Prime Minister Jacinda Ardern, against Treasury's advice, sees KiwiBuild as the 'biggest lever' the Government can pull to improve housing affordability

Prime Minister Jacinda Ardern, against Treasury's advice, sees KiwiBuild as the 'biggest lever' the Government can pull to improve housing affordability

Prime Minister Jacinda Ardern says KiwiBuild remains the “biggest lever” the Government can pull to improve housing affordability.

Treasury in July advised Housing Minister Megan Woods against making KiwiBuild her priority.

Asked by interest.co.nz in a post-Cabinet press conference on Monday whether [in the absence of a capital gains tax and the version of KiwiBuild Labour campaigned on] the Government needed to take more drastic action to lower house prices, Ardern said: “It [KiwiBuild] is our biggest lever on the affordability front.

“The goal of KiwiBuild continues to be to use the scale of the state to increase supply, and also try and bring down - by building en masse - the price of housing.

“It is not a subsidised programme though, so it does experience some of those costs that actually warrant us considering whether or not they’re fair, like the cost of building materials.

“But also, it warrants us looking at whether or not there are other opportunities to bring down the costs, like prefabrication.

“Those are all areas of work we know we actually need to continue to look at. In the meantime, we will continue to use the size and the scale that we have as the government to build en masse to make housing more affordable in New Zealand.”

Treasury told Woods: "Without supply reforms, building programmes will be expensive, inflationary, and slow to deliver.

“Even with substantial increases in budgets, housing assistance cannot address housing need across the spectrum in the current housing environment.”

Treasury suggested the new Crown entity responsible for housing, Kāinga Ora, needed to be specifically focused on “lowering the price of housing”.

Asked whether she agreed with this, Ardern didn’t provide a straight answer.

“We have had a longstanding focus on affordability," she said.

“One of the issues however alongside affordability has been whether or not deposits have also acted as a barrier to first-home-buyers. And that’s some of the feedback that we had coming through strongly as we were working on the KiwiBuild reset. And you will see from the reset that that’s where the focus has been.

“But we know affordability is an issue and that’s why KiwiBuild exists in the first place.”

Treasury advised the Government against doing what it’s doing by committing to lowering the deposit first-home-buyers eligible for a government-backed mortgage need, from 10% to 5%, and removing the cap on the amount groups of first-home-buyers buying houses together can receive via the Government’s HomeStart grant.

“Demand-side assistance such as rental assistance and home ownership assistance will struggle to increase supply given the constrained environment,” Treasury said.

“In fact, financial support is likely to increase prices when supply is constrained. The Accommodation Supplement and HomeStart grants are examples of demand side assistance.”

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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Ok I admit I was wrong when I said JA didn't want to be associated with KB after she wasn't seen supporting Woods at the reset. Still for what it's worth, I think she's scoring an own goal for supporting KB against Treasury advice

Ah speculator jumps out of the bandwagon..

https://m.oneroof.co.nz/news/36678 to understand the scale of supply in the pipeline.. treasury spoke about supply...

That is impressive.

She would have been advisded by her comment watchers that she needed to trundel herself out. Not turning up from the start was a major blow, to continue with Kiwibuild is insane. Oh well, not that long till she and the Greens gets the boot.

... the nails are being shot into the wood at a rat-a-tat-tat regular rythm ...

No , it's not a KiwiBuild home in construction ...

... it's the coffin of Taxcindas coalition government being built ... far from having the good sense to distance herself from this appalling failure of a dreadful policy , she's backing it , endorsing the mangey mutt ... flee if it has fleas Miss Ardern ... ..... ma'am , why are you scratching ?

It's 'lever' not 'leaver', but I like the headline all the same.

Thank you. Corrected.

Ha ha Freudian slip?
'Leaver' is much more apt.

Aye and if that’s the lever, then what the heck is the fulcrum? My third form physics tells me a lever ain’t no damn use without one of those!

That you Jemmy!

Haha i thought it was intended as "leaver"

Which politician will say that they house prices to fall... it will be political suicide

At least they are working in the area of affordability, in comparison The National government claimed there was no housing crisis...

GO FIGURE

11
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The problem is this silly woman does not understand the problem .......... let alone what is driving prices up

'Silly'......is being kind. She has no clue how to run anything, let alone a country!

... look at the pain on the face of the sign language lady in the photo at the top of the story ...

Is KiwiBuild impossible to sign politely , without resorting to the middle finger ?

... or , is her heart just not in it , trying to convey a ridiculous message from Taxcinda to the hard of hearing .... WHAT ?

