Nearing the two-year mark as Housing Minister, Megan Woods speaks to Sam Sachdeva about learning from the mistakes of KiwiBuild, opposition plans to fix the housing crisis, and whether the Government is leaving renters behind
In New Zealand, the health portfolio has served as the traditional hospital pass for a Cabinet minister, thanks to the myriad complexities of the system.
It has by no means become easier – but these days, the title of Housing Minister may just pip to the post of most challenging role, as Megan Woods can testify.
Woods is approaching her two-year anniversary in the housing portfolio, having taken over from Phil Twyford as part of the Government’s June 2019 policy “reset”.
Speaking to Newsroom, Woods says she was “under no illusions” heading into the job about the scale of the challenge that awaited her.
“It’s not easy. There’s no one thing that you can do to fix it, there’s a range of measures that need to be taken, and really it’s about rebuilding capacity for a government to have the ability to be a participant in the housing market.”
In their public protestations that there is “no silver bullet” for the country’s housing crisis, Woods and Prime Minister Jacinda Ardern have – knowingly or otherwise – borrowed from the language used by their National predecessors Nick Smith and Bill English.
Despite Labour’s own difficulty getting on top of the problem, Woods has no sympathy for National’s housing travails while in power.
“The government might have talked about there not being silver bullets, but there were some bullets of their own making that has led us to where we are.”
Not only had National sold off a number of state houses, she says, it failed to build in their place, leaving office with 1500 fewer public houses than when it started.
“If the previous government had built the 1500 to 1600 [a year] that we’ve been talking about … we’d have about 15,000 more houses in the public stock today, and that would address a big chunk of our public housing waiting list.”
“The days of thinking the state can be a passive bystander and the market will provide, I think, are over. I think we’ve seen that there is market failure, the market hasn’t delivered.”
One long-term problem identified by Ardern, cultural as much as political, has been the view of housing as a lucrative and ever-reliable investment.
Woods shares that concern and says the Government is working on options to encourage alternatives, like “build to rent” apartment developments designed to be tenanted long-term rather than sold to individual owners.
“What opportunities does it provide for so-called mum and dad investors to invest in a different way in housing, to bring forward new supply, not have to have the hassle of being the landlord because it’s a more professionalised rental market, and more importantly, they’re not competing with their kids in the suburbs over the same stock.”
She is less keen to challenge the political orthodoxy that a moderate drop in house prices is beyond the pale, noting for many Kiwis their housing is their largest asset, but wants the Government take a more hands-on role in the sector than in the past.
“The days of thinking the state can be a passive bystander and the market will provide, I think, are over – I think we’ve seen that there is market failure, the market hasn’t delivered.”
Of course, her government has had housing failures of its own – most notably with KiwiBuild, now synonymous with over-promising and under-delivering.
Woods says KiwiBuild ran into the same problems as the broader housing sector – a lack of buildable, rather than zoned, land for development.
“What we’ve seen really since the 1970s, is governments walking away from large-scale infrastructural investment for the building of new housing…
“The belief that, you know, the people will pay a price to councils in terms of contributions and rates, and councils will be able to fund infrastructure, we’ve seen it hasn’t happened.”
The $3.8 billion Housing Acceleration Fund announced by Woods last month is an attempt to address that shortfall by providing grants to fund infrastructure for both private- and government-led developments.
The fund was welcomed by Local Government New Zealand, but Kiwibank’s economics team described the figure as “a drop in the leaky bucket” while the Opposition seized on a lack of meaningful detail about how and where the money would be used.
“That bucket is never going to be filled unless someone’s prepared to put the first drop into it,” Woods says, noting separate initiatives to create new financing tools for developers and fund nearly $500m of housing and urban development infrastructure through the Infrastructure Reference Group.
She is equally unapologetic about waiting until the second half of the year to firm up the specifics of the fund, saying the Government would have been setting itself up to fail had it rushed ahead with a fully formed scheme without speaking to people on the ground first.
“If I look at that infrastructure fund that the previous government brought in, I think probably a bit more time talking to the partners might have actually seen some houses built, because actually one of the things is that we can’t really point to the houses from that fund.”
Where National offered councils loans rather than grants and failed to link the infrastructure fund to housing outcomes, Woods says the Government “will be inextricably linking the investment in infrastructure to the building of houses”.
Tying house caps to market rises
Woods is also sceptical, to say the least, about National’s current proposal for emergency legislation to immediately free up more land for housing through zoning changes – similar to the approach taken in Christchurch after the city’s devastating earthquakes.
Christchurch’s success in keeping prices down was due to a unique set of circumstances, she says, with a strong pre-existing urban development strategy and greater certainty of demand for developers thanks to the insurance cheques flowing into Cantabrians’ pockets.
Nor would the Government want to replicate everything that happened in the city, with Woods noting a shortage of smaller, lower-value homes and a sprawl of greenfields developments without suitable transport linkages.
Another element of the Government’s own housing package greeted with scepticism was the decision to increase the income and house price caps for the First Home Loan and Grant schemes.
While a change to the caps – last updated in 2016 – was sorely overdue, the tweaks appear well short of reflecting the dramatic uplift in prices since then. As Newsroom’s business editor Nikki Mandow has pointed out, the five percent cap increase for existing houses in Hamilton sits in the shadow of a 50 percent increase to the city’s median house price over the same period.
“One of the core beliefs of us as a government over the last four years – well, nearly four years – has been that New Zealanders need more safe, dry homes, regardless of tenure.”
Woods says the Government made a conscious decision to skew the cap increases towards new builds, but concedes more work may be needed: among the options she is considering is tying cap increases to movement in the market.
“At the moment, it’s political adjustments, and when I say political work, you have to go to Cabinet, you have to make decisions around it – I want to do some further work [around] actually just having some tagged indexation.”
With concern that the overall package of reforms could benefit aspiring home buyers but leave renters further behind than ever, Woods insists affordable rentals were “top of mind” when the policies were being developed.
“One of the core beliefs of us as a government over the last four years – well, nearly four years – has been that New Zealanders need more safe, dry homes, regardless of tenure.
“It’s why we’ve embarked on the reform around residential tenancies, it’s why we’re wanting to make sure that regardless of whether you own or rent your home, that you’ve got a secure place you can feel secure in and your kids can grow up well in.”
Whether or not Woods can deliver on that ambition may determine how her eventual successor feels about taking the job on.
