Central Government to create temporary fund to pay for roads and pipes in high growth cities such as Auckland, Christchurch, Tauranga, Hamilton and Queenstown; Councils will have to repay funds or buy back infrastructure after houses built

Central Government to create temporary fund to pay for roads and pipes in high growth cities such as Auckland, Christchurch, Tauranga, Hamilton and Queenstown; Councils will have to repay funds or buy back infrastructure after houses built
Prime Minister John Key talking to Corin Dann on TVNZ's Q+A on July 26

By Bernard Hickey

Prime Minister John Key has announced the creation by the central Government of a NZ$1 billion Housing Infrastructure Fund to pay for water and roading infrastructure in high growth areas to accelerate house building.

The contestable fund would be available for councils in Christchurch, Auckland, Hamilton, Tauranga and Queenstown to build infrastructure, but that they would either have to repay the funds or buy back the infrastructure after it was built and home owners were paying rates. The Government would create the fund by borrowing up to NZ$1 billion.

Key told the National Party's annual conference in Christchurch the announcement would ensure more houses were built faster in areas that needed them the most.

“The contestable fund will be open to councils in high growth centres – currently Christchurch, Queenstown, Tauranga, Hamilton and Auckland – and help bring forward the new roads and water infrastructure needed for new housing where financing is a constraint," Key said.

“We want more houses built so first home buyers can get a foot on the property ladder, so people who work hard can reward themselves with a place they are proud to call home and so tenants have more options for good rental properties," he said.

The Government was criticised after the May Budget for not addressing the infrastructure funding roadblocks to more housing developments, particularly in Auckland where the Auckland Council is up against its borrowing limits. The Government announced a National Policy Statement (NPS) on urban growth last month, which aimed to encourage Councils to free up land for more housing supply, but it did not address the problems some Councils have in funding the roading and water infrastructure needed to prepare that land for housing developments.

The NPS highlighted the current stand-off where the Government called on Councils to free up land and the Auckland Council pushed back by saying it could not fund the extra infrastructure needed. Today's announcement aims to break through that log-jam.

More details on Fund

Finance Minister Bill English and Housing Minister Nick Smith later issued their own statement giving more detail on the Fund.

English said the Fund would help bring forward the new roads and water infrastructure needed for new housing where financing was a constraint.

“The Government will invest up front to ensure the infrastructure is in place. But councils will have to repay the investment or buy back the assets once houses have been built and development contributions paid," English said.

Smith said the fund would only be available for substantial new infrastructure investments that supported more new housing, not to replace existing infrastructure.

“To access the fund, local councils must outline how many new houses will be built, where they will be built and when they will be available. Ideally, they will have agreements with developers on these issues," he said.

“Funding may also have other conditions attached, such as faster processing of resource consents. All of this will require close collaboration between central and local government.”

English said infrastructure financing was one of the three key constraints to building houses, alongside land supply and consenting requirements.

“Councils have strict debt limits which means some lack the headroom to invest in infrastructure now and then wait for future development contributions to recover the costs. The fund will help provide more infrastructure sooner by aligning the cost to councils with the timing of revenue from development contributions," English said.

English said the creation of the Fund would require the Government to "temporarily" borrow up to NZ$1 billion, which would increase net debt until it was repaid. Smith and English said in a question and answer document issued with the announcement that the creation of the Fund would not affect the Government's capital allowance.

Any impact on the OBEGAL measure for the Government's surplus would depend on the nature of the infrastructure projects agreed, they said.

"Because it is intended to be repaid within 10 years, the fund is not expected to impact on the Budget capital allowance," they said Q&A document said.

UDAs also planned

Smith said the Government was also considering establishing Urban Development Authorities (UDAs) to help further speed up the supply of new housing.

UDAs had streamlined powers to override barriers to large-scale development, including potentially taking responsibility for planning and consenting and other powers, Smith said.

They were recommended by the Productivity Commission last year, including the potential for UDAs to have the power to compulsorily acquire land.

Smith and English said in the Q&A document that options for managing the funds were being worked through with Councils and that existing models were being considered.

