That’s the advice from New Zealand’s largest sharebroking firm, First NZ Capital, in a note to clients on the political and practical challenges the government faces as it starts 2019 on the backfoot over slow progress on its flagship KiwiBuild affordable house-building programme.
Analysts Arie Dekker and Grant Lowe say the government has itself to blame for the degree of attention being given to abandonment of KiwiBuild’s first year target of 1,000 homes, when other elements of its housing reforms are more important and are vital to the eventual success of KiwiBuild, which FNZC says cannot yet be judged.
“It is right for there to be some concern about early momentum, but focus should go on other areas that are being progressed,” says FNZC.
The UDA, which will not be created until early next year based on its current legislative timetable, “should in our view be the real focus point,” says FNZC. “If the government follows through on it, it has the capacity to make a real difference on existing house prices through the opening up of land supply and provision of infrastructure solutions and funding that both enables development and pushes out the cost of infrastructure from upfront section prices in favour of recovering it over the long term.”
BusinessDesk understands development of a new class of infrastructure bonds is progressing well, with credit rating agencies recently confirming that debt raised in the UDA’s name will not sit on either central or local governments’ balance sheets.
Equally important, says FNZC, is whether the government keeps its commitment to “open up the Auckland urban limit – something we’ve heard less on in recent times – but something that remains an important signal of government intent in the city with the greatest affordability issue”.
Both the UDA, with its proposed sweeping powers for central government to over-ride local government plans in pursuit of lower cost housing, and the policy to do away with the Auckland urban boundary, are politically charged. The UDA is already sparking some protest from local democracy advocates, while the urban limit issue is seen by some urban activists as a recipe for “sprawl” rather than ending the artificial inflation of land prices within the boundary.
FNZC says the government “has in some ways contributed to the scrutiny it is getting” on KiwiBuild through its early emphasis on target numbers of affordable homes to be built in the early phase of the policy instead of talking up “the more significant enabling work that needs to be completed to pave the way for KiwiBuild”.
While KiwiBuild and the UDA, infrastructure funding and urban limit policies are running in tandem, KiwiBuild has got ahead of the others in political terms while depending on the implementation of the others for successful delivery.
“We believe the government continues to realise the big wins on housing affordability will only be achieved if it frees up meaningful land supply and allows long-dated funding of infrastructure, … both of which would take some time to enable, but more important than the first year targets on KiwiBuild.”
“Improved housing affordability outcomes will only be achieved across multiple parliamentary term, with risks of derailing the agenda through poor communication and overly-optimistic short term goals,” FNZC says.