21
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So JA says:
1) lower the deposit for FHB to 5% (= 95% loan)
2) "The goal of KiwiBuild continues to be to try and bring down the price of housing"

So you get FHB's into a house with a 95% mortgage and then you try to lower the value of their houses… how is that going to end up? please JA think… just think a little

So your solution is to keep prices rising, so you get richer...

11
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DGM, I wish you were less obsessed with my comments (and stop insinuating things I don't say or don't mean)

So you don't have an answer..

Hi Yvil,

The DGM frequently misrepresent what others say here. They're tiresome.

Whenever they do so, pull them up on it - hold them accountable for what they write. That's what I do.

TTP

And people take you seriously?

I often (usually) disagree with Yvil, but not in this case. Her point is very valid.

I find it quite sexest that she dose that.

LOL

Lowering the deposit threshold keeps prices rising.

There's a cap on prices KB houses..

And those caps pretty much determine the lowest price a developer is going to set their selling price at (best unit/apartment in the development = cap -$1k, Carpark optional extra), work backwards down the list of units.

So your answer is to leave it to the free market...

We saw what happened when The National government did that.. their mates just got richer and prices shy rocketed

No, my answer is for govt to build housing for it to rent rather than pay landlords accommodation supplements (with a brief stopover in tenants accounts) but not build for sale. And to remove the obstacles to the free market building houses for sale.

Yep, kiwibuild is self-defeating: if you believe its going to work, why would you buy now instead of saving and waiting till houses are cheaper (and interest rates keep falling..)?

KB needs to be renamed The Block NZ.
We knew what was going to happen in the auction, it took the contestants for a ride.
It was a flop like the last two before it and they anounced it would go again.

Spot On.

If you do anything you lower the LVR as you lower prices so that the amount of the deposit stays the same and you use the savings from falling interest rates to pay down your debt faster.

Yvil - Good comment, JA looks tired and beaten abit like the DGM's on here waiting for the property crash !

From what I saw the other night, she's struggling.

Maybe it's the voters bad.

She is what she is.
We only saw her for a couple of weeks before getting the job.

Not like had prior experience for this (executing sound policy) - assuming that such formulated.

Got the job in unconventional fashion (the switch) &(coalesced with least popular parties). - hence problem formulating sound policy

So she reverts to type. Advocacy.

Very good point there Yvil.

And this is hardly a complicated concept. Very worrying.

Exactly. They buy an overpriced house with next to no equity, then when prices come back they end up with negative equity. Shes got the order mixed up. Lower prices first, then affordable credit

at a guess...end up with negative equity???

17
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The biggest lever demand side would be to shut the front door. No mention of that though is there...

The biggest lever demand side would be to shut the front door. No mention of that though is there..

Yes, but immigration is a key driver of the NZ economy and its "growth." Also, JA is a globalist. Shutting the door on immigration is ideologically abhorrent in a globalist mindset.

Didn't stop Labour and NZ first promising(lying) to cut immigration during their electioneering.

Great, they've just corrected the spelling error. Pity though, the original "biggest leaver" headline error was
quite suited to the likelihood of Kiwibuild being the biggest job "left" unfinished by the Labour party judging by how far it has fallen short of it's targets.

Incidentally, like Jacinda's camouflage top!

Careful, you don't want to go there, it could be construed as a sexist comment by some...

Thin ice right there.

BS Jacinda.
Your party has been talking up prefab for years. But it's all talk.

Would have been great if they asked her the status on where OSM is at

One Square Meal?

Off site manufacturing = prefabs

OSM is more than just prefabs, its meant to be a tie up between the private entity and the government, where by they will deliver products at a more competitive value then..

The last i heard there were two shortlisted..

"where by they will deliver products at a more competitive value then.."

Then what???

what do you mean "then what"..

we need mass production, delivered at a competitive price.. at the moment, there is no healthy competition in the building space... its a broken system...

https://youtu.be/Q4n9Qc8yg1M?t=82 (Not for small person ears)

you need your ears shot???

Meanwhile prefab company goes bust in Auckland as Govt. string it on, and other Preb manufacturers struggle to ramp up.

They been in government for less than two years Fritz. So you’ll have to wait until October to legitimately use the plural.

A poll would be interesting right now. My guess is that national would win an election today. Labour seem to be failing on all their key policies unfortunately. Not sure what they are thinking - surely building stuff would be good for a slowing economy so why not try? Subsidies were definitely not what I voted for.

I can't understand why they can't get on just build.. screw all those with vested interest..

Yeah it's strange.
Unfortunately I think they are incompetent.

