Cabinet has refused Housing Minister Phil Twyford’s request for him to be given the authority to adjust the KiwiBuild price caps in accordance with future market volatility.
In a KiwiBuild Cabinet paper, Twyford requested he, and the Minister of Finance, be given the power to adjust the upper price limit of KiwiBuild homes at their discretion.
“Given the dynamic nature of the housing market, I seek delegated authority from Cabinet to amend the proposed KiwiBuild price caps (whether up or down) over the life of the programme, in consultation with the Minister of Finance.”
But his request was declined, a spokeswoman for the Minister told Interest.co.nz.
“He did go to Cabinet with that [idea] because he thought it would make the process more efficient.
“But he didn’t get authority because Cabinet preferred that it goes back to them to make the decision if they do want to change the price caps,” she says.
She adds that the rationale behind the idea to delegate the power to adjust the caps was “a bit of future proofing.”
Speaking to media, Twyford says he was not disappointed by Cabinet’s decision.
“It’s not big deal,” he says. “Anything significant goes back to Cabinet colleagues and I’m perfectly relaxed about that.”
He says he does not expect any changes to the KiwiBuild homes caps “anytime soon.”
Minister of Finance Grant Robertson says the decision was made because Cabinet wanted to make sure it had an overview of the KiwiBuild system and the price caps were a critical part of that.
In Labour’s pre-election manifesto, the party outlined a KiwiBuild home in Auckland would cost between $500,000 and $600,000.
But, because “land prices and development economics in Auckland have shifted further in that period,” according to the paper, the maximum cap on an Auckland KiwiBuild home was increased to $650,000.
In the Cabinet paper, Twyford said he is not proposing any immediate changes to that upper limit.
Risky business
The documents also reveal the Crown has the option to rent out or repurpose for social housing any KiwiBuild houses that a developer is not able to sell.
“The buying off the plans initiative, by its nature, involves the Crown taking on some risks that the market is currently unprepared to take itself.”
Although officials will undertake the appropriate due diligence to make sure prospective developers are credible, “we are taking the sales risk as houses we end up with through any underwrite may not be sold.”
“However, if this is the case, the Crown always has the option of holding these houses, for private rentals, or repurposing it for social housing,” the paper says.
Twyford told the House on Tuesday the Government could also step in and sell any properties developers were unable to offload at an agreed upon price.
National’s Housing Spokeswoman Judith Collins says given the risks outlined by the Cabinet paper, it looks like the Crown could become an unsecured creditor in failed developments.
“This means, all the houses [Twyford] has announced with the KiwiBuild label which have been subsidised by the taxpayer could be at risk.”
23 Comments
If Twyford cannot increase the sale price of these houses in order to make sufficient profit, the $2b? seed funding will probably not be enough.
Once the value of these places ramps up to the market value, there will be a windfall gain to those who have won the ballot. The rates payable will take a significant step up too. I hope that those who buy these houses will take that into account. But I suspect that human nature being what it is, large numbers of these people will sell up when they are can and take the money and run. But that is way past the next election cycle, so this will not be on Twyfords radar.
There does need to be some way of preventing 'lottery winners', Hong Kong's home ownership scheme is similar to kiwibuild and restricts the sales price to some constant percentage of market value. No huge windfall profit for initial owner. And rates need to be based on full market value.
You are being too generous to assume a profit, it will be about not loosing money on each build, that is the quickest way to chew through 2b.
But the idea is meant to increase supply so both cost of housing inputs and the supply will make them cheaper.
And this is why they are having to underwrite the cost to build by developers, not so much for the developers benefit but the banks won't lend on a project where they see declining value in the LVR ratio by the time the project is finished - unless under written/secured by other equity, in this case the tax payer.
If you read and listen to all what is happening, they haven't a clue how this thing is going to pan out financially. They have to cover for an over supply that causes prices to fall and yet cover for any increase in costs. And yet try to manipulate the market so whatever they sell for recoups their cost - which will be higher just because of the bureaucracy involved.
I think that to do something is better than doing nothing, having the will to do something is a good start. But having the will to do something and then picking the wrong thing to do, is not.
Its part of the human condition that has always been with us as the following one liner words of wisdom attest:
Sins of commission are better than sins of omission
Asking for forgiveness is better than asking for permission
Better to have loved and lost than to never have loved at all etc.
Take your pick Phil.
Don't read too much into this. It simply means that he has to ask Cabinet before he changes the price cap, instead of being able to make the call himself. There is almost no chance Cabinet was going given him autonomy over this - he was definitely just trying his luck.
