The KiwiBuild initiative was not the Labour Party’s only response to the affordability crisis, or perhaps the most important. Tax proposals, tenancy laws, banning foreign buyers, state house building and infrastructure bonds were all just as important. But KiwiBuild became the “flagship” for the Government’s housing effort.
Clearly, it is now in difficulty. Its chief administrator, Stephen Barclay, has resigned in dispute with the newly established Ministry of Housing and Urban Development and Housing Minister Phil Twyford has been forced to admit it will not reach his stated target of 1000 new homes in its first year.
He expects to have only 300 completed by July. Even that may be optimistic. Just 47 have been built so far, with another 236 under construction. To put those numbers in perspective, New Zealand councils issued building consents for 32,800 dwellings in the year to November. KiwiBuild is contributing roughly one house in every 100.
And they are not much more affordable. As became evident in the first allocation, buyers of KiwiBuild homes in Auckland and other expensive markets are going to need good household incomes to service multi-million dollar mortgages.
They might be getting a cheaper house on easier finance but they are taking on a debt they can only repay on resale. The trend in recent decades has been towards bigger houses. Despite families getting smaller, those that can afford to build or renovate houses have designed them bigger. Vast living spaces and internal areas for workstations and home entertainment have replaced the lawns and gardens of long ago.
That is one of the reasons house building has not kept pace with population growth. KiwiBuild offers finance to developers to produce some smaller, more affordable units among the homes they are building for the open market. The finance is no doubt a powerful inducement at a time banks have become more reluctant to lend for residential investment, especially on apartments.
The taxpayers are underwriting the risk banks are reluctant to take but taxpayers are not the only ones who stand to lose if the Government proves to be wrong in its belief there will be a continual demand for units built to its specifications.
Not much market research appears to have been done before KiwiBuild was adopted. Some should be done if the Government is determined to press on with the programme. It should not step it up simply because it has set itself almost impossible numerical building targets.
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It has better policies in its armoury against rising house prices, which have stabilised in any case over the past three years. Auckland sales fell 20 per cent in December, which appears to be a result of the ban on foreign buyers that took effect on October 22. The Government can count that a success and think again about KiwiBuild.