Labour government faces the crunch on housing

KiwiBuild is a good option, but is it achievable?

Patrick O’Meara

Wellington, May 15, 2018

Labour inherited a myriad of housing problems from the previous National government but KiwiBuild can fix that, Housing Minister Phil Twyford has said.

The Labour party hammered the previous government on housing, accusing them of presiding over a crisis of rising unaffordability, falling home ownership, and growing homelessness.

Mr Twyford said that housing policies were a social and economic disaster.

“You have got the lowest home ownership rates now in 66 years, Auckland has some of the most expensive housing in the world relative to incomes and for two winters in a row there has been a massive surge in homelessness with thousands of people living in cars and garages,” Mr Twyford said.

“It is hard to imagine it being much worse.”

High expenditure

Governments spend a lot on housing.

Housing subsidies such as the accommodation supplement, income related rents and latterly funding for emergency housing, totals $2.2 billion in 2018, an increase of 66% since 2008.

But on the supply side, National relied less on money and more on creating conditions for the private sector to speed up building.

National Housing spokesperson Judith Collins said its special housing areas would create an estimated 70,000 homes.

“There was a real commitment to improving the situation for the private sector to undertake more building development,” she said.

“That is really evident in parts of the country where there has been a big increase in housing, particularly in my electorate of Papakura, but also in other parts like Botany.”

Nevertheless, a lack of affordable housing and sharp rise in homelessness forced National to act more directly, earmarking $2.7 billion over four years in last year’s budget to boost supply.

National slammed

National faced heavy criticism for selling state houses when demand was rising, and persisting with a failed attempt to get social housing providers to fill the gap.

A Housing stocktake report released in February found that over the past decade, dwellings owned or managed by Housing New Zealand Corporation (HNZ) peaked in mid-2011 at 69,717 units, falling to 62,917 units in June 2017.

The share of state houses dropped from an estimated 4% to 3.4% of the national housing stock between 2008 and 2017.

Mrs Collins denied that National was ideologically averse to the state providing housing, but it “was an acceptance that we weren’t going to improve the situation for people if we didn’t look to other options.”

“Certainly, when you have got social or community providers saying, ‘Look, we could do a better job than HNZ in some of these situations.’ Well, why wouldn’t we look at them?” Mrs Collins said.

While government spending on maintenance increased to $314 million last year, it received $305 million in dividends from HNZ.

Salvation Army social policy analyst Alan Johnston said Housing NZ tried hard to boost housing in high demand areas like Auckland, but National never gave it enough money to do its job.

“They asked Housing NZ to do an impossible task of radically restructuring its balance sheet, reconfiguring its stock and returning dividends while at the same time maintaining the number of houses that they provided.

“And it simply didn’t work.”

KiwiBuild Programme

The new government will put in $2 billion in its KiwiBuild programme to build 100,000 affordable houses over the next decade. Affordable was defined as less than $650,000 for a home in Auckland.

Mr Twyford said that the market failed to deliver despite National’s faith in the private sector.

“Not only did they fail to build more housing but in Auckland, last year, they only built 8600 new homes. The city needed 14,000 just to stand still.”

“And on top of that, the market hasn’t been producing many affordable homes. Only 5 percent of new builds are affordable. That’s nuts,” he Twyford said.

KiwiBuild was aiming for 1000, 5000 and 10,000 new homes over the next three years respectively. It was unsure whether Mr Twyford’s goal is achievable.

The building industry was already flat tack, and crying out for more workers and raw materials.

High costs impact

Certified Builders Association chief executive Grant Florence said the high cost of land undermined the government’s drive to build cheap houses.

“There needs to be some direction or commitment from central government around what they will do to bring that cost down, or provide some subsidy to that, or whatever.”

However, Mr Twyford said $650,000 for a house in Auckland was indeed still too much for many people. He was talking with banks about a shared equity model, where a bank would take a stake in a house to lower the initial cost.

More state houses that the government had promised was also critical, Mr Johnson said.

“There’s an absolute urgency to build state houses, because of the problems we are having around people in poor housing conditions, homelessness and transitional housing.”

An extra $1 billion was needed to fix the problem, Mr Johnson said.

Patrick O’Meara is Economics Correspondent at Radio New Zealand. Indian Newslink has published the above Report and Pictures under a Special Agreement with www.rnz.co.nz

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Photo Caption:

  1. Phil Twyford and Jacinda Ardern at the announcement. (Picture by Dan Cook for RNZ)
  2. The number of homeless in Auckland is pathetic (Picture Supplied to RNZ by Auckland Council)

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