I honestly feel very sorry for Phil Twyford .............. he is shovelling sewage uphill with this Kiwibuild scheme .
I am prepared to wager he will not last as housing minister , and there will be a hospital pass to some other hapless bugger .
He cannot be sleeping well at night with all this pressure on him .
What is astonishing is that he keeps smiling when being interviewed as if he is on top of this massive culture of expectation they have created
What is astonishing is that he keeps smiling when being interviewed as if he is on top of this massive culture of expectation they have created
He appears to deal with the load much better than Nick Smith did. Really a role that I wouldn't wish on my worst enemy. Damned if you do. Damned if you don't.
KiwiFail!!!
He knows that he will be pushing shite uphill trying to get the first homebuyers to buy the KiwiBuild shoeboxes, because of what the 650k will buy.
So he has asked to increase the cap and then says it doesn’t matter?
Totally out of his depth with housing portfolio, would be better working back at Oxfam where he is not under scrutiny and he can say anything he wants and no one can hold him accountable!
Let us see what these 650k houses are looking like.
He should also be getting the people who will not qualify for Bank lending to de register so that we can actually see how many people are queuing up for the boxes!!
" The documents also reveal the Crown has the option to rent out or repurpose for social housing any KiwiBuild houses that a developer is not able to sell."
So there you go ... As I said yesterday, KB will end up sold only to HNZ and other charities housing homeless people ...No one in his right stable mind will borrow and invest in a shoe box, hold it for 3 years, spend 12-15K on body corp expenses and then sell it for a loss.
However, day after day, we discover the quality of this minister and how shallow his management skills are . He has some nerves and guts to smile on Camera and admit that he was zapped and told to P off.
We have handed the KB train to a mad joker who has no CLUE, no License, and No knowledge whatsoever about this matter and the risks involved. An ex Oxfam manager thinking that it's like throwing free donner's money wherever he pleases all in the name of "saving the FHBs! " from rent and landlords.
Here he is, after everything has almost failed, asking for AUTHORITY along with his mate GR to fiddle more in this failed project and throwing more Good money after Bad, because he now KNOWS that his limits are UNREALISTIC and developers will dry out smart fast ...... they seek free hand for effective Market intervention thinking that the best way to fly this PIG is to give it away almost for free !!
Not $2B, not $10B, not even $20B will cover PT's KB backside. and guess what, he knows that too well ...he just thinks that he has time and power to play it smart.
It is like a bunch of kids wanting to take over and have more authority to mess up without oversight ! .... you know oversight can be very annoying when noobs start their binge spending.
Not only they won't Add NEW housing to the supply shortage, they don't know how to manage the risk and the financials ... sticking around labels on already planned housing being built since last year ..... so typical attitude of astute Losers, ask for more money to throw in and ask for free hand to control....
Some here say that I am bitter about this CoLs .... But Do we really want more proof that FHBs have been taken for a ride? Do we need more proof that we have a CoLs running this country into ground again? and Do we really need more proof that voters were conned in 2017 ?!
Will anyone in his sound mind elect Labour to Office again in 2020?
Eco Bird, we know what is happening or not happening, but really we are wasting our time trying to point this out to many on Interest.Co because they are hoping that Phil knows what he is doing!
Judith Collins writes some good stuff on Twitter but I don’t believe that she seems enough media attention to put across her point of view.
National need to seek more media to point out how nil this KiwiBuild is going and asking Phil the serious questions like how many of the ones registered already will qualify for blrrowing from a Bank!
She needs to ask who they have interested in this shared equity system on something that they have no details on.
One minute Phil says that he didn’t think there would be any capital gain on the KiwiBuild boxes and next minute he wants to increase the cap for KiwiBuild due to the dynamic housing market!
Make up you mind Phil or stand down and give your portfolio to someone that can handle it, geez there is no one in the COL!
Well we all know that that is what's going to happen and when the final plot and a development distribution comes out no one will by the KB portion , so the Gov will buy it for HNZ, pay the developers, and get on with it .... However, only some idiots seem to hope and believe otherwise .. I guess they are now disappointed ( to the point of denial ) in their Mates.
Two projects like the above and KB will be finished next year, the $2B will be gone and no one will talk about it again because we won't have more money .... easy! ... most probably it would then be either more KB or wage increase !!
When all is done and dusted, It won't be PT's fault, it would be someone else's - it would definitely be National's fault because they didn't leave the CoLs enough money to spend and waste !!
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