Question is who's better of the two evils?

Is there a third option?

If you listen to the clip again, she does talk about "the state building in mass ".. probably we need to probe that statement.. interest.co can you please add that to your questions list..

Well that could mean anything. It's easy to throw around words like that.

Hence I said we need to probe what she meant by that..

The problem with our reporters is that they tend to stick to questions in front of them, rather than being spontaneous..

Because most MPs would be a hazard with a nail gun..

Sorry to burst your bubble but National won't get anywhere near winning with Simon Bridges as a leader that is a fact. Funnily enough the only party i see is doing their job is NZ first. They have done better than any other government with their management of the Defence Portfolio at the moment.

No, its your opinion. I honestly don't know at this stage who is going to win the next election. National is still despised by a lot of people. Its not a matter of picking the best party, its a case of picking the least worst, and its seems both parties are trying to outdo themselves in the race to the bottom.

Prefabrication is indeed the way to go, but not the old concept of it - my father did that version pre-1960; we've moved on.

My 135 sqm house was closed in in two day's work, by 2 teenagers and 2 adults, using SIP panels in 2005. Total build cost ex labour, 50k. What has made it more expensive in the intervening years, is folk commandeering what was once the commons - design, construction - and the regulatory tangle which resulted from the (human vs nature) arrogance that was leaky homes. Add OSH and similar compliances, and you've got most of it. Then it's the banks only loaning on multiple bathrooms, developers stipulating minimum sizes, and insurance insisting it be signed off before tenure - guaranteeing the taking on of instant debt, nudge nudge wink wink banks do well with captive audience and insurance is of 'more'.

Add that all together, and there will never be 'affordable housing'.

The commons might be the best escape route from our broken economic model...
https://youtu.be/xDKth-qS8Jk

Where can I get what he's been smoking?

I've seen many commentators on here blame local authorities for being the biggest impediment to getting buildings up and prices down.. so how about we incentivise them to make things happen.
Legislation that slowly moves the costs imposed on central govt by the housing shortage (accommodation supplements and emergency housing etc) from Central govt to local govt, say 5% per year for the next 10 years, so it eventually ends up 50:50 Local govt/Central govt?
Voters get the choice, elect/let councils free up the land, and speed up the paperwork and minimise BS charges or accept that councils are going to have to raise rates to fund their share of the costs.

Thatd get them moving lol. Or they would just hike the rates

Treasury's advice, FWIW, is fairly much exactly what most of the commenters on this site who have development/building/commercial experience have advocated for. No need to rehearse the sorry list yet again, most of us old hands can recite it in our sleep. If only that advice was being listened to, If only Gubmint had vertebrae, cojones, and the steel will needed to pump it through. Just like the '84 Labour crew.....But don't bet the farm/house/subdivision/company on their doing anything useful. They've had two years to Do, nine years to Plan what to do, and this is what we get....

Sheesh....

Thanks for pointing that out so we all don't have to repeat what we have been saying.

They seem to be beyond comprehension.

Because it's all about trade offs. The reality of those trade offs is that the nation would go into serious decline if we wanted "affordable housing." They're learning those realities now. The economy is built on housing being "unaffordable." It's the key wealth generator. Has been for a while.

Housing is not a 'wealth generator'.
It's a money pit - money in, nothing out. It doesn't generate any wealth, it simply redistributes it.
A wealth generator is something that is productive and scalable - the antithesis of what property ownership is.

It depends who for, housing can be a wealth generator for the owner and often is

True. The point is that while an individual can profit, not everyone can because a marginal dollar spent on housing does not result in increased productivity.

I think Nymad is being generous in agreeing with you. It isn't a wealth generator at all. Sure it can generate a redistribution of wealth in the owners favour, that is zero sum game and a long way from wealth generation.

Sure is - if rents cover the cost of debt + capital gains make it an attractive passive investment. Everyone needs a roof over their head

I am astounded at the incompetence of Ardern .

How can she not know what is actually pushing costs of housing through the roof

Where the cutting of a single property into 2 costs circa $200,000 ?
Where the RMA is a massive hurdle to orderly development
Where councils use the subdividing of land as a revenue source , and a mighty big one at that
Where Watercare charges about half a years minimum wage ($20,000 ) for a $300 water connection

With all of this I am surprised anyone can afford a home

You're a bloody stuck record with your BS about a $300 water meter. You aren't just paying for the meter, theres a few 10s of kilometers of pipes between it and the water treatment plant..

Or do you want to pay higher water rates on your property?

