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David Hargreaves says the Government's plan to directly fund housing infrastructure is great - but as ever with this government, the policy will stand or fall on whether the government can deliver, and its previous form is not good

David Hargreaves says the Government's plan to directly fund housing infrastructure is great - but as ever with this government, the policy will stand or fall on whether the government can deliver, and its previous form is not good

Sounds good.

But can they deliver?

The Government's intention to pump $3.8 billion directly into infrastructure to support new housing development is eminently sensible. And, indeed, it's quite hard to work out just why governments have been loathe to step into this area.

It's long been the bug-bear. Who pays for infrastructure?

Okay, people are happy to build new houses. But who pays for all the drainage? The roads? Necessary shops? Etc, etc.

So, for the Government to climb in and say it will fund supporting infrastructure to allow housing development to take place is a great idea.

But. And it's a very humongous but, how will this all work? Can the Government actually implement it?

This Government is now in its fourth year in power.

Its signature to date - and it's not a good one - is that it is big on pronouncements and grand gestures, but absolutely diabolical at implementing plans.

Time and again - and Kiwibuild has been the biggest abject failure in this regard - grand statements have been followed up by a singular inability to roll up sleeves, get hands dirty, and get a job done.

In that respect I don't take much encouragement from the pretty vague language about this $3.8 billion fund. When will it be set up? How will funds be applied for? Over what timeframe is this money set to be utilised?

I don't think it takes a genius to deduce that anything that is now going to require input and involvement of local councils right around the country has the potential to get completely bogged down in procedure and, kind of, who get's what bickering.

Apologies if I sound unduly negative on this.

Look, I want it to work. I think potentially this part of the housing announcement could be the absolute key to getting our housing market on a more even keel in the longer term. 

Where my doubt comes in is that we've got to hope that a government very poor at execution can have learned from previous mistakes and really make this one work.

No second chances

And I've got to say, from what I could see of the high-powered gathering of ministers announcing the housing package, everybody looked very well aware that what they were announcing was important - and that it is important for them to get it right.

We take our housing pretty seriously in this country.

The Covid crisis enabled Labour to somehow get away with the complete botching of the housing issue in its last term of Government.

It is unlikely the electorate would be as forgiving again.

Specifically on the $3.8 billion fund, I hope there will be a series of updates laying out what is happening and what is proposed.

Governments generally seem to like coming up with a big figure of money but with little explanation of where exactly the money will go and over what period.

So, it will be important for this Government to keep fleshing out more detail of what's been spent and where and just how things are going.

As I say. It's a good idea. But good ideas need implementing and, well, you know...go back to previous comments higher up this piece.

Of DTIs and things

And finally...

It's probably worth a quick mention of what WASN'T in the housing announcement.

Clearly Finance Minister Grant Robertson and Reserve Bank Governor Adrian Orr still don't seem to be on the same page around the potential introduction of debt-to-income lending restrictions.

Essentially Robertson wants first home buyers left out of such restrictions and have them targeted at investors. Orr would prefer to see them applied across the board.

I await the outcome of this one with interest.

And speaking of interest - the housing announcement didn't have anything concrete on the much touted idea of limits on interest-only lending for investors.

The media release from the Government said only this: "Ministers are also considering closing a loophole on interest-only loans to speculators. The Reserve Bank will report back to Ministers in May on this and any proposals around Debt to Income Ratios, particularly for investors."

This all smacks a bit of something being put in the 'too hard' basket. So, again, I will be very interested to see what follow up there is. 

In summation, I think Tuesday's announcement was pretty good. But what happens next in terms of implementation will be everything. 

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34 Comments

12
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I don't think we can expect much. I've got no confidence in Woods and the rest to deliver anything.
Question Time will be explosive over the next couple of years, that is my guess.

Won't happen, National and Labour are chasing the same voters. Reducing house prices is a no-win situation.

$ 3.8 billion is a drop in the infrastructure ocean ... ramp it up to a meaningful $ 20 billion or more , and we may see some housing projects grow , a'la Christchurch post 2010/11 earthquakes ...

... go big & bold , Robbo !

15
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It's actually a 3.8 billion subsidy for property developers and owners, who should foot the bill.So it will raise house prices.
Need to get rid of the demand side of the equation, how hard can limiting immigration be?

a lot harder than driving skilled educated Kiwis to work overseas.

Immigrants tend to have a positive effect on most economies. Especially in NZ, we're lacking skills in so many crucial areas required for growth.

Limiting investors with multiple properties would do so much more for the economy as a whole.

13
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TES...I suggest you go to London, Milan, Brussels, Paris, Vancouver, Los Angeles and Bradford and ask the people born there if they agree with you. Immigration is great for you if you are a landlord, property speculator, run a certain type of business or are fixated on total GDP (rather than per capita GDP). If you are not part of one of those groups immigration is hugely negative and the poorer you are the worse the negative effects will be.

I see what you are saying, that excessive immigration can drives up house prices, which increases inequality, and I have to agree. But if that's what you're saying then you've just described gentrificaiton, and managing the effects of gentrification takes well balanced long term policies, not blaming immigrants as politicians do.

I'm not a landlord, speculator or business owner. But my industry (and probably many other industries) rely on a lot of overseas professionals to grow and that includes recent immigrants.

