By Luke Malpass of the NZ Initiative
The announcement of ‘KiwiBuild’ by Labour leader David Shearer was certainly bold.
Under Labour, for the next decade the government will build 10,000 homes every year, for less than $300,000 each. Applicants for this housing will not be means tested. If there is more demand than supply, anyone wanting a house will go into a ballot and the lucky ones will be drawn out.
As rationale for this, the Labour opposition cites the economies of scale that government can achieve, and the cost pressures for first-home buyers.
However, the major problem with this programme, aside from the woeful economic analysis, is the lack of any clear objective.
New Zealand’s history has featured different government programmes to get people into housing. From state rental housing in the 1930s, to the progressive sale of those homes from the 1950s, to capitalisation of the family benefit, and 3% loans from the State Advances Corporation. For all these schemes, successive governments made as much land available as was required.
All of these policies were aimed at specific groups. State housing was state-built housing provided for poor people at cheap rent. The state advances and 3% loan type polices (there were many different incarnations) were part of the post-war welfare state in New Zealand, where it was believed vital to support returning servicemen, and the subsequent baby boom.
Agree or disagree with these policies, they did have an internal logic, clear objectives, and some moral direction. However, KiwiBuild has none of the above. Its underlying ethic seems to be a vague sense that people are entitled to cheaper housing and government should provide it.
Instead of trying to address the underlying factors of housing price inflation – housing supply and development incentives at the local level – a massive ‘nation building’ type scheme has been announced.
These unanswered questions need to be addressed: Where will the land for these houses come from (particularly in Auckland)? Will land only be available for this government project, not for private builders? Who will pay for the infrastructure?
Given that the top three residential building companies in Auckland could only build 535 houses between them in 2011, what are the odds of hitting 10,000? And most of all, what is an all-comers housing lucky dip doing masquerading as sensible policy?
These are only some of the questions that need to be asked of KiwiBuild – a solution in search of someone, anyone, to help.
This piece first appeared in the New Zealand Initiative's Insights Issue #25. Sign up for the regular Insights here.
The New Zealand Initiative was formed in April 2012 when the Business Roundtable and the New Zealand Institute joined forces.