Government funding for 8000 new homes will not necessarily increase the total number of homes being built but it will likely change the mix by increasing the supply at the bottom of the market

Government funding for 8000 new homes will not necessarily increase the total number of homes being built but it will likely change the mix by increasing the supply at the bottom of the market

One of the most significant policies announced in the Budget was that the Government would provide funding for an additional 6000 state or community houses and another 2000 transitional homes (emergency accommodation provided on a short term basis).

The size of that commitment should not be underestimated.

The Government's own figures show that between June 2018 and the end of March this year the Government had built 2726 state houses, funded or part-funded the construction of 470 community houses, and that another 2393 state houses and 266 community houses were under construction.

So the Budget announcement will more or less double those numbers.

However whether the plans result in a corresponding increase in total housing stock over and above what may have already been planned is another matter.

Much will depend on how delivery of the new housing is achieved and the Budget announcement was short on detail in that regard, but it won't necessarily mean the Government will have to start the development of 8000 new homes from scratch to achieve its goals.

One of the hallmarks of this Government's housing policies is that it forms partnerships with private developers on new projects, which can see part of a development earmarked for state rental housing, part of it set aside for KiwiBuild homes and part of it for homes sold on the open market.

However the current economic turmoil engulfing the world is likely making the private developers in those projects nervous, perhaps to the point where they will be considering putting their involvement on hold.

Rather than having those projects put on ice, the Government could increase the number of state rental properties planned for such projects and get those underway as quickly as possible, underpinning the construction sector at the time when that support is most needed.

Its private sector partners could then return to the project a couple of years down the track when the economy has settled, allowing the developer to complete the project with homes to be sold on the open market when it is capable of absorbing them.

Another option would be for the Government to take over private developments that were at risk of failing because of the economic downturn and repurpose them for state or transitional housing.

That could be achieved by the Government purchasing the developments outright, or effectively underwriting them by leasing them for use as state or transitional housing once they were completed.

If such strategies are used they might not see the total supply of new housing increased over and above what was already planned, but it could change the mix of new housing stock, with more of the total supply of new homes being delivered as state and transitional housing rather than private housing.

That would mean the increased government spending would see more housing delivered to the bottom of the market where it is most needed, and it would also provide continuity of work for the construction industry in its hour of need.

So there are plenty of ways the increased spending on housing could be sliced and diced but however it is done, the construction industry will be one of the main beneficiaries.

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47 Comments

Should work out quite well, if you are a person interested in the trades this will be the perfect vehicle to get you trained and eventually into your own business a few years after you are qualified...after staying with your boss a couple more to pay back their investment in you. Don't forget to get trained up on financials too...you need that as much as your safety boots!

Although if the houses are factory-built, it will be more a matter of punching buttons on a factory floor full of CNC and other precision machinery, rather than swinging a hammer or captaining a framing gun....

Thats the direction the sector desperately needs to head in but construction in NZ, like many other sectors in our economy is quite perversely technology resistant and refuses to make the leap, preferring instead to build just the same way my greatgrandfather did while other countries use this thing called BIMS....

3-4 stock standard builds for state housing will be perfect. Ease to mass produce and builders wont need to be as skilled to build them.
Sure they will be incredibly generic. But these aren't custom new builds. They're not for luxury or showing off. They are for shelter and warmth.

Just like QBH do. 3 bed $105,000. Resilient, warm, low skill assembly. see facebook.

Could have 10x'd / 20x'd that target and gone for 80,000 / 160,000 homes. Other countries have done similar in recent history. No reason why it can't be done.

You do remember how kiwibuild went dont you ?
Out of 100k homes to be build they managed was it 46 on there own and then bought houses off the plan that no one would want ?
As long as govt is NOT involved in the building process itself they might get some built.

Kiwibuild Mk1's primary failing was that it was instigated at the wrong part of the property cycle, this is the right time for it to be rolled out. Also the property sector is highly resistant to government intervention so it was always going to struggle to gain traction which is why Twyfird refocussed on building more HNZ homes in the interim.