"With roads, for example, we’ve already accelerated priority Auckland transport projects through NZTA. We could use a similar model for roading projects under the new fund. Another option is a special purpose vehicle along the lines of Crown Fibre Holdings, which was created to manage the roll-out of Ultra-Fast Broadband," the said.

The Government planned to call for applications later this year.

"In the meantime, councils can start identifying projects to put forward," they said.

Longer-term, councils would need to find new ways of funding infrastructure through existing funding tools or potentially coming up with new ones, Smith and English said.

"This is a short to medium term fund to enable the acceleration of new houses in high-growth areas rather than an on-going subsidy to councils," they said.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

75 Comments

22
up

Why is PM silent on demand side of housing Crisis now that he does admit that their is a crisis after continue denial.

Now waiting for the govt denial to stop and accept that this crazy housing crisis is caused by [ offensive race-based smear removed. Ed ] in NZ and has to be stopped.

This reality is known to all except National party. How hard is it for the govt to get the correct data and prove everyone wrong. Please not the faulty data announced earlier as mentioned by the agency itself.

19
up

"Why is PM silent on demand side of housing Crisis now that he does admit that there is a crisis after continue denial."
Good question.
Perhaps because that would entail tens of thousands of recent arrivals to be exited. And tens of thousands of Visas to be revoked. And turning down the low wage immigrants, which may lead to wage growth, which is not permitted for developed countries under globalisation.

Supply & Demand interact to achieve Price.
So, let's add 30k more houses in Auckland, will that satisfy the increasing/large Supply? And affect Price?

If Immigration/students/house-buying 'business/investor" immigrants are restrained, will that lower price?

The agenda is clear and they really are doing poor job of taking advantage of the Immigration and investor boom by building more houses. Is this what we want?

im pretty sure the agenda is about equality ... that is to try encourage as much sewage into the town water as we see in our rivers

22
up

Again JK is trying to divert the attention of the people of New Zealand from non residents / overseas buyer speculation which is the main cause of rising house price in Auckland by multiple.

Investement on supply and infractructure is good but by initself will not help if demand is not controlled.

The effort and money government puts in defending non resident buyer is surprising. However hard the govt may try will not help as they stand exposed.

Like Brexit- Jkexit will happen.

Like Brexit- Jkexit will happen.

Is that JKexit with a silent K, evita?

20
up

Am not sure they deserve any kind of kudos for doing the absolute minimum required to kickstart some building, after being caught out by the media, probably building in the wrong long term areas, and from a monetary point of view by probably borrowing offshore themselves, and therefore harming the exchange rate and current account. Separately I suspect $1billion doesn't go all that far; and doesn't address more strategic infrastructure issues like arterial transport, or schools or hospitals etc.

15
up

It won't consider those wider infrastructure costs. Just access road infrastructure and pipes to the boundary.

16
up

Bargain basement sprawl then. Not much of it -$1 billion seems like a lot -but all National is promising is a few years of interest free lending. Only a few Nat party land bankers will be in a position to gain from this. Great -what a intellectual powerhouse this government is -surely their spin is becoming less and less convincing to the public?

10
up

“surely their spin is becomming less and less convincing to the public?” - one would think/hope so but I am continually amazed at how they have been able to get away with it up until now. The lack of knowledge of the average person on these issues is astounding.

21
up

“To access the fund, local councils must outline how many new houses will be built, where they will be built and when they will be available. Ideally, they will have agreements with developers on these issues," he said.

Binding agreements? Doubt it. No wonder land bankers bank! Everything Key's mob come up with serves them so, so well. This one might as well be called the public (ratepayer) subsidy of private capital gain. This issue of new infrastructure that they are trying to resolve is addressed by Development Contributions. The market (developers) have rightly said that those costs are unaffordable. So, we have a clear price mechanism telling us this growth is unaffordable and unsustainable - yet this government ignores that and passes on the cost of that growth to future generations.

None of this makes sense - and for what, a paltry prop up of GDP figures through immigration policy settings.

