors then supply the older, cheaper housing as rentals
Lol. FHB's are told to buy an affordable home and climb the property ladder. Instead they had to compete against their own ma and pa "investors".
The dumbest strategy was removing land from the CPI, calling it an "investment" rather than a consumed resource... turning homes into "residential investment property" and outbidding each other with more debt... and thinking it was creating wealth and making us rich.
Clever humans but dumb in the long run.
Lol You think that FHBs should've had a clean run of it with almost no compitition at all? Where in any industry does anyone get a free clean sweep of almost no compitition at all? So FHBs had to compete against investors, so what? Those just starting out in the workforce also had to compete for jobs with those who have also had decades of work experience. Should we also ban certain experienced groups from being able to change jobs just so entry level job hunters can have an easier time of it as well?
But it's not fair? Where in the book of life does it say anything at all about life having to be fair? About always having to have a clear path yo success with no obstacles in one's way? The best stories, movies & successes come from the underdog, who has had to endue & over come hardship to achieve. What a boring life it would be if there were no compitition at all for anything, and everyone just survived on hand outs instead. Labour eutophia fantasy land stuff. Exactly why oue economy is in worse shape than when they entered. Can't solve economic issues by throwing handouts to those who want, and constant penalties to those who have.
If government continued with the level of social housing for the neediest (because economic theory and the market demands low wage essential workers and unemployment), if ma and pa and the middle class kept climbing the property ladder via new builds, if property investors created something productive that contributed to the economy instead of buying existing houses and peddling property investment courses, we would have better housing supply.
Interest deductibility removal didn't make house prices cheaper, in fact quite the opporsite. Under Labour we had seen a 94% increase in house prices, even with a global recession and huge 20% price drops accross the country our prices are still 68% higher than under the previous National government before Labour took over. Rents rose over 60% under Labour & over two and a half times faster under Labour than the previous National government.
Considering when National took over home ownership is now at its lowest in over 70 years, it shows Labours tampering actually caused more tenants, than few. Too much "penalizing the greedy landlord" & not enough after thought to the intended consequences thay followed. Decieved Labour voters always conveniantly forget these stats, but are widely known & not hidden, you can find them on Stats.co.
Removing interest deductability on the surface may have looked like a win for tenants, but when it adds an additional $4000 - $8000 per year per landlord property, guess who's paying the extra? I'll give you a hint, it's hasn't been the landlords. They don't run charities that continue to absorb constant costs, they run a business. Try incentivize next time, not penalize. One does not get a donkey through the corn fields by whipping it.
By your logic Interesting we cannot hold Labour accountable during their 6 years for any policy that has caused considerable price rises, increased homeless and increased crime. By this logic we cannot hold the government of the day accountable for current failures, we must blame everything else but. By this logic, any failings, price rises, increase in homeless and crime under Nationals current reign cannot be blamed at National, but must instead be blamed at everything else but.
No wonder why our economy is now the worst i our countries history when National took over - because Labours recieved voterbase refused to hold their government accountable for their constant failures, which of course included the removal of interest deductability. Clearly your not up to date with basic economics 101 - increase a businesses cost or risk to operate, and the additional cost will be required to be past on to the consumer, therefore increasing the cost of service or product. How on earth did one think that By increasing a landlords cost and risk to operate that somehow magically rents and house prices would reduce? Another Labour unintended consequence and fabrication.
Under the last Labours 6 years governing we had higher house prices and plenty of hand outs, yet home ownership fell to its lowest in over 70 years. Go figure. You expect thay developers build houses en mass for charitable reasons? That's exactly why Kiwibuild failed under Labour in the first place - they offered developers government contracts to build houses for them at far less profit. Any business regardless of what it sells is out to get top dollar. Why would developers build for government for significant less than what they can continue building?
One wants more houses built, but aren't prepared to allow the companies doing it to profit. Get used to more homeless in that case. Socialism working at its best - equality, as long long as we are all equally poor.
Sounds very like the guarantee give for finance companies a while back. Came in when a few had gone under and threatened to impact heavily. Ended up being gold plated and costing billions while saving something that should have gone to the wall. Corporate welfare plain and simple. Why just guarantee this industry, other businesses pay interest rates over and above housing rates, why not help them out with a guarantee?
Oh no, this was one of the worst parts of the entire Kiwibuild disaster! It should never be revived.
Developers with the Govt guarantee simply jacked up the prices of new homes, and when they didnt sell (because the prices were so far above market value) they then made the Government buy them at those inflated prices. These homes then sat on the Govts books until market values rose high enough to cover the stupid price they paid for them.
Can we not repeat the dumbest ideas of the last Labour Govt?
Australia has a Capital Gains Tax and their house prices are far more expensive than ours!
Should any government here ever bring in a comprehensive CGT I can guarantee that it is going to make housing even more expensive here.
They are moaning just as much if not more over there with housing costs, so be very careful of what you wish for!
Another example of the Post hoc ergo propter hoc fallacy.
I'm completely baffled. We had a left wing government who campaigned hard in housing but abandoned their own housing policy as soon as they where elected and drove house prices to all time highs. We now have a right wing group government who have implemented substantial housing reform into an already falling market and are now adopting some of the policies the last government abandoned.
Are we nearing a political polar inversion?
National are not right wing at all, they are at best centre left, which for lefties is not left enough, so for them in that case they may as well brand National as right wing, but they are not. NZ does not have a right wing political party, for if we did, the lefties would lose it even more than they have with incoming National that was bound to happen. Everyone saw National was bound to take over governing for the next 2 terms minimum, apart from the lefties.
not true ACT are as right wing as you can get, go and read Roger Douglas book, he believes in very little government and pretty much user pays for everything from health, education, welfare , his tax rate is 10% and GST is set much higher .
even DS baulks at some of these ideas as its even too extreme for him
, people have to contribute a set proportion of their income (and there is an employer contribution too) to dedicated private accounts for:
- health
- risk events (unemployment, disability etc)
- superannuation
There are lots of details, but on health everyone would have to buy an insurance policy against catastrophic events (anything more than $20000 per annum) and would have to meet other expenses either from their own health account, or if that was exhausted from direct government funding. Something similar applies to unemployment: your risk account is your first line of support, but if that is exhausted the government remains provider of last resort.
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