I agree now is absolutely the right time for NZ to start a massive government-led house building programme. But lessons need to be learnt from the last three years.
KiwiBuild other failing was being too focused on middle income earners who cannot afford their first home. There should have been more focus on building affordable rental housing for low income workers who make up the vast bulk of the poorly housed renting cohort.
KiwiBuild prices are too high for the bigger majority of renters -especially now there is a significant economic downturn.
Fundamentally there is a lack of demand for KiwiBuild houses meaning it is impossible to ramp up the build rate to 10,000 houses per year. Yet if KiwiBuild can not ramp up, it can not transform the construction industry with factory built pre-fab housing, more efficient master planned developments (Hobsonville 2.0, 3.0...) etc.
State housing and the likes of Community Housing Provider housing will need to do the hard yards... and then the private sector can ramp back up further down the recovery to build the general market houses.

This is a good initiative, much better than the $1.5bn per year handed out to private sector landlords in the form of the Accommodation Supplement.
I would expand the house building initiative by creating another capital fund that gives a significant amount of funding to non-profit Community Housing Providers to build another 8000 houses again.
State housing is mostly directed at beneficiaries and superannuitants. HNZ's income-related rent subsidy scheme means state house tenants pay a maximum of 25% of their income. Which means HNZ pays about 2/3 of the capital cost of a state house and tenants 1/3.
If community housing providers built houses targeting low income workers on the minimum or living wage with affordable rentals (a living rent) that consumed no more than 30% of their income the capital subsidy support could be about 50%.
This would diversify new housing developments that require construction industry support by adding low income worker residents into the housing mix.

I hate to say it but the reality is that most of the non governmental housing providers, Salvos, Habitat and the rest just cannot get a toehold as land prices are too high. They have the best of intentions to follow how their housing models work overseas where land is abundant and cheap but it doesn't work very well in NZ. No scale what so ever and unless land is gifted or they have some extraordinary sources of funding they are unfortuntely very limited in their activities, mostly limited to repairs and maintenance of the housing stock they own, with the occassional new build in the mix.

Back in the 1930's within the first year of the State housing build programme land was acquired in over 100 towns and cities in NZ. Kainga Ora -Home and Community needs to do the same. Then Kainga Ora needs to masterplan fantastic mixed income, mixed housing typology and mixed residential/commercial urban developments. In these master planned developments non-government housing providers need to be given a place by giving them access to building capital and access to affordable building sites.

But back then they were buying land at basically rural prices.

Are Kianga Ora going to buy projects from distressed developers and homeowners at bottom of the bust prices, or are they going to step in and pay too much and artificially stop the market finding its true nonvalue added value?

The property market won't take its real hit for another 9 to 12+ months if left to its needed correction.

I have no faith that they will 1) be able to build affordable homes, and 2) build warm, dry, healthy homes.

I think you'll suprised at both how KiangaOra will accquire the land it needs and where that actually is located. On warm dry homes, are you expecting a rerun of the 1990's/2000's with the industry self regulating and building leaky homes? It can't self regulate anymore and much has changed to improve the performance on new builds..although we are far behind performance levels of European building technologies....

Why will I be surprised? And what about the price of it?

I was surprised how the Govt. stuffed up Kiwibuild, it takes skill to stuff up that bad.

Self-regulation has nothing to do with whether we have warm, dry. healthy homes as all most did was build to the minimum code. The regulations of which the Govt. set, plus built their own houses too.

If we want the same performance levels as the Europeans, then Govt. have to use the European performance levels as the minimum.

Thanks for promoting my idea Greg of the government buying and repurposing stalled / failed private developments.

As long as they are fit-for-purpose it's a great idea!
We just have to make sure the Government doesn't take on those developments that were targetted at shoe-box; investor-led, speculative buildings that are now headed for disaster.
Ones with 'good bones'? Fabulous!

Agree 100%, but who is this 'We'? Of course, they going to take on those developments that were targetted at shoe-box; investor-led, speculative buildings that are now headed for disaster.

Roberston didn't come out and say we are going to build 8,000 affordable, warm, dry, healthy homes of the type and in the places needed. He just said 8,000 homes.

The quantity is their target, not the quality.

I don't like Labour either, but try not to let partisan views cloud judgement.

Phil Twyford is on it!