16
up

Lovely windfall for developers and foreign money-launderers, paid for by the NZ ratepayers. Which is probably a feature rather than a bug.

22
up

PM advisors and Spin Doctors are trying to re-capture the Sunday media space, as there has been too much airtime on uncontrolled growing immigration, foreign investors, foreign house buyers - so they are now trying to get the airtime. Clever tactics, but there is no word from the PM on the Demand side.
.
So NZ taxpayers now foot the bill in several ways: lower wages, & tax dollars needed on the growing infrastructure needs from Auckland population growth etc.

19
up

National party will do everything to cover up foreign buyer issue which is the main reason for housing crisis.

Whatever measures they think is how to boost their elite and overseas friends.

Mortagebelt you are absolutely correct but surprisingly oppositionand media are silent. Can any experts doubts what you are saying. Still nothing can be done - this is helpnesness and aguish building up.

17
up

Hey, look on the bright side. If they ever manage to get out of the vortex of corruption and stupidity long enough to build some sewers, maybe Nick Smith will fall into one at the opening ceremony and drown.

Fingers crossed

16
up

Too little too late and pointless just focusing on a few centres where the rich have their holiday homes. Address the overall problem now. Shut the immigration flood gates, hit the speculators hard, remove councils authority to restrict land supply and remove as much BS around consent process as possible
Time is precious and the problem immediate if not already a decade overdue for action

Karma

Dunno about other councils but Auckland Council shouldn't have needed this - if they'd just been a bit more responsible with ratepayers money, they would have plenty left over for infrastructure.

I'd say Auckland Council would have easily wasted a couple of billion in the last few years.

I think we might have had some labor party fella named Phil goff do the thing labor always does with money when they get into power...

This is what you call a Blind Trust.
A Govt in denial giving money to those who don't really know what to do with it.

S7E6: - Season 7 Episode 6 of the NZ produced never-ending soap opera "The Supplysiders"

who will be building with the government now funding, hmmm, could it be more taxpayer funds for friends, surely not
The Prime Minister has raised the prospect of Chinese companies funding and building infrastructure in a bid to speed Auckland development.

He says an urban development authority is an option as is allowing companies - including from China - to directly fund and build some of the city's infrastructure

http://m.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11659497

What are the odds that the whole underlying purpose of this exercise in delusion and futility is to score a directorship for useless Max with whatever company dishes out the sweetest bribes, I mean, wins the tender.

11
up

I would loooove to know what internal polling that precipitated this was saying.

Even in solution of housing problem they try to find opportunities for their friends. Wonder is this policy for kiwi or are used as a mean to help their overseas friends.

16
up

John Key is forcing the ratepayers of Auckland to take out $1 billion of (further) unpayable Council debt, in order to fully subsidise infrastructure, in order to support private construction enterprise - which will in no way render housing affordable for the ordinary ratepayer who is paying that Council loan. Cheers John.

I don't think it just the Auck ratepayer. (It will benefit the whole country).....J.K. Tui ?

Oh well, all that untaxed capital gain will cover it won't it? Cause I don't hear anyone really complaining about getting that

11
up

Since I am yet to meet any senior local government officer who is well-informed, competent and accountable, this latest piece of madness will undoubtedly result in massive cost overruns and huge rises in local-body rates, as the usual suspects get their snouts into the public feeding trough and suck as much as possible out of if, knowing that there is extremely poor oversight and no accountability.

Case in point: upgrade of Vickers Rd to Northgate, originally costed at $9 million, revised to $16 in 2014, with the latest publicly announced figure as the project nears completion being $24 million.

I suspect that New Zealand's number one growth industry is ordering, delivering, placing, removing, and invoicing for orange-and-white plastic cones, temporary safety barriers and temporary hazard signs.

10
up

Corrin Dann
Let's move on to immigration. Kerry McDonald wrote on his website and I quote “a high rate of immigration is a national disaster he says it is lowering the living standards of New Zealanders with serious economic social and environmental consequences “ Now this isn't Winston peters saying this it is a respected economist and businessman. He's worried about immigration, not because he's but because he's worried about the numbers.