@pragmatist ...........Nonsense the infrastructure around my home in Greenhithe was installed and paid for by the developer 30 years ago . The cost of a meter in 2010 was $3,500 now its $20k .

And there is never any need to upgrade as you add new connections (more demand) right? That one pipe that was installed for 1000homes will keep working just fine for 3000 homes...

This is what you get with this joker.. to get more donations...

https://www.newshub.co.nz/home/politics/2019/09/simon-bridges-sings-comm...

Yeah.
I might still potentially vote Labour to keep him.out.

the better of the two evils.....

Or, to steal a phrase from the blogosphere of yore, the 'Lesser of Two Weevils'....

perfecto

#BeijingBridges

#BurningBridges

.. our resident Labor troll is getting worried ...

I have read this piece ...... TWICE, and listened to Jacinda .......... TWICE and she did not answer the question at all .

Basically she does not understand the problem .

While building material prices are high they are not excessively so .

Wages of tradesmen have gone up , by a significant % since 2010 , but even that is not the whole story

The real costs the have sprialled out of control is LAND , and for no good reason , other than excessive charges in DC LEVIES , RMA processes and very expensive costs to subdivide land , and onerous conditions of subdivision

Go Boatman....you tell 'em. Best that Labour reduce promises at the next election, or maybe plan a big wedding a few months before........

Clueless

Increasing LVR and wanting house prices to fall.

And then this,

"we will continue to use the size and the scale that we have as the government to build en masse to make housing more affordable in New Zealand.”

I know of one Canadian Prefab builder that has enough spare capacity to send us 3,000 prefab houses a year, the largest home builder in the USA builds 55,000 houses a year, and in 18 months Labour have managed to get less than 1,000 built.

Economy of scale is a U shaped curve, the shape of the U based on the skill of the company. Labour are already maxed out.

You can tell from their 'density is good' speech, they are going to fund even smaller dwellings, 1) to get numbers up, and 2) to show that prices are dropping.

Who cares if it is not what you need and on a $m2 basis increases.

Smoke and mirrors, it's insulting that idiots take us for idiots.

At least Phil Twyford made sense, just poorly executed.

There is no logic or rational to what JA is saying and I'm listening to Woods on Q&A now, and it is no better.

Twyford was a genius compared to Woods!!

5% deposits is aimed at supporting change in emphasis to increase demand for first home type building instead of cashed up boomers hogging the pipeline. It might work!

or itll exacerbate the property speculation issue as another property becomes more affordable to boomers, combined with the dropping interest rates lol

how does 5% deposits for FHBs make it more affordable for boomers?

I like the optimism, I really do. But as I sit here dreaming of what sort of investment property I would buy, the lower quartile houses are right in my firing line. If I can get one, and the government allows further injection of fuel to those who also need a small property, then I know my investment will pay off.

The biggest lever in improving NZ affordability isn't held in NZ. It's the Chinese capital controls preventing money flowing out of the country. The further tightening to prevent house and apartments and insurance being purchased will increase the effect.

JA can twiddle with KB but the house of cards is already teetering. The Antipodean in the Auckland CBD has 80 separate listings for units for sale on Realestate.co.nz How much are prices going to have to fall before locals want to buy is anyone's guess. But fall they will - as will the price of all these new builds simply to be able to get the stock sold.

Exactly. I think there is a bit of trouble on its way for all these thousands of new builds being delivered.

hopefully there will be an oversupply, bring prices down!!!

Overpriced apartments are in for a crash, lower end freestanding houses might keep sliding gently for a while longer, they won't crash unless the economy dies, and then it wont matter because you won't get a loan to buy one.

Their "must sell" prices for 2-bedroom apartments start from over $1 million.

So...about ten times the average household income of Auckland for a basic 2-bedroom apartment, surrounded by many other apartment buildings including one directly in front. This seems frothy.

Well I think the current government is doing wonderfully in protecting the interests of property investors like myself. Young people have 'had it good' for too long under the former National government but Labour, well, they are the really showing National that killing progressive policy can be as easy as clubbing baby seals. The pièce de résistance for me would be for the current government to crash the economy by placing constraints on productive economic activity (energy, agriculture etc.), lower interests rates would really help us squeeze a little more juice from the lemons. The real question for me is if I can get an incentive on my next Lexus SUV because it's a "hybrid"? This truly is living gentlemen!

12
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Dear PM Jacinda Ardern,

There are 5 things to consider, %, demand, supply, tax, Kāinga Ora

1) Price of money - we have low worldwide interest rates which drive up asset prices - nothing can be done about this

2) Demand - the excess demand is coming from an immigration rate that is too high for the demand response to stay up with. NZ has run a high immigration rate for a long time as a % of population. But, in absolute numbers that x% kept going up & most immigrants stayed in Auckland driving house prices upwards.