Lol ..........Try-fail Twyford , has so may rods to hit himself on the back with already , I am sure he does not want to create another one

I worry about the current enthusiasm for gummit plans to build more state houses. Yes all good...keeps the building industry busy in these otherwise perilous times. Yes it will house many currently in dire straits.
But what sort of society are we trying to foster? The provision of shelter clothes and food is surely a basic responsibility, especially on those starting a family. There is no doubt the provision of shelter(housing) has become seriously skewed in recent times, but surely there are more imaginative ways to correct this problem than simply creating a "where's my house" situation as young people look to government to provide the answers. What we saw on tv the other night...a family of 10 living in derelict caravans, being given (albeit theoretically temporarily) a rather nice camper van and with the Minister responsible telling us confidentally, that..."of course they really need a proper new home"...(maybe coming as a Christmas present!) No questions from government or media asking how this family grew so large with no housing in mind,....where current social payments are geing spent,......nothing except..."here's a need...the taxpayer needs to provide answers."
In my view, the whole state housing system which quickly moved from a short term hand up, to long term entitlement, has been a blot on our nation. Far better to provide real , practical assistance for young couples to purchase their first, yes pretty basic house or apartment. If needs be government could own the land..ie a leasehold arrangement to minimize entry costs. And for heavens sake, where did idea that a first house had to have a full kit of new whiteware, 2 bathrooms, etc.m come from!

they need to move to a scheme to move away from that, i promote a three year lease with one right of renewal in the current property, after that you have to move, i am not worried if you move next door to another state house to stay in the area for schooling, the message is you dont own this house and are only entitled to stay here whilst your circumstances warrant it, and that also goes to size of house, once the kids are gone you get down sized
i get sick of the articles of someone or kids of someone that refuse to move out of a state house because that is where we grew up.

No questions from government or media asking how this family grew so large with no housing in mind

One child policy perhaps?

Leasehold land is no good when the lessor owner just hits the lessee tenant with market and higher rents. And govt seems no different to private owners, A friend of mine had a council owned leasehold with his one house on the section. Since 2000s the rents were hiked and through his own misfortune he ended up in forced sale with a property that was worthless. Cost to freehold was also likewise set extremely high and not viable for someone wanting an affordable dwelling. Local govt when strapped for cash start looking for revenue streams

I worry about the 30 years of crap housing policies which has inflated house prices and rents to insane levels, to the benefit of property owners and to the detriment of workers.
What sort of society are we trying to foster? An egalitarian society where anybody can do well or a classist society based on hereditary property wealth?
What sort of economy are we building? One based on rentiers and rorts? Or one where business and workers are rewarded for being productive?

The crap housing policies that you so eloquently refer to, are the bureaucrats who control developments and the consenting process. Their rules now are insane and extensive and their processes protracted. They don't care if you get your consent. They get paid either way and of course there are more council staff than ever. A mate told me that they prefer to decline an application because that way they cant get blamed for a decision. The 1970s and 1980s had more houses built per year on a much smaller population base. The rentiers whom you love to hate are only responding to the environment.

Yes rentiers exist because the market/regulatory system lets them exist. It is stupid. Democratic sovereign countries like NZ should act to protect its citizens from rentiers. There are lots of options including demanding better of our local government planning/land-use regulators.

I suggest reading Home Truths from BWB Books.

Puts paid to the idea that central housing efforts have not been a massive part of how affordable housing and home ownership became commonplace in NZ. It never was a case of people getting into affordable housing on their own two feet alone. (Leasehold was also used in the past by governments.)

What you are describing is a big part of how people had affordable housing by the 80s and 90s. Not just their own two feet at all.

Where did the idea that a first house had to have a full kit if whiteware and 2 bathrooms come from? Our of the delusions of baby boomers, presumably. I'm 38, and the vast majority of my friends have bought their first home by now (most relatively recently- within the last 1-5 years). Not a single one of them bought, or expected to be able to buy, a house with new whiteware, 2 bathrooms, etc.

FHBer here from 3 years ago, the dishwasher that came with the house couldn't even do a full cycle/drain. Retrieving the dishes also meant mopping the floor. 3 years on, we we're still handwashing. Imagine what our boomer ex-vendors would think??????