John Key
“We'll o.k. I don't think the evidence bears that out. To start off if you look at the average wages in NZ they are up .

Corrin Dann
But it is still 20,000 below Australia.

John Key
But it almost doesn't matter what the politicians say it is what New zealanders think and what we do know is that New zealanders are not leaving as they were because they see the oppurtunities.

Corrin Dann

But on the flip side of that Treasury says, in a recent report, that immigration keeps wages lower , the profile of those coming in tends to be in low skilled areas and it still seems to be in jobs that New zealanders could fill and it's keeping New Zealanders wages down so the wages could be higher than that.

John Key
We would like to see even more New Zealanders come off the benefit and take up employment

Corrin Dann
But their facing competition from migrants coming in

John Key
We'll I don't think that's quite right, It depends on a lot of factors. Some of the work can be seasonal, so someone comes in on a seasonal work program which we have reciprical rights because they are part of our FTA or RSC which is a . But they also come in as a regional issue , so if you take Queenstown, go and ask any operator in the heart of the season they just cannot get workers, now, you just can't pick people up and transport them to Queenstown; you have family infrastructure [ and low pay, lack of accommodation and sky high rentals]

Corrin Dann
I guess what I'm trying to say, is your government using immigration (Strong immigration) to prop up and economy that is suffering from a dairy down turn, to get you through a . You have high house prices

John Key
Well ok. The answer is no. If you go back and look at those figures in 200? x kiwis went to Australia, now x Kiwis...

Corrin Dann
But hang on, if you look at the numbers it is only a quarter that are returning Kiwis

Jk
That's right, because some go in and some go out. But my point is fewer people get residency now than when Winston peters was foreign minister under Labour.

Corrin Dann
you don't want to get immigration down , to fall though, do you. I just got to say something. I saw you in a speech after the budget and you were in a big room of business people, now some of those were the biggest business minds of the country and you stood up and said: “don't worry about treasuries figure the estimation that it will go back to 12000, you were confident the figure was going to be a lot higher than that.

JK
I just think it is likely to be higher than that

Corrin Dann
But it's like telling them you wanted immigration to be up. You were telling them “ don't worry the demand will be there, the economies going to stay there, that's what's keeping New Zealand afloat

JK
No, what I like about the fact that migration is strong is that I think that it reflects both returning Kiwis and that it shows they have confidence in New Zealand and that we have an open economy, but personally I think New zealand is a much more successful country/ for that.

Corrin Dann
But the issue is can NZ cope in terms of schools, roads, ...the argument is that we are not coping with that. The people living here their living standards don't increase

JK
well, I don't agree with that. I think were are building roads and schools and hospitals...

http://tvnz.co.nz/q-and-a-news/pm-s-reaction-aussie-election-results-vid...

John Key should grow a pair and own up to picking on that waitress, she was just trying to do her job and he picked on her even after his embarrassed wife tried to stop it. What a loser

12
up

Master of the double-speak and non-sequitur.
.
'a conclusion or statement that does not logically follow from the previous argument or statement.'

Dann: Salaries still 20k below Aus
Key: 'Doesn't matter what politicians say...' Huh?

14
up

Denial and lie and now double face.

JKEXIT

http://www.curia.co.nz/

http://www.newshub.co.nz/politics/david-cunliffe-blames-migrants-for-hou...

but then there are polls saying only 35% think immigration is too high (which is the result wanted)

REVEALED: How Bad Polling Is Used To Convince People Brexit Support Is Tanking

http://www.breitbart.com/london/2016/05/26/questions-raised-anomalous-br...

21
up

Why is Key in such a state of denial - he says "we need to build more homes and build them faster - it is a supply issue."
He is wrong - it is totally a migration issue. Shut down migration for three years and let the current build rate ease the problem.
Instead he promotes a $1 billion infrastructure proposal that his Chinese mates will benefit brilliantly from along with Fletchers.

Jk is sincere and tottaly focused.......... to help his overseas friends and elite few kiwi.

Will have to wait for election next year to see the last of him unless something happens but I think no provision in NZ except election.

Do Fletchers pay tax?

