By Alex Tarrant
The biggest opportunity for brownfields housing development within Auckland's city limits is in the hands of central government, Finance Minister Bill English says.
As the biggest landlord in the city via its land ownership for state housing, the government had the opportunity to do its bit for intensification in Auckland to boost the supply of more affordable houses there, English told the New Zealand Council for Infrastructure Development Building Nations symposium on Tuesday.
However, that did not mean forcing the highest possible number of houses onto state land - the government needed to be careful about its approach to development as it would affect some of the most vulnerable members of the community, he said.
The government needed to work with outside interests to better leverage the Crown's NZ$15 billion state housing investment, about half of which was in Auckland, English said.
Of the NZ$15 billion, about NZ$5 billion of the state housing stock was "in the wrong place, in the wrong condition, and the wrong size," which meant the government was "determined to get a better deal and get people who know how to manage the capital [better] doing it."
Managing the state housing stock in a different way to access that stranded NZ$5 billion may cost the government more than it expected, but it had to find way to recycle that capital to provide a more efficient social housing stock to better meet people's needs, he said.
Problem in Auckland
"We clearly have a problem in Auckland with a lack of supply of housing, particularly lower-income housing," English told interest.co.nz after his speech to the symposium in Wellington on Tuesday afternoon.
"The government is the biggest landlord in Auckland by quite a long way. So in addition to more greenfields development, there are opportunities for intensification within the city, and the government land represents the biggest opportunities to achieve that," English said.
The front end of that process was in Tamaki. In July, Housing Minister Phil Heatley announced the government was setting up a joint venture with the Auckland City Council to source private investment to help redevelop its state-house holdings in the area and increase the amount of affordable housing there by subdividing some larger plots.
"Now you've got to be quite careful about this kind of development, because we're dealing with state housing tenants, who are among the most vulnerable people in our community," English said.
"But I think everyone's starting to realise that we could do better with the government assets that we already have, to contribute to housing supply in Auckland," he said.
Finding the capital
The government needed to be more creative about how it recycled the Crown's capital, English said.
"The traditional model of everything being done by Housing Corp as a monopoly has left us with some good stock, and some very poor stock, and some people living in unacceptable circumstances," he said.
"So we need to work with others who have a better set of skills.
"Particularly [around] the risks of development - the financial risks, the construction and operational risks - so that we can do more, faster, to both give us a more efficient housing stock to enable us to help more people in housing need, at the same time as to meet the needs of Auckland for more housing in the city," he said.
Use capital better
The government did not help nearly enough people with the very vast lump of capital that it had invested in state housing, English told the symposium.
"We have essentially a monopoly provider of state housing services, and there’s now a broad consensus across the housing sector, within government and outside it, that we need change," he said.
“So over the next few years the government will be looking for viable capital recycling models which will enable us to deliver much more efficient housing services for those who are most vulnerable, and alongside that, provide our cities, and in particular Auckland, with its largest brownfields housing opportunities."
Capital in the wrong place
The government owned somewhere between NZ$6-7 billion-worth of houses in Auckland, English said.
"There’s plenty of opportunity there to alleviate some of their supply problems by the government making those assets available for, in the first place, meeting housing need, but in the second place, allowing development of housing well within the city boundaries," he said.
About NZ$5 billion worth of the NZ$15 billion state housing stock was "in the wrong place, in the wrong condition, and the wrong size."
"You have to ask yourself, what kind of government system we run that allows NZ$5 billion worth of PAYE - because that's what it is; people paying over their NZ$180 a fortnight to give to the government - that we'd managed to get NZ$5 billion of it stranded," English said.
"And you've seen the pictures on TV. We're still the biggest slum landlord in the country by a long-shot. So while it's complex, because you're working with vulnerable people, we are pretty determined to get a better deal and get people who know how to manage the capital doing it," he said.
The government "may have to face the reality that could actually cost a bit more than we might expect, to run that kind of housing stock."
"That's probably the area [in terms of infrastructure] where we've got the most to learn, and where we could get the most benefit from what are actually pretty straightforward diciplines out in the market, but have never really been applied to this asset," English said.
27 Comments
Where are decent jobs - PM ?
Here in the countryside in most villages many businesses are struggling and for the average Kiwi life increasingly becomes unaffordable. We see a lot of empty shops and almost every second house is for sale. Many are forced to leave - no jobs.