No mention of prefabbed/factory-builds. That would obviate the need for old-school tradies, hammer hands and the usual on-site meleé. Also strikes directly at employment, so probably off the table - all them Barista and Tour Guides gotta have something in their future.

Seriously, Does anyone really believe that this government actually knows what it is doing, after KiwiFlop and all the other policies that just haven’t looked like being achieved?

I'm not sure it achieves much blaming government for ones own shrinking circumstance.
Imo, people ought to take responsibility for there own decisions, especially debt.

IMO the government should take responsibility for the legacy of their poor planning laws, allowing councils to strangle land supply and fiddling with migration settings to import population pressure. No one has any control over these things at an individual level, so blaming them for the debt they have to take on to get by is ridiculous bootstrapping.

Exactly, the Govts. the role is to enact legislation to enable competitive markets to operate. All they have done is allowed monopolies to exist that create price distortions in the market that are costs to you and me, but are revenue for the Govt. and those that privileged enough to have the monopoly advantage.

At least how they handled CV was top-notch, better than most leaders in the world. It's hard to fix housing crisis when there is a huge housing buble there. You need to keep the economy stable while you are fixing the crisis. Not even mention that we are in a economy down turn. That makes even harder to fix things.

You can't have Jobs, Jobs, Jobs when you have Robots, Robots, Robots in a factory building Houses, Houses, Houses....

No mention of the tens of thousands of workers currently in NZ on the temporary right to work visas of multiple types. That through no fault of their own are currently surplus to requirements. If the government is willing to fund their existence in New Zealand via welfare and other mechanisms for the next 1-2 years while we wait for international tourists to return on mass and fill the hole in our GDP.
Then we need those 8000 plus new houses.
But if the government are going to keep the status quo around visa rules and entitlements to benefits. Those people will be forced to leave NZ and we will be in a housing surplus within a few months.

This is a challenging one.
Would a housing surplus be such a bad thing?
A lot of positives and negatives.

Just need to convert holiday homes and commercial buildings to homes. Farmers do same thing. Sheep no good you go cows, cows no good go trees. NZ still in good place.

Didn't Grant Robinson say these 8,000 houses would be financed by $5b in borrowing? That's $625,000 per house. Unless I am missing something here, that's not really increasing supply at the bottom of the market. That's a 20% premium on the NZ ex AKL median, and an 8% discount to the national median. As several forecasts are now predicting a drop greater than 8%, these will be more expensive than the median home in no time flat.

Too true but do not forget that HNZ and private social housing providers who pay no tax receive by way of government money subsidies way more per dwelling than us private landlords. Social housing tenants receive four times the assistance of tenants in private rentals. Remember less than half the private rental tenants get any Accommodation Assistance. So it really does not matter that houses for gang members cost $625,000.

I didn't realise the industry had capacity to even consider talking to Grant Robinson regarding a state funded house building regime. Maybe he's bluffing again??? He's probably padding the number to see who takes the bait. I wonder how many builders will be quick as lightening to latch on to the teat of the very government they've been so vocal against.

A bit like babies with born with cleft palates, it's amazing how technology has allowed property investors to survive.

What about migrating suitable state tenants into owners, then recycle the money into building more homes, and so on. When you take all the government costs into account, I very much doubt that renting out the state houses is profitable for the government and the best outcome for the government and the occupants would be owner occupants. Ownership gives a big sense of pride and security for a family.

I would not get too excited about the number 8000. That is spread out over several years. I do laugh about the claimed number of new social houses being built. Just look at the annual report of HNZ over the last 3 years. The net gain is way less. Remember for the last 5 years the private sector has brought over 16000 more rentals to the market every year and each year that number climbs. Surprise this is why the percentage of rentals versus owner occupied climbs every year. Despite deep pockets of the government their civil servants can never match the skill and drive of you and me.

SMOKE & MIRRORS or Punch and Judy ?

The Government runs on wishful thinking , first Kiwibuild , total flop , now they plan to house everyone unable or unwilling to pay for the privilege .

How the hell will they do this ?
Who the hell will pay for it ?

And lets not forget that if all and sundry feel entitled to a free state house , it will never shorten the wait -list of people wanting such a freebie

Its a lose-lose idea