​Q+A: Minister Phil Twyford interviewed by Corin Dann

Mar 26, 2018 | News

It is located at the Unitec site in Mt Albert.

‘It’s going to be the site of an exciting new urban development project that will see probably between 3000 and 4000 new homes built there.’

I would hope that we’d see between 30 and 40% KiwiBuild affordable homes for young Kiwi families.’

Minister Phil Twyford also told Q+A’s Corin Dann he also wants to see state housing on the site.

The Minister says the government is ‘committed to exploring a shared-equity programme’.

‘We are looking at shared equity, because, you know, for a lot of people, a mortgage of $500,000 is out of reach.’

The Minister says it will be a year before they can build on the site.

Q + A
Episode 4
Interviewed by Corin Dann

CORIN We are going to talk housing now, KiwiBuild. New news from Phil Twyford this morning, who joins us in the studio. Good morning to you, Mr Twyford.

PHIL Good morning, Corin.

CORIN Good to have you here. Tell us, you’ve got an announcement coming in an hour or so out at Unitec Mt Albert, Auckland. What have you got?

PHIL Well, it’s very exciting. We purchased nearly 30ha of prime urban land in the heart of Auckland at the Unitec site at Mt Albert. It’s going to be the site of an exciting new urban development project that will see probably between 3000 and 4000 new homes built there in what we hope will be a showcase for the best of modern urban development.

CORIN How many KiwiBuild homes?

PHIL That’s something to be worked out once we get the development partners in place. I would hope that we’d see between 30 and 40% KiwiBuild affordable homes for young Kiwi families.

CORIN So, we’re talking 1000 or so, something like that?

PHIL Probably a bit more than that. I also want to see state housing there, cos, you know, if we don’t build good affordable public housing, state housing, for people, who will?

CORIN We know that there was an initial look there by the last government out at Unitec, and there was protests – well, groups that were unhappy because of the transport, because of the congestion. Are you expecting some pushback there?

PHIL Well, we still have to do the master planning. We’re at a very early stage right now, but ensuring good transport links will be a critical part of this exercise, but the amazing thing about this site is that it’s going to have superb transport links. It’s got the Mt Albert rail station at one end. It’s going to have light rail at the other Pt Chev end. It’s right next to the water-

CORIN So you’ve got transport, but people are still going to drive, and those roads around that Unitec are already very congested. You put in 5000, so that’s a lot of people and a lot of cars going into a very congested area.

PHIL Well, with such fantastic rail links, with the bus service line on Carrington Rd. It’s got cycle lanes on all sides of the development site. Actually, this could well be the first big developments we’ve ever seen where you don’t need to own a car to live.

CORIN Who’s going to do it? Who’s going to build it? Have you got the builders? Have you got the companies, the property developers? Who’s doing it?

PHIL So again, it’s early days, but we are going to be working closely with Auckland iwi on this. You know, under the Treaty settlement, members of the Tamaki Collective have the right to bid for and to have a role-

CORIN So, they’re an investor or property developer part of this?

PHIL Both, and we are going to be sitting down with iwi in the weeks to come nutting out exactly the process that we are going to take and what kind of involvement they will have.

CORIN Pre-fab houses? What sort of houses are we talking about here?

PHIL Well, consistent with our wider KiwiBuild plans, I think offsite manufacturing, modern pre-fab, has to be one of the biggest opportunities we have to build more houses, better quality, at a better price. And I would hope that the houses we’re going to be building on the Unitec site, a good number of them, would be modern pre-fab houses.

CORIN So let’s just focus in on the KiwiBuild homes that are going to be there, because this is the ones for first-home buyers, the ones that people are struggling to get on the property market. What will the pricing be for a KiwiBuild house in Mt Albert- the Mt Albert development?

PHIL So, you’re talking medium-density, as pretty much all the KiwiBuild homes in Auckland are going to be medium-density, apartments, flats and town houses, terraces. 500,000 to 600,000 is the kind of range we’re talking about.

