A wrap of the not so politically sexy work underway to increase the supply of houses... eventually

A wrap of the not so politically sexy work underway to increase the supply of houses... eventually

By Jenée Tibshraeny 

Any resolute folk out there still holding their breath over the Government making real headway addressing the housing crisis, please come up for air.

Change is on the horizon, but it’s taking time.

The Government has successfully pushed through policy changes aimed at curbing housing demand – particularly by speculators.

But the crucial supply-side reforms key to unlocking land for development, funding infrastructure, getting large-scale government-led developments built, and sharing risk in a way that doesn’t stifle development are a wee way off.

In fact, there’s a risk that if some key pieces of legislation aren’t passed during this electoral term, and if a National government is elected next year, much of the leg work done by the Coalition Government will go up in smoke.

Building and Construction Minister Jenny Salesa on Friday announced plans to introduce a certification scheme to reduce perfricated housing consenting requirements. She also annoucned improvements to building product information disclosure requirements and penalty hikes for non-compliant builders.

Yet legislation will only be introduced in the first half of next year. It will then have to go through the regular parliamentary process before being passed – hopefully before the election.

Salesa is yet to make a call on more divisive issues involved in the overhaul of the Building Act 2004, like licensing building practitioners and possibility reallocating risk for building work between local councils, builders, homeowners and insurers.  

This reallocation of risk issue is key.

Ratepayers have forked out around $1 billion in the last decade for local councils to settle building disputes.

They’ve ended up with this bill because New Zealand uses ‘joint and several liability’ to allocate liability when multiple parties are responsible for the same loss. This means a claimant can recover damages from any or all of the parties that caused the loss. If one of the parties is no longer in business, the onus falls on whoever’s left standing - AKA the local council that provided the building consent.

Salesa doesn’t appear to have decided whether to cap councils’ liability, so they become less risk adverse and speed up the consenting process.

The issues here are complex, as if the buck doesn’t stop with the council, then whoever else it stops with needs to be covered by insurance. But if insurers deem them risky and charge them high premiums or refuse to insure them… well, then there’s a problem.

Insurers will be more comfortable if builders are made to meet higher standards. Getting the balance right will be complex – especially as on top of dealing with building quality issues (to avoid another leaky homes saga for example), consenting authorities will increasingly have to weigh up climate risk.

In other words, will the house it gave you consent to build on the coast be insurable in 10 years’ time? If it turns out it isn’t, who’s liable?

Liability is complex and doesn’t make for a compelling election campaign issue. But it is a key part of the housing jigsaw that isn’t being built in a hurry.

Then, of course, is the reform of the Resource Management Act (RMA). A working group has been tasked with making a list of recommended changes by mid-2020. Legislation won’t even be drafted before the election.

National is treating RMA reform as the panacea to solving the housing crisis, so will push on with this if elected. The question – as always – is whether it will build on the work started under this government, or put its own stamp on it.

National’s Judith Collins has already put a stake in the ground and said reforms should better protect property owners’ rights.  

A third key piece of work underway, key to enabling more houses to be built, is around Kāinga Ora – the agency set up on October 1 to pull together Housing New Zealand, its subsidiary HLC and the KiwiBuild Unit, to lead urban development projects and be a public landlord.

A bill will be introduced before the end of the year to give Kāinga Ora access to a range of existing development powers that are currently spread across multiple statutes and agencies.

This will be crucial in giving central government the ability to override local planning laws to speed up development of large-scale projects in designated areas.

It’s a key part of what’s needed for KiwiBuild to gain traction (should the Government put much resource into it).

It essentially gives Urban Development Minister Phil Twyford the tools to do much of what he campaigned on ahead of the 2017 election.

Writing a solid piece of legislation and getting it passed before the election is a must for him.

Twyford also wants to introduce legislation to enable new infrastructure funding models, like the one used in Milldale north of Auckland that sees homeowners help fund local infrastructure via a levy added to their rates, to be rolled out more easily.

There aren’t visible signs of progress at this stage.

However, there is in theory nothing stopping other consortiums replicating what Auckland Council, Fulton Hogan, Crown Infrastructure Partners, ACC, Auckland Transport and Watercare are doing in Milldale, in other parts of the country.

Finally, work is underway to ensure a new National Policy Statement on Urban Development, which will direct local councils to provide for more intensification under the RMA, takes effect during the first half of 2020.

If you weren’t blue-faced holding your breath for quick, structural change to enable more houses to be built, you might be blue-faced having read this list of work underway.

The Government should be given kudos for tackling the root causes preventing enough houses from being built.

It helped ease demand with its foreign buyer ban and extension of the bright-line test (even though the Reserve Bank’s loan-to-value ratio bank lending restrictions was the real handbrake on demand).

But it’s these long-standing structural supply-side issues that are the real spanner in the works.