Fact that the Goverment is the largest Slum Landlord in the world is old news. Nat politicians has been talking about re-doing Housing NZ for ages.
Is Bill English just crying wolf again ?? How many times ave we heard "We have to treat our assets more efficiently ...blah blah blah..."
Nats has been crying Wolf so many times I won't believe them even if the Big Bad Wolf knocks on my door....
Encapsulation.....
The suggestion here from Billy ,aside from an urgency to change the system, is about trade off's of valuable land banks for partnership in redeveloping elsewhere.
So I don't see floating it unless partially, and that would become a " walk right in stupid" share offer.
Nope they already got the players lined up I'd say........now,Developments / Developers like Stonefields ( Todd Property Group) would certainly fit the frame in Central East through to Otahuhu....
Just an example ,...but watch this space.
Bill English comment on "vulnerable people" is the key word. How are you going to kick out people from their homes when they lie down infront of your tractors ?
Not a good look for any political party......not to mention a heaven send opportunity or David Shearer to finally look good on the side of "Darth Vader" like National politics.
Think this idea will ever see fruition ?? If it does why hasn't it happened already ??
Housing NZ has an obligation to taxpayers to use its capital more effectively
Example. We own a property in one of Aucklands pricier suburbs. Ours is the worst house in a street where the average value is around $1m . Next door is a 2 brm state house, occupied by one person on 800m2 with a water view. Across the road is a 2 x 2brm state owned duplex on approx 1200m2 again with water views. There are plenty more examples like this in the surrounding streets.
If the Govt cashed these up they could provide a better standard of housing for more families.....
Not defending the process here Ricardo...just pointing out the facts, this drive by English is to get ratification or public approval, and start moving at speed. The agenda is to have it viewed as a housing shortage solution while depopulating desireable areas of those some consider undesirable....bringing in investment and contracts for the boys.
What you will see in the short term are shiny new tennament complexes, what they will become in the longer term is overcrowded and just as unkept as some ,if not many are now.
Make some inquiry of your own, say on... Smallville Ave area Mt.Roskill, that's greenlighted and ready to go, while you will find State owned property in Scout ave (up on the hill) sold or traded to investment partners to fund the new tennament blocks.
No shortage of demand for hi quality land in that Area iconoclast.....the push is more about who gets pushed south of the ridge...i take your point , but I think there is enough demand as anything that has been a State selloff has gone in a blink for very good money.
I think the hearding agenda is ahead of the funding agenda as I think they already have an idea it will work out...as in demand.
The government "may have to face the reality that could actually cost a bit more than we might expect, to run that kind of housing stock."
Sounds like an advertisement for PPPs - it will cost more but that's the price of "efficiency"!!
The Big Kahuna is the only thing that will break this cycle of looking after the vulnerable. Why not instead eliminate vulnerability - adopt a zero tolerance to vulnerability programme. Introduce an across the board GMI - let those qualifying as "vulnerable" take say the first year of their GMI in a forward paid lump sum if used as a deposit for a house - and sell off all the State Housing stock in one massive big go giving preference to "vulnerable" bidders.
Say the GMI was set at $12K per annum - this lot of squatters living with their (now deceased) vulnerable mum would have a collective $60K deposit between them;
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10828389
Interesting concept Kate - I do like your style. One of the biggest problems that NZ has faced is how the Govt and bureaucrats have interpreted the Universal Declaration of Human Rights. While the declaration provisions for work, health, education and other benefits to individuals the Govt and its agencies appear to have interpreted this as the State must supply these. The State then grew numerous other services under the guise of people can't help/take care of themselves, the State knows best, BS mentality. They tax us all which is an impediment to our rights and then pay the costs of all these bloated services.
If a different interpretation had been taken and the Government and its agencies had ensured that private enterprise was able to operate efficiently and without unnessary Govt and bureaucratic intervention this would have secured a zero tolerance vulnerability programme. A straight up and down clear cut environment and expectation would have been achieved. As people generally place their best interests first they would have been motivated to get off the couch and would also have taken the necessary precautions to cover themselves under most circumstances that could arise that were going to affect their incomes.
The empathy people have towards each other generally directs them to look after those that find themselves in need. The Govts past and present have used this human empathy trait to grow and expand the public service rather than letting the people take care of each other. After the Chch earthquakes when the whole city came to a standstill, the entire city was about family, friends and helping strangers. (This is something you would generally witness in rural areas) The people of Chch if they had been left to their own devices would have restored the place far quicker than any other organisation could have ever hoped too. Another example would be road accidents where strangers look after strangers. I think it is an instinctual behaviour to assist others and the Govt and bureaucrats have tried to remove the responsibility away from the people. There is actually not much difference between the Govt and looters. Both are opportunistic and both take from other people.