CORIN So somebody is going to get a $600,000- what, two-bedroom, three-bedroom house in Mt Albert?

PHIL Yes. Two to three, yes.

CORIN That’s really cheap.

PHIL Sure.

CORIN I mean, the minute they open the- the minute they get the key, that will be worth $100,000 more, won’t it?

PHIL So the first thing is we’re going to be flooding the market over time with these houses. We are going to change the market dynamic, not just with increasing supply through KiwiBuild, but also the demand side tax changes that we’re making, so you’re not going to see the kind of year after year high levels of capital gain that have been a feature over the last 20 years-

CORIN But can you get a three-bedroom house of any kind in Mt Albert for 600,000? The point I’m making is – where’s the fairness in this? So how do you decide who gets that house? And presumably they’re going to get a massive capital gain regardless of what happens, because that’s quite a low value for that area.

PHIL So in the early years, until the market dynamics change sufficiently, you are going to see the potential for windfall gains. That’s why we’re very likely to have, for example, a requirement that you stay in the house for a certain number of years-

CORIN Five years, is it?

PHIL We haven’t put a time on it yet-

CORIN You did put a time on it in your election policy.

PHIL We said that there’d be a significant number of years-

CORIN You said five years.

PHIL Well, and at the end of that time, you might have to, for instance, pay back a share of the capital gains, so that’s basically to avoid the situation of a windfall gain.

CORIN Hang on, that wasn’t in the policy. That’s new.

PHIL Yeah, what we said was- all we’ve said for the last six years , is that you’d be required to stay in the house for a number of years. If you had to leave- People have to move for all sorts of reasons. Then you would have to repay some of the capital gains.

CORIN I thought the policy said once you’ve been there for five years, then you got the capital gain. You had to stay for five years. That’s what the policy said.

PHIL Yeah, that’s what I’m saying. If you had to leave earlier, then you’d have to pay back some of the capital gain.

CORIN Yeah, sure, but are you saying that it might be longer than five years? Is that what’ you are signalling?

PHIL We haven’t put detail on that. We’re still working through some of the detail on that issue.

CORIN But you did put a date- you did put the five years on it. So you’re now saying that it could be changed?

PHIL Yeah, it could be. We’re working through some of the detail on that to see whether there might be better ways of doing it.

CORIN Because, yeah, so the other thing is – are you looking at shared equity? I mean, would it potentially—Would you potentially be looking at the government owning some of the house to help those who can’t raise the deposit or can’t service a $500,000 mortgage?

PHIL We are looking at shared equity, because, you know, for a lot of people, a mortgage of $500,000 is out of reach. We want a big group of young Kiwi families to have access to the amazing opportunities that KiwiBuild will offer, and so shared equity, where, for instance, the government or another investor retains a share of the equity, and that means a much smaller mortgage for the homebuyer, but over time you get the opportunity to buy out that equity stake. That could open up affordable home ownership to a much bigger group of Kiwis.

CORIN How widespread are you looking at doing that?

PHIL We’re doing the work on that now, but it will take capital-

CORIN Yeah, I was going to say, you’ve only got $2 billion to play with. You won’t have enough money to do that with on a large scale, will you?

PHIL Yeah, so we never intended that the $2 billion that kicks in on July 1 as the capital fund for KiwiBuild, it was never intended to fund shared equity with that, but actually what’s becoming clear is that there are opportunities, for instance, to bring private capital in, so we’re exploring that now.

CORIN Banks, are you working with banks?

PHIL And other investors to see whether or not we can create a fund that would sustain a shared-equity programme.

CORIN So how does that work with the private banks? Do they get some sort of sweet-heart deal on the number of houses they get to write loans for?

PHIL I can’t talk detail on that now, but it’s—We’re committed to exploring a shared-equity programme.