Agreed on both of you, BUT sadly? the past 20 years both Lab & Nat only cave in to demand from specific countries of migrants origin, soft approach in NZ wealth distribution creation, instead? all frolicking to big cities, clogging the unprepared Healthcare systems, Schooling and? the immigrants largely being ignored to choose their meaningful highly specialised work area contribution, hence they're all mostly being forced to be leveraged becoming the landlord, sad govt. policy.

Crude numbers but gives an idea of the massive ticking timebomb in NZ:

As per OECD stats, NZ had 286 more foreign-trained doctors working in the country in 2018 as compared to 2017. In the same year, the number of NZ-trained doctors in Australia went up by 102; therefore we had a net gain of at most 184 doctors from migration.

That's even lower than our long-term average of 3.4 doctors per 1000 inhabitants at a time when most of our health workforce is aged and needs to be replaced at a higher rate than before.

Welcome to real NZ Advisor, in 2013 NZ actually blocked overseas trained doctors to protect the local patch area stating a 'game changer' by Deb Powell & Des Gorman, 7 years later (about the average time to train a new doc).. in 2020. NZ cried fowl about ageing workforce. From around 2014 massive drive to 'shift' the intake/graduation into Maori & Pasifika (albeit their clinical field job retention average around 2.5 years, before drop off from Radar), the graduates all those years?.. less than 100, most went to academic.. not into hardcore hospital settings. Everything have been rigged, the papers, thesis, exams. If you failed? then it's because the exams are being discriminate against your race, they skew the view that those exams? were actually worldwide standard. C19 is just an intro. - watch out for more bigger things facing the NZ Healthcare... suddenly NZ realised (may be in the future) - that facing a mammoth task in Healthcare? it's about working together as a 'team'
.. right now? - it's about race, discrimination, inequality/despite actually in medicine+nursing; equality doesn't means 'identical' of service.
NZ is well and truly move forward to gain more wealth through housing, with more wealth? means more tax being paid that can be used in Healthcare sectors, and? don't worry more and more specific ethnicity being ramp up in NZ.. to be qualified in short period of time. NZ pfft.

14
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I would say they will lay 12 metres of pipe and make a video clip patting themselves on the back.

I admire your optimism - not sarc.

Nice PR headline, that's it...

$3.8B just doesn't sound like enough to do much over a short-medium time frame. If it were at least double this size, it might be more believable - especially if you factor in failure to deliver making it slow to get out the door.

revolution is needed to make NZ house affordable.

no other ways.

Could you please outline how a revolution would lead to a reduction in prices while retaining incomes at present levels, or keep house prices at the same while increasing incomes; either path would work to increase housing affordability. Thanks.

Lots of jobs for people maintaining idling tanks in the square?

We have comparatively low levels of property tax (rates) in NZ compared to other OECD countries. Councils just need to bite the bullet and significantly up rates to pay for infrastructure. Why do wage earners and income tax need to subsidise property owners?

In reality who do you think would end up paying those costs?

Rate arrears are growing exponentially and will increase further as the recession bites, 2021 will be arderns winter of discontent and an anus horriblis rolled into one.

Until the RMA is changed, to stop councils strangling development with restrictive land zoning, yeeting more money into the market will only drive up section prices without any meaningful increase in house building.

I'm pleased with the measures announced today and GOD KNOWS I'm NOT Easily Pleased~!!

National's response today has been a bit shameful. Labour said today's announcement would focus on demand and first-home-buyers, it has. We got more than socks for Xmas.

The package will improve supply too. There is NO QUESTION these measures HAVE been well thought out.

This is a great START and Labour should be congratulated

You've gone full fan boi on this package!!

I really, really like it~!! It's a good START. Labour stumbled onto a winner here.

The infrastructure half could end up being self-funding and it's positive for both employment and money velocity. Even Act can't knock it too much.. even secretly thinking it's good work too..

Yes, a start. Would the RBNZ be the ones to start yeeting interest-only lending for investors? Perhaps they can tidy up business weightings for lending while they are at it.

Judith once again showed her true colours lol

I hope Grunter keeps his promise to keep an eye on rent increases. There are landlords and 'struggling investors' out there on stuff and other commentors showing their true colours, and some feel very genuinely hard-done-by!

As we all know its very easy to keep borrowing, this government is pushing us closer to a banana republic.
Roll on the ability to travel.

Yes, we ALL know PM Ardern loves throwing money out her motorcade.

We ALSO ALL know Labour have done GOOD WORK Today.

Wouldn't be surprised if we now see companies,that build and rent out properties start listing on the NZX.
A number of companies in the USA do it and are very successful.

You only need to look at the performance on other infrastructure package announcements and see where they are at.

Light rail anyone? $20b and 3 years later... it doesn't look like anything is even decided.
Lets get Wellington moving? $6.4b and 2 years later... they have managed to lower inner city speed limits to 30kmph.

At half the amount of the LGWM project, I suspect they will be able to create infrastructure for 30 sections at $125m a piece in 15 years time.

Their only options now is to implement DTI for both FHB & Investors by mid of this year. And make sure to give sufficient extra funding for the following to be unleashed: IRD, AuditNZ & Commerce Comm.

Got this idea that interest rates will be up for further significant falls. Over the next four years. Banks will want to protect their client base, and continue to grow their lending portfolios. All in the name of healthy competition naturally!