Doubt our current predicament has much to do with the UN Declaration and instead has alot more to do with bureaucracy having a mindset of self-preservation.
Take this recent bit of policy 'work' on vulnerability;
http://www.stuff.co.nz/national/politics/7526176/Govt-launches-plan-for-vulnerable-children
With the mind boggling target to:
Reduce child abuse by 5 per cent by 2017.
What?! 5%!!!! Absolutely embarrassing .. I seriously cannot believe this Government openly admits to a virtual 'acceptance' approach to one of the most disgusting statistics about modern NZ society. Years and years ago a paediatrician recommended all babies born in NZ should have a WoF assessment done before leaving hospital - and where the home environment the child is going to fails that warrant - immediate and on-going intervention would be provided. That's a zero tolerance approach.
I was involved in some preliminary investigations into PPPs in GI some 3-4 years ago.
I am far from convinced.
1. The economics of building medium / high density in GI are appalling - the land values are far too low to justify building terrace housing and low / mid level apartments . Fine if the Govt is prepared to throw lots of subsidies at it, like they did with Talbot Park. But certainly not sustainable beyond a "demonstration project"
2. Will the market really be interested in apartments in GI, whilst overall HNZ landholdings remain high and public schooling is so poor? I'm not convinced
IMHO the Govt would be far better placed to do some greenfield development in South Auckland, relocate tenants there (yes there would be some painful upheaval but thats life), and sell up say 30% of its GI landholdings straight to private interests rather than undertaking PPPs. These sales could then fund development in South Auckland. Unless there is a significant reduction in HNZ landholdings in GI I can't see much private sector take up.
But no, old middle of the road English sounds like he is going to tread carefully and as slow as a snail. So I expect some kind of PPP to kick off in the next 1-2 years, it will look reasonably good and be trumpeted as an urban planning "success", but will fail financially and we won't see any more
You heard it here first
Matt I don't think it's so much about the market's interest in the development per se, I'ts more the carrot offered to the market by way of trade off that will be of interest , no doubt , numbers are being crunched furiously as we speak.
And there will be a significant reduction BTW, replaced by an unkept park a farther up the road toward Pamure.
Sorry MIA...I must have missed those two...I thought it was to have everybody waving and smiling while cycling the never ending think big project, generally feeling a part of that smug contentment eminating from our glorious leader..........or was that not a policy..?.um...lemme see here now...?
People, people, people .... you have it all wrong. The gummint MUST keep increasing tax breaks and subsidies to help home buyers, as this will continue to KEEP THE LANDLORDS rolling In clover, with supremo capital gains and increased rents !! ....not forgetting the BANKS, as they MUST be kept with their maximum profits intact !
C'mon why should the gummint stop now ..they have gone on this path since they came into office .....and why would anyone think they would change course now, must have rocks in their head...... the die is cast folks.
This is all part of the plan to transfer what ever wealth there is, to a smaller and smaller sector of the population .... you are either in one camp or the other.
So get with the "winning team" .... MAX yourself with DEBT and jump on the property band wagon ... ALL ABOARD !! .......as NOTHING is going to change.
the property development industry (incl financiers, banks, builders, lawyers, advisors etc etc) are hurting bad at the moment and are looking for some risk transfer to the Crown and council, and some subsidies to make a development scheme worthwhile.
depending on the output, this may or may not be bad for the country and could result in some economic benefit - but i wish the pollies would be more straight up about the capital and risk transfer rather than pretending it's for the vulnerables.
agree with matt that talbot park wasn't financially viable for most involved. for this to work for the private sector the captial and risk transfers will have to be more advantageous (more rates and taxes), or the product will have to be cheaper and nastier.
also agree that a simpler way of improving the housing stock is for govt to sell down state homes and rezone - but this won't sort out the ingrained social and economic problems in the area, which i believe need fixing. we can build tenements in south auckland, but there will be no aggregate level improvement for auckland if we just shift people around.
but i'm the first to admit that doing so is not easy. infrastructure is easy and is downstream. 'wicked problems' are hard and are upstream.
if you want more info on the changes in tamaki check out this site - it's a local blog where i'm trying to get together background material
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