Easy to find the answer:
http://www.fletcherbuilding.com/media/45505/Fletcher-Building-Annual-Results-Analysts-Presentation-19-Aug-2015.pdf

They earned NZ$487 mln cash before tax in fy 2015 and paid tax on that of $72 mln in cash.

Or, if you prefer their audited financials, they earned NZ$376 mln and provided $96 mln for tax, on an accrual basis. To save you the effort of working out the overall effective rate, it is 25.5% (compared with the face corporate rate of 28%).

No company ever "pays" the face corporate rate. All business have expenses that get written off, even if it is just bad debt.

yes i would imagine some very exaggerated cost from one of their overseas companies?

You mean - No Corporate - Most small businesses, which are the the back bone of employment and our economy according to Keydashian, pay the full whack. I know I do.
He did actually say this yesterday on the telly. Empty meaningless words, but they did dribble out.

Do multi-national Fletchers pay tax? A double whammy for the New Zealands building a house, have to use really expensive building materials from a multi-national company that may not be contributing to tax in our economy. Anybody keen to vote on the govt competing with Fletchers with their own importation business that could be so much cheaper and pay tax at the same time?

You can't stop tens of thousands of expat Kiwis moving back home to New Zealand.

1 million Kiwis live overseas. 650,000 Kiwis live in Australia.

So, it is $1 billion for 5 cities, say $200 million for each city.
How many Kms of new road, or water connections for how many new houses would that get for Auckland ? And will that all be only in the new suburb developments ? Just asking.

13
up

So where is the return on the billions we are spending to house, school, medically treat, superannuate, transport feed, etc for all these immigrants. Certainly no sign of it in the 0.2% GDP rise per capita to the year ending March.

This record after record immigration is in effect yet another form of corporate welfare, the tax payer is paying for those costs you mentioned, but the only ones that are benefiting are the businesses.

If you think immigration is causing the housing crisis (I think it is a short term cyclical driver, the long term issue is supply) then a lot of businesses aren't benefiting either.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1166...

The housing crisis is costing ordinary Auckland businesses as many firms cannot afford to compensate their employees for housing related living costs.

Only the rentier businesses (the FIRE economy) are benefiting. The rest of us pay...

So all you people want to live in a land with sub standard infrastructure?
When the water doesn't flow, the lights go out?
Civilization costs money.

John Key is following this example..

I know you are all over the BREXIT news, affairs, rhetoric and balderdash...and all that kerfuffle.

They have talked the subject round and around in circles. The whole World is in a spin...about it.

However, someone has come up with a super plan to end all this speculation.

If we all stick together we could implement this...so take a look, worth the wait.

Thank goodness this exists!...someone went to a lot of trouble to figure this all out. Credit where it is due..if you will excuse the hyperbole. ...once again.

It equally applies to Housing.

http://thebrexitplan.com/

Google Analytics.
The font of capitalism gone wrong.
Shame they bet too early.

Well done Prime Minister

NZ has been well done - done over.

Like most people, with their hand in your pocket....but no regulation for the past 1500 years....there is a simple analogy to be found...with the waste of taxpayers money, rates...etc.

The size is the most important....but let us start at the bottom...and work our way up...

These two will make Fine Politicians and Bankers.....one day. Maybe in NZ or UK.

http://travel.aol.co.uk/2016/07/02/council-spain-discovers-gardener-driv...

Andalusia, nice place.
You ever been there?

Yep, Spain was one place I considered living....many, many years ago.

Went there first when I was 19 years of age...

I have friends who live there now. renting a place for 350 Euros per month...work that out in NZ dollars....then ask yerself, who is rooking who.

Remember when the world is your oyster...You just have to shell out as little as possible to enjoy it...in some places.

350 Euros per month doesn't go far. Taxi fares etc.

It certainly goes a lot further in Spain, than NZ.

It is called the simple cost of living, not the cost of a huge mort-gage...ie...death grip.

In todays time survey may suggest onething but does not take long to change. Sometime it also depend, how the questions are framed in the survey.