Should Labour have been less ‘big ideas’ and more ‘pragmatism’ while it was in opposition, so it could hit the ground running a little sooner when it took office? For sure.

Is it moving fast enough now? It’s hamstrung by its lack of experience.

What its experience over the last two years should show it is that it should’ve prioritised doing the above; given itself the tools to actually build more houses, before putting the spotlight on a programme like KiwiBuild.  

Sure, KiwiBuild was a sexier policy, more of a vote winner. But that’s what the spin doctors swarming the Beehive are experts in – framing “boring” issues like liability and infrastructure funding in a way to get the public on board.

Take a second breath. There is hope for supply-side reforms to see more houses built. Eventually.

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?

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10
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Definitely cap the liability for councils, not least because it means the other two parties need to bring their best game but because its socialising lax building practices and poor organisation by developers. Dealing with deeply ingrained self serving supply side building constraints is not unlike the task which faced governments in the 1980s when they were trying to revive the farming sector which had been placed in a hopelessly privilaged place in the economy and was literally sinking the country through its extreme unproductivity. Likewise housing and land development, for so long the darling of the economy (if you're not fussing after farmers, still!) needs to be gently removed from its pedestal hopefully without causing too many frowny faces along the way. That will take some doing, given that most elected representatives at local and national level have significant interests in maintaining the status quo. Will those particular turkeys actually vote for christmas? We'll soon see....

Good comment.

As noted above, good comment!
But given the number of frowny faces about at the moment (even by many commentators on this site!) perhaps your suggestion of "housing and land development, for so long the darling of the economy ... needs to be gently removed from its pedestal hopefully without causing too many frowny faces along the way." is already quite a bit 'along the way'. Let's hope so. (NB: My view is to forget the 'gently' bit, but then again, I'm impatient ...Besides, the farmers were given no such luxury)

I'm impatient for change too, mostly for having left the sector sometime ago out of sheer frustration at the lack of ethics and lack of innovation. We don't want to make the fatal mistake of rogernomics by causing more damage than benefits during the transformation, as it will only shock the already conservative construction sector and could make things even worse....if thats at all possible.

For a long while yet, housing market adjustment will be via upward movement in the price mechanism - not through any great expansion of supply. The constraints for the latter are too major and often insoluble in the short/medium term.

TTP

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Sorry old chap, you need to pull your head out of your backside.. did you miss that small announcement about streamlining sign-offs on off-site builds? Just one more nail in the property Ponzi coffin.

Let's recap what has changed in the last year or so:
Foreign buyer ban
5 year bright line.
Auckland council hits 16 year high in number of consents for a month, and 2nd highest month ever.
Housing NZ builds are coming online slowly taking pressure off the bottom end of the rental market.
Multiple months with lowest sales in (7,8 and 11)years.

The only thing stopping a collapsing market is the interest rate death spiral, and our silly govt propping up the market with first home grants and first home loans.

The National Policy Statement - Urban Development is also likely to force councils like Auckland to rezone much of the inner 'leafy suburbs' for higher density housing. That could make a difference too

Crikey, imagine what the government could do if they stopped the Landlord Supplement too. Ending that middle class welfare could put some pressure on.

What is "Landlord Supplement"? Never heard of that.

How is New Zealand any different?

The Australian economy is completely cactus, We’ve let manufacturing completely fall apart and we’re just deluding ourselves thinking we’re a wealthy country just because we’ve got inflated house prices and because we’ve got an immigration program to prop up tax receipts and prop up the housing market. It’s going to end in tears — households are already at capacity in terms of their ability to pay rent and buy houses.”

(Matt Barrie, The tech entrepreneur and multi-millionaire)
https://tinyurl.com/y384g6s4

Anywhere you find neoliberalism you find realestate speculation and its attendant underpinnings of tax receipt supporting immigration programmes.

And yet as Adam Smith wrote:

How(ever) selfish (a) man may be .... there are evidently some principles in his nature, which interest him in the (welfare) of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.

If so, there must be hope...and that is the society I want for New Zealand.

I see you like reading fairy tales... Its probably true to some extent for the vast majority of people, but its not universal.

Another great Adam Smith quote: "No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable."

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Here is a novel idea. How about we stop importing people, there is no need for the rate of immigration that we have. I am so surprised that no-one has thought of this before

Just have to keep hammering it: Yes to Immigration but at a sensible rate .

A good thought, but a bit more complicated than that, not least the impact on residential land values. I think we need to look at the big picture and realise that high levels of immigration are not just a NZ issue. In the past few decades the world seems to be on the move, perhaps with the visual power of the internet, everyone is looking for a better life, aided and abetted I am sure by armies of immigration agents making a living out of encouraging folk to get moving.
NZ, given its geographic isolation and relience on primary production could have had the best chance of exercising some moderation on inflows, but how could our pollies restist the "sugar rush" boost to the short term economy. This is not a new phenomenom...in 1840 Aussie developers were waiting on the doorstep of Auckland for government to complete the land purchases. I guess they didn't have cellphones but you can bet they put a modest deposit on chunks of land and signalled London to "let her rip" with boat loads of wide-eyed immigrants clutching pictures of the cheap & cheerful wooden houses lining the streets (yet to be actually built) of the wonderfully named housing developments..."Ponsonby",..."Newton"...etc., etc..(sewerage & water supply to follow in due course)
A heady mix of political short-termism, and canny developers, and banks with created money to lend,....never easy to put back in the box!