A high immigration rate drives up gdp (but with dis-economies of scale which have to be addressed but later down the track.) Cynically its a very easy way to prop up the economy.

The immigration rate is slowly falling under Labour, but we need a proper population policy of managing the immigration rate around maximising gdp/capita growth & socioeconomic benefits.

3) Supply. - The RMA was meant to be effects based legislation, but was hijacked & old style town & country planning act zoning was implemented which is rigid & inelastic. Every individual rule in the RMA certainly did not go through individual regulatory impact assessment. If they had most rules wouldnt exist.

The RMA needs revamping - All existing rules and covenants should be sunsetted with a 10 year horizon and a single effects based national level urban plan developed by all councils jointly guided by an appropriate National Policy Statement. (we dont need district plans stacked as high as the skytower for a population of 5m)

Developer contributions - these should be ditched. They simply push up the capital cost of housing. Its not the developer that creates the demand but the user. Targeted rates should be implemented.

Building supplies oligopoly - the ComCom needs more powers to ensure competition. The ComCom should have to give much more weight to the HHI index when making decisions.

4) Land tax - we need a land tax to drive the efficient use of land, offset by reducing other taxes

5) Kāinga Ora - Treasury is right in its advice. This entity should be purely focused on providing housing for the very poor in society (some currently living in garages), where the private sector cannot make a profit.

It should aim to also provide this accommodation mixed in with other economic tiers of housing (provided by private sector) to avoid the development of slums.

Absolutely nailed it on every front.

Some - but not all

You need to bill the subdivision up-front, so it is indeed the developer who should wear it. Minor point though - the developer is parasitic on the occupier, as per landlordery.

Will take time but higher density around town centers on existing HNZ land seems a no brainer. Anyone wanting a large piece of grass can buy a section elsewhere.

Yes I agree it is the "biggest lever" on a toilet I have ever seen. Time to flush Kiwisaver and this COL me thinks.

It's not the size of the lever it's how you use it. They have no idea how to use it as they are construction virgins. It would be great if the Government wasn't groping around in the dark hoping that they will deliver the election promise.

The incompetent fools at the Housing Commission are still providing bad advice to the Government, and the only correct decision is sack all of the fools at the top. Yet they haven't taken any action.

I think the only lever we will see is a deleveraging of debt. Tight conditions created by bank capital requirements are reducing liquidity. The reduced interest rates are just helping to keep some mortgages out of default. Due to this the 5% deposit is unlikely to be effective (they are targeting the top 10% income earners again).

Economic illiteracy and dishonest.
I like Jacinda but I am afraid there is no EFFECTIVE socialism in her government. It is all niceness and consulting people and not upsetting key voter tranche between 50-60% on income scale in key Auckland marginals. No tax increase on rich; no major cheap fabricated State funded for rent housing policy and no CGT. Plus no cuts or policy on reducing immigration. Nothing to sell therefore at next election stall. Usual limp Labour reality in office as always since 1976 in OECD countries

Food for thought

"There is an accommodation crisis - that is very different.

"I asked him in the ad break 'does it matter when you build your high rise apartment if I happen to buy a whole bunch of them and rent them out to people?'. He said 'no this is not about home ownership, this is about supplying places for people to stay'."

A breakdown of Auckland house prices by Barfoot and Thompson in January shows the average sale price for a three-bedroom dwelling is $913,056. The average rent is $568.

Richardson had a strong message to those complaining about the prices.

"I don't give a rat's ass if you can't afford a house, what I care about is if you can't afford to rent a nice place to stay."

Earlier this month, it was revealed that the public housing waiting list has ballooned to more than 10,000 households - a 73 percent increase in a year.

While the Government has built more than 1100 new state homes since taking power, its efforts with KiwiBuild haven't entirely worked out. In January, interim targets for the scheme were cut after it was announced only 300 houses are expected to be built by July - 700 less than the target."

https://www.newshub.co.nz/home/new-zealand/2019/02/there-is-no-housing-c...

More of a divining rod than a "lever", I would say. Perhaps, at best, a joystick disconnected from the ailerons. Gets off the ground but we all know where it will "land".

Ms.Ardern may well have had a halo above her head when she first got to be Prime Minister However with those comments in regards to still be supporting KiwiFlop,the dunces hat is on!

How can KB be a big lever when no one is buying them, that is apart from the government?