KiwiBuild was ambitious. Will it still be?
That’s the question the country is asking as Megan Woods prepares to release the details of the much-vaunted KiwiBuild reset on Wednesday.
The Government has been tight-lipped about how it will try to rescue the housing programme from the doldrums. July saw the Government’s self-imposed deadline to build 1,000 houses pass with no update on the reset progress and fewer than 200 homes complete.
What it was meant to be
KiwiBuild started as an attempt by the then-Opposition Labour Party to score a blow on National where it hurt: the housing crisis.
It was the sort of policy that could capture the imagination of the nation: build 100,000 homes in ten years through developments on Crown land, designing medium-density suburbs integrated with public transport corridors, and just a little bit of help from buying a few in-progress houses “off the plans”.
The brand-new suburbs would be built by Kainga Ora, the yet-to-be-created urban development agency that would have the power to ignore RMA restrictions. Buying “off the plans” entailed buying a portion of a development outright or promising to buy houses that don’t sell, in order to lessen the risk for developers.
These “off the plans” houses were supposed to help the Government meet early targets but otherwise play a minor role, for fear of opening KiwiBuild up to accusations of being welfare for property developers. That, coincidentally, is how Phil Twyford characterized National’s development at Hobsonville Point while in opposition.
Less than two years later, as Minister for Housing, Twyford would be subject to blistering attacks from Judith Collins for pretty much the same thing. KiwiBuild was over-reliant on “off the plans” developments and still struggled to get new houses built. Jacinda Ardern replaced Twyford with Woods in June.
What’s at stake
It’s hard to identify any specific part of KiwiBuild that’s guaranteed to make it through the reset, beyond the general idea of building more houses.
Even the programme’s name is in doubt, with pundits and the Opposition saying the KiwiBuild brand is now politically-damaging. That message hasn’t quite filtered down to the New Zealand public, however, with 60 percent of Kiwis supporting the policy and 34 percent against.
More substantively, the 100,000 home figure is also uncertain. In May, Twyford declined to say the target would remain the same after the reset.
Some of the broader objectives of the programme could be altered. Although KiwiBuild was meant to produce affordable houses, the Government quickly found people had little demand for the type of home that could be built affordably and little ability to afford the type of home that there was demand for.
This was highlighted by the Government’s struggle in selling ten affordable KiwiBuild houses in expensive Wanaka. They were on the market in October but six had yet to sell as of February.
The houses ranged from $565,000 to $640,000 in a town where the median house price tops $1 million. Still, at more than $500,000, the Wanaka homes were out of reach for the people who wanted them. At the same time, the middle class earners who could afford them found them too small.
“A lot of people in Wanaka can’t adjust to smaller places and they think it’s like Coronation Street. Everyone says that to me,” Lyal Cocks, the former deputy mayor of the Queenstown Lakes Region, told the Herald in February.
Exactly what market the programme targets is in the air as well. Perhaps the Government will re-purpose it towards aiding Housing New Zealand in building more state housing, since the waitlist for HNZ properties has doubled since the Government entered office.
What can be done
KiwiBuild was ambitious, but it was also flawed. By setting targets that were politically-motivated, not practical, the programme condemned itself to political meltdown. At a fundamental level, it was unable to find the right niche in New Zealand’s housing market.
To build affordable houses that no one wanted to buy in a country short on housing is a difficult prospect, but it’s one that KiwiBuild accomplished. The task for Woods is making sure the remaining 98,800 homes are built for market conditions.
The Green Party has one suggestion for how to see this through. Co-leader Marama Davidson said at the Greens’ annual meeting in August that she wanted to see the Kiwibuild reset incorporate rent-to-own plans.
Part of the confidence-and-supply agreement between the Greens and Labour, a rent-to-own programme would see a portion of tenants’ rent going towards building equity in the house. Once tenants have enough in their Kiwisaver to combine with existing equity for a deposit, they would then switch to paying mortgage instead of rent.
If KiwiBuild started building rent-to-own homes, Davidson believes, the portion of the market that was priced out in places like Wanaka would be able to get a toehold.
But KiwiBank senior economist Jeremy Couchman cautions against over-reliance on rent-to-own schemes.
“It is a way that certain people for who it seems unattainable to buy a house may be able to get some equity in a home,” he said. “But it does mean you are putting up a lot of risk for taxpayers. It may work in some parts of the country but I don’t think it’s a broad brush approach that should be applied.”
Instead, Couchman wants to see the Government take a harder look at improving market conditions so houses can be built more affordably. “From our point of view, it’s a question of if this is the best way to divert Government resources into increasing the supply of housing.”
He said there were other areas the Government could be looking at.
“It’s a chance for the Government to look at the building supply industry. That’s a very expensive aspect of building a house. Then there’s things around planning and consent process and local council intervention. These are other areas that perhaps they should look at that add a lot to cost as well.”
The issue, Couchman says, isn’t supply. “There’s already a lot in the pipeline when you look at building consents,” he said. Instead, it’s that the sort of houses people want can’t be built within their price range.
If the Government wants to avoid repeating its Wanaka feat, then serious introspection is needed, he says. Whether the name or the targets change is immaterial if affordable houses can’t be built affordably.