I take issue with that stance as it is too shallow a view. The principal reasons for immigration in colonial Auckland/NZ still applies is that the embryonic colony would not have survived on such few numbers in the population for long. Once the gold was gone and farming ramped up the cities would have emptied into the countryside, and the cities would have for want of manpower.
The current situation is similar in that we have a hollowed out middle in our workforce, of appropriate skills, and skilled immigration is vital to support this replacement. For whatever reason we have a lower income group who will not or cannot upskill and move into this vacancy. Why else are we for example recruiting filipino workers for our farming industry, or indian folk for our engineering and automotive workforce. Where are our own trained citizens for these roles, even though these folk were offered the training years ago straight out from high school?

Why do we keep on importing low skilled workers who's jobs will likely be replaced by automation in the future?

The reason why the Minister has not made a decision on removing the Council liability is because it will still be in internal discussions at MBIE, and will form a part of the Building Bill which should be out next year. I will be adding expert support to what should be an insurance policy for a project rather than everyone involved being a part of any claim. Any bailout should have come from central government not local government.

Having multiple parties involved also means slow resolution to any claims (not that insurers do anything but slow the process down). Slow fixes don't just result in dwellings that may not be habitable but may expose the population to unnecessary health risks where they are still technically habitable. Slow fixes also result in apartment or townhouse owners losing capital and it also stops further investment. The way claims are currently handled has damaged our economy and the health of the population.

I agree that the reckless way the Housing Commission was put together did not produce results, and could never have worked given the way it is structured.

Try putting up a graph of houses constructed in NZ, year on year, Jenee.

My guess is it will resemble a hockey-stick, with the odd state-housing bump along the way.

No exponential increase lasts forever, and this one hasn't long to go. How about a 'where to from here, in light of the limits to growth' article? Global debt maxing-out - and the Japan-previewed repercussions - of same, might be one input. I suggest we have more than enough housing, for the number of people NZ can support sustainably - so another article might ascertain what that number might be?

Just blindly cheering for more and yet-more and yet-more and yet-more - while blaming anyone for the fact that at some entirely predictable '' yet-more' phase the growth would cease, is a tad unthinking, perhaps. Intensification still needs supplied and fed, still from 'somewhere else'.

Re the header to this story ................ I doubt it

There's no political will to deal with the impediments to development .... its too cozy for developers , landbankers and the like , the RMA is a nightmare , the town planners have the same sense of urgency as the average sloth , and they rip us off with all manner of levies and charges

Need to look at the demand side. Mass immigration policy continued by this government is ludicrous.

Come on Jenny Salesa stop buggering around:

1. Do something about 'phoenix' building companies.

2. Have a moratorium on all immigration until we finally decide what skilled workers we need.

What happened to the REINZ HPI story?

I've been looking out for this too! They keep changing the date on the economic calendar...

Jenee ........ please dont knock speculators , its a common misconception that they rig prices ........ they dont !

Speculators are an essential part of any free market , they provide housing stock to rent for people so deep in debt that those over-indebted will never afford home ownership anyway .

Speculators are people willing to risk capital to earn something ........ no different to investing in any other asset or bank deposit for that matter .

Speculators also ensure the efficient allocation of capital .............. without speculators we could end up with FEWER houses !

Speculators are fundamentally inseperable from investors , either could have a long -term or short-term view

Speculators dont fix prices in a free market economy , there are simply too many players for any one player to "fix 'prices .

Speculators who get it wrong , get burnt , and believe me they do !

We have speculators in every market , be it used cars , or sheep or cattle at a stock sale , even the bidder for seafood at the fish market is a speculator .............. he buys something with the intention of making a gain .

The "housing crisis " is not caused by speculators , its caused by poor planning , too many immigrants , not enough builders and cheap money , all these elements make housing costly

Its simply wrong to blame speculators, or any other single market player for that matter , for the so called housing crisis

I've just come back from Dubai, they certainly don't have any problem building "en masse" and then some (I actually think Dubai will hit a wall with over supply). The point being that dictatorship, in the form of Sheikh Khalifa and his family, is a very powerful way of getting things done. Democracy, on the other hand, in the form of numerous NZ NIMBY's is a very powerful way of getting nothing done. So, in short, Jenée, no, NZ is nowhere near the point of building enough houses

Number of Dubai inhabitants capable of outlasting fossil energy?

0.