CORIN So what this all says is that you’ve looked at it—Cos there’s a lot of criticism from the likes of MBIE, Reserve Bank, Treasury, I mean, Infometrics. They all, sort of, suggesting that you’ve been quite heroic with your forecasts about how many houses you can build and the affordability. You seem to be saying that you’ve gone away and had a look and, yes, you have to come up with some new solutions, particularly around affordability to get people into these houses.

PHIL Corin, we inherited a mess. We’ve had to start from scratch to build the platform for a massive government-backed building programme, and we’re going to throw everything including the kitchen sink at this problem. No stone will be left unturned, because the crisis is so bad in New Zealand, it requires ambition. It requires bold and creative approaches, but I have no doubt in my mind that if we apply ourselves to this seriously, we will build a supply chain of beautifully built modern affordable homes for young Kiwi families. Starting from July 1 when that $2 billion kicks in and then over that three years, we’ll ramp up to 10,000 a year.

CORIN So when will the first house be built out at Mt Albert, KiwiBuild house?

PHIL Well, the early advice is that probably it will be about a year before we can build on the site, so Unitec, Polytech, who own this site up until now, they have to relocate some of their operation.

CORIN Is that frustrating for you? Because, you know, you’re under massive pressure. Every day in the House, Parliament, you know, Judith Collins is on your back. She’s saying, ‘Hey, when are these houses going to be built? When are they going to be built?’ When are you going to turn some sods?

PHIL Sure, so you’ll see the first KiwiBuild homes later this year. It will start off as a trickle, but very soon it will be a flood of announcements. We’re working with private sector right now. We’re looking at buying properties, or underwriting them, off the plan in private sector developments. We’re also providing vacant government land to developers so that they can develop them on a deferred-payment basis and build KiwiBuild homes on that land.

CORIN I want to go back to where I started on that equity thing because it’s still bugging me. So how—Let’s say there’s, what, 1000, 2000 KiwiBuild homes out at Mt Albert, for instance, how do you decide who gets them, right? So is there a ballot? Who’s the first homebuyer who gets in? Because they win the lottery if they get that place. They got great transport, a house that’s under the market value. Boom!

PHIL So, there’s no doubt in the early years there’s going to be far more demand for these houses than we can supply in the early months and years, so we’ve always said that we will ballot these houses. So first homebuyers, as long as they’re citizens or permanent residents, they’re first homebuyers or second-chancers who are in the same position, they will put their name into a ballot for a particular group of houses in a particular development.

CORIN And you’ll screen them, you know, test them and all these sorts of things to make sure they are who they say they are and that sort of thing?

PHIL Yeah, I think so, but there’s no need for a big bureaucracy to support this. It’s pretty simple. But after a while, Corin, there won’t need to be a ballot, because there’ll be so many houses coming on stream, there won’t be the mismatch of supply and demand that we’ve inherited after nine years adrift.

CORIN So how quickly do you think you can get rid of the ballot scheme?

PHIL We’ll have to wait and see.

CORIN Here’s the thing. I don’t think anyone—People are grateful of the ambition and the drive and that you’re trying to do all this, but have you just been too ambitious and too heroic? I mean, to put it, well, rather crudely. Infometrics, the economic outfit, they just said you’re pulling numbers out of your arse. That’s what they said. That was the name of their report. KiwiBuild – you’re pulling numbers out of your arse.

PHIL I’ll tell you what, that’s a lot better than sitting on your arse for nine years, which is what the former government did on housing.

CORIN Touche. The fundamental issue they have, though, is, and it’s one that the Reserve Bank and Treasury has touched on as well, is that you’re going to crowd out the private sector and that net, overall, by the time you’ve built your KiwiBuild houses, we’re not going to have many more houses than we would have had anyway.

