Kiwibuild should build more rental properties economist Shamubeel Eaqub says

Jan 28, 2019 | News

Economist Shamubeel Eaqub says KiwiBuild will have to change and might be better off building social or rental houses if it’s to reach its goal of 100,000 houses.

“People have really misunderstood KiwiBuild, it’s such a complicated thing. It’s a complete distraction,” he said.

KiwiBuild aims to increase the housing supply by facilitating the building of 100,000 homes within the next decade.

Another 250,000 would normally be built by the private market over that time and Eaqub estimates the country will be another 200,000 short.

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With KiwiBuild having difficulty getting projects off the ground, he suggests it might be time to switch to building social housing or even rental houses, because buyers aren’t at the price points that KiwiBuild houses are selling for.

“The underlying issue of affordability never went away, and that’s been the achilles heel of KiwiBuild from the beginning.

“The reason why I think build to rent has to be the answer is because that is how they solved the housing crisis post-war in Europe.

“If you think about the waitlist we have for state housing right now, that’s around 10,000 families.This Government is planning to build more unlike the last government, which was selling them but even then they’re planning to build about 4600,”

He said the Government was planning to fail.

“Not only are we not keeping up with population growth we are not even meeting current need. We need to much more ambitious about

Shamubeel Eaqub says the debate about KiwiBuild houses’ affordability is unnecessary, since it was never meant to be a subsidised housing programme.

Eaqub said that KiwiBuild was not fit for purpose and should be changed to meet the greatest need. He said there were good economic reasons for doing so and noted that the accommodation supplement is a huge and growing cost for the government.

However, Auckland Council chief economist and housing specialist David Norman said it would be a bad idea to change KiwiBuild’s home ownership focus.

KiwiBuild was always aimed at increasing home ownership and anything else was really duplicating the work of a different sector, he said.

Property Institute chief executive Ashley Church is also expecting KiwiBuild to change, in the form of some kind of sweetener.

With its homes selling for not much less than the market price, and penalties for people who sell their KiwiBuild homes early, Church said the Government would be forced to alter its centrepiece housing programme.

“This will take the form of changes to eligibility criteria, a coordinated Government ‘charm offensive’ to private developers, or some form of state subsidisation or delayed payment, or any combination of these”.

Experts note KiwiBuild is still a work in progress, and other work underway within the Government could help make it more successful.

The Lakeside development in Te Kauwhata will see 175 KiwiBuild homes.

Urban Development Authorities have already legislated and are gearing up masterplan big communities where planning has been tough. UDAs have the power like the NZ Transport Authority to use the Public Works Act if necessary to confiscate land.

Housing Minister Phil Twyford is also believed to be working on a shared equity scheme, which would help people without sufficient funds to share ownership with another entity such as the Crown or a council.

Some developers have spoken out in defence of KiwiBuild, saying failing to ramp up quickly enough does not mean it’s not influential.

Auckland developer Charles Ma is working with the Government to try involve KiwiBuild in Auranga to help deliver affordable housing.

He said he had not looked at the recent figures on KiwiBuild but believed in general it was a good initiative from the Government.

“KiwiBuild is one step towards the right direction in addressing some of the housing issues for first home buyers.”

Auckland developer Charles Ma is working with the Government to try involve KiwiBuild in Auranga to help deliver affordable housing.

Auranga has the potential to deliver a lot of homes that could be for first home buyers. By partnering with KiwiBuild, it would make it easier to deliver these homes, Ma said.

“KiwiBuild makes it just that much easier to create affordable housing, that’s quite difficult under a conventional market.

“Right now I think KiwiBuild is heading in the right direction. There’s still a lot of complexities to get the right result and to unlock more housing.”

But Eaqub said that the problem is too big to be able to fix with $2 billion, the size of KiwiBuild’s fund.

Instead he said we could partner with institutional investors to build rental properties or use the deep pool of money in Kiwisaver.

“But can you invest into residential property with that? No. Why not?,” he said.

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