Come election in NZ and definitely if national continues with their arrogance, the result will surprise many narional die hard supporters.

New 'affordable' homes is BS
How is it in low income areas.. Sth Auckland, Manurewa/ Takanini these places on 400m sections sell for $850 K to $970K.
A solid refurbished home on 600+ m section with garage etc in same area around the $530 to 590K.
A Solid tidy 4 bed home next door to the above on 1500 m section with 2x garage, new 12m x 7m shed and able to build 2 more ' new affordables' around $780 to $820 K.

10
up

Just heard Nick Smith Housing minister in paul henry show that this billion dollar is must for the housing boom to continue.

It shows that whatever government is doing is not for solving housing crisis but to ssee that the boom continues.

With this mindset how do you expect the current national govt to act to curb speculation and control instead want it to grow.

I cant watch Paul Henry anymore. He doesnt ask hard questions. Its like a visual tabloid. No substance.

Why the debate. One thing is for sure that the national party will do nothing to control the ever growing house prices. Infact will help and find means to see that it continues as it is in their interest.

Their body language, denial, lie and everything shows that are under obligation or have some pressure from their overseas friends.

May be are bullied by them and helpless and pass on the same to Kiwi.

Only time will tell but definitely to be so stubborn and away from reality shows something is not right ( Surveys have gone wrong everywhere, so cannot take comfort with with popularity survey but try to feel the pulse of the masses, where many politicians in their arrogance and power go wrong and have gone wrong) .

This is ironic. National laugh at Labour's KiwiBuild policy to build thousands of homes and now they've setup something similar. How is this going to fix the supply problems. There are not enough skilled tradesmen and building materials are more expensive than ever. There is still no incentive for land bankers to subdivide land. There are still many many low skilled immigrants coming in every year. It's not like there is a lack of printed money to invest in infrastructure anyway.

This is yet more diversion with the left hand and inter-generational theft with the right hand.

Good to see the government taking some action but a billion dollars won't even touch the sides. And why is Christchurch on the list when they're in danger of over supply?

Perhaps the Auckland council should stop funding low reward projects like that horrible pink cycleway in the middle of CBD.

they just wasted a bundle of money building cycle ways in mangere, it seems the new in thing to produce cycle ways

Apparently more middle class Pakeha in Latex is the answer. Even in Mangere.

Just me or have others started having strong feelings of disgust every time they see John Key in parliament or taking questions from the media (generally talking trash -he know its trash, just the same way we know it's trash). I give the guy credit for his outstanding ability to believe is own BS for such a long time. But come on John, wake up and smell the coffee! You're full of it!

I've been around long enough to see a number of PM's, and this is the first time I've felt such strong negative feelings towards the leader of our country. I truly think it's time the guy steps aside.

Inndependent observer , you are not the only one, many gets similar feeling.

Solution #jkexit

Anyone hearing JK on Morning Report this morning would of picked up on him continuing to blow on about it "just being a supply issue" (Guyon let him away with it as the useless journo he can be at times) and he also reiterated that the government are not going to do anything that will bring existing house prices down. Thus, they will CONTINUE stalling supply and flooding our country with foreign demand while at the same time ignoring speculation.

So....my conclusion is this. A crash has been made our only eventual certain outcome due to political manipulation. So when it does crash in the near future...you will know who to blame and who to chase with a pitch fork.. OK.

More corporate welfare, I bet some developers are going to make a killing out of this, it won't make the slightest difference on any house prices, it's just a chance to help out some rich mates.

Oust JK and Nick Smith,

They have failed NZer's allowing foreign money and excessive immigration to affect the standard of living of working class NZer's through direct investment, shell companies and foreign trusts...

They had their chance to rectify the problems they created over the last 8 years but have chose to deny this is one despite hoards of evidence to the contrary -

National has screwed up, and it's time to get them out... and get back to focusing on serving NZer's interests where working class people earning $120k in their household can't afford a decent house in the city they were born in... I mean WTF?!

Get Key the hell out and get a govt that will serve NZer's for a change and not just rich buddies for large private contracts to build more housing for a problem the current govt created