PHIL Well, there’s two things to say about that. First is that we have a situation of market failure right now. They former government thought somehow the market would magically fix itself. Our philosophy is that when the market fails, it’s time for the government to roll up its sleeves and get in there and fix the problem. That’s the whole philosophy of KiwiBuild. The second thing is that some of the earlier advice from Treasury and MBIE in the first couple of weeks in the government didn’t take into account that we’re going to remove some of the obstacles that are currently stopping industry from scaling up. Now, pre-fab or offsite manufacturing, that’s one of the ways we can get around the workforce shortage that we have. So if we can contract large volumes of KiwiBuild homes. Let’s say thousands of homes over multiple years, to a firm that has a factory that can churn out high-quality homes at a better cost, we get around some of those workforce issues.

CORIN Can you guarantee that they’ll be quality? Cos this is the concern, that you’re under this pressure. You’ve got huge pressure to deliver this. Are you going to make sure that we’re not going to have slums, that we’re not going to have poor-quality houses. For example, will these houses be energy-efficient? Will they meet your carbon-zero act?

PHIL Well, one of the big advantages of a mass procurement programme like KiwiBuild is that you can actually set standards. I mean, we’ll be making sure that those homes are top quality, beautifully designed and built, and warm and dry. When you build homes in a factory using the latest digital high-precision automation, actually, the quality is superior.

CORIN But you’re still 9000 builders short, though. That’s what the Reserve Bank says, that you’re 9000 builders short to do that.

PHIL Right, so with offsite manufacturing, you need fewer skilled workers, cos you’re using automation to build these houses in factories, but we’re also putting in place a workforce development strategy right across government. We’re going to ramp up trade training and apprenticeships right across the entire construction industry. We’re also going to aggressively recruit the skills we need from overseas, because we’ve inherited a basket case. It’s going to take that kind of bold action to kick start the industry.

CORIN Before we go, on the issue of affordability and loans, so will you make any changes to the ‘Welcome Home’ loans, the KiwiSaver kick-start in order to help people get in?

PHIL In a perfect world, you’d want to do that, but at the moment we have this terrible imbalance between supply and demand – not enough supply, too much demand. If we throw more subsidies at homebuyers, that will only have one consequence. It will drive prices up even higher, and we don’t want that.

CORIN Because one of the things that Infometrics talked about was that they, and I think it might have been MBIE actually, that, you know, you’re looking at someone needing—a couple needing $114,000 in Auckland in order to service a mortgage for a $600,000 home. I mean, that’s going to rule out a lot of people who you’re targeting if they have to have that level of income.

PHIL I’m not sure about those numbers, you know. Core Logic recently said that more than half of first homebuyers in Auckland were buying homes more expensive than 750,000. There’s a huge number–

CORIN But how much are they earning, though? I mean, that’s the thing, if they can afford it, then they don’t need help, do they?

PHIL No, those people don’t. There’s people that are just next to them who are kind of looking for the helping hand that KiwiBuild can give.

CORIN So what will the salary limit be? Will there be a salary limit?

PHIL We’re not going to means test KiwiBuild. We don’t want to put in place a big heavy bureaucracy to run this. We’re going to build so many houses, Corin, that there’ll be homes for first homebuyers who desperately want a home of their own. Former governments in New Zealand did this for decades, and we can do it again.

CORIN But you’re telling me, though, that someone whose parents might give them 100 grand for a deposit, who’s earning—a couple, a young professional couple earning $150,000 could get in the ballot. If they’re lucky, they get a house out at Mt Albert for $600,000 that’s probably going to be worth $800,000 a year later. That’s not fair, is it?

PHIL So means testing, we just don’t think that’s the way to go with KiwiBuild. Everybody wants home ownership. We’re going to provide KiwiBuild houses for people who can afford them, but we’re also reforming the rental market for the half of Kiwis who rent. We’ve stopped National’s sell-off of state housing, and we’re building thousands of extra state houses. Our housing policy is a big, bold reform programme, and there’s something in it for everyone.

CORIN Phil Twyford, thank you very much for joining us, and good luck with your announcement later today.

PHIL Thank you.

CORIN Thank you.

Transcript provided by Able. www.able.co.nz

Please find the full transcript attached and you can watch the interview here.

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