Ministry still sees need for Govt to underwrite housing developments

Property

Ministry of Housing and Urban Development believes stalled Government underwrite would help stimulate the construction sector and see more affordable houses built

17th Feb 21, 4:58pm by Jenée Tibshraeny

Housing Minister Megan Woods

The Ministry of Housing and Urban Development believes the Government could help increase the supply of housing by underwriting private developments.

The Ministry’s deputy chief executive, Brad Ward, on Wednesday told Parliament’s Social Services and Community Committee the finer details of an underwrite programme - beyond KiwiBuild - were still being worked through.

Housing Minister Megan Woods in August secured funding for a ‘Residential Development Response Fund’. The plan was for the Government to start underwriting and directly investing in developments at risk of not getting off the ground in November. But this never came into fruition.

Woods in December told interest.co.nz there was less urgency around getting the Fund up and running as the housing market was buoyant and fears of a credit crunch were dissipating.

“We’re not putting it on hold. What we’re doing is continuing to work through to make sure the criteria fit the current circumstances that we’re facing,” Woods said.

Ward on Wednesday told the Committee: “It is still very much an important tool that we think will continue to encourage the sector to build and also encourage the sector to do more in the affordable housing space.”

Asked by National’s housing spokesperson Nicola Willis why the Residential Development Response Fund hadn’t been launched yet, Ward said it was important the Fund’s design took account of “whatever else the Government chooses to announce, or do, in the demand and supply space in the future”.

Woods on Wednesday told interest.co.nz officials were “reworking” how to best use the $350 million allocated towards the Fund - $250 million of this being redirected from KiwiBuild and $100 million from the COVID-19 Response and Recovery Fund

“We certainly still need to do a lot of observation of exactly what the impact of the current set of circumstances will be on construction,” Woods said.

While KiwiBuild sees the Government underwrite houses that meet a set criterion, the aim of the Fund is to assist in the development of a broader range of housing types.

As at December, a net 42% of construction businesses had a negative outlook when it came to ease of securing credit, according to the latest ANZ Business Outlook Survey. This was a worse result than the months prior.

Woods said an underwrite would form part of a “package” of measures to boost housing supply, but wouldn’t say when this package would be launched.

The Government previously said it would announce policies to boost housing supply at the Budget. A date for the delivery of the Budget hasn’t been announced. Last year the Budget was delivered in May.

Separately, Finance Minister Grant Robertson committed to announcing a set of measures to address the demand-side of housing before the end of next week.

His announcements were to follow consultation with Treasury and the Reserve Bank, including around whether to change the Reserve Bank’s remit, give it debt-to-income tools and possibly extend the bright-line test.

However Robertson on Tuesday told interest.co.nz there is a possibility the announcement might be delayed, as he’s been tied up with COVID-19.

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79 Comments

by Fritz | 17th Feb 21, 5:02pm 1613534553

I wait with baited breath for Megan Woods to come up with something meaningful.....
She seems to be full of hot air.

by gingerninja | 17th Feb 21, 7:32pm 1613543523

It's infuriating. WTF does she mean the government "believes"??? Wasn't one of their election promises to do exactly this FIVE YEARS AGO????

Clearly immigration is not the cause of the housing crisis because immigration has been minimal this year, house building has been strong and yet house prices have just flown beyond the grasp of an entire generation. The supply/demand argument is nonsense.

When is someone going to have the balls to do something meaningful?

by Fritz | 17th Feb 21, 7:37pm 1613543846

She's a moron. And hopeless. Might be academically smart but has no real world smarts. Hopeless.
I don't know what's worse, a minister with huge ambition but no ability to deliver on it (Twyford) versus a minister with no ambition (Woods). I think I would rather have Twyford, and that is REALLY saying something...

by Zack Brando | 18th Feb 21, 10:51pm 1613641866

I look at Minister Woods as an Ice-Breaker.. someone whom forges through obstacles at the intersection of legislation and realization.

However, Ice-Breakers need to focus on one crisis at a time. Her divided attention may make for generous remunerations rather than results.

by Fritz | 17th Feb 21, 7:38pm 1613543899

I don't think you can argue immigration is meaningless based on one year.

by gingerninja | 17th Feb 21, 8:03pm 1613545436

Not meaningless maybe, but certainly not the most significant factor. I don't think supply/demand is the most significant factor with the housing market at all.

by Brendon | 17th Feb 21, 8:26pm 1613546810

The monetary stimulus from Covid has turbo-charge house prices. Although housing costs - especially rents have been rising faster than incomes for several years, in particular in places like Wellington where the build rate compared to demand (from immigration, employment, rising incomes etc) is the worst. There is lots of evidence for this - the rapid increase in the public housing waitlist for instance. This years burst in house prices did not come from nowhere. There was an underlying imbalance in supply and demand for housing prior to covid. The monetary stimulus has made the bad housing situation worse.

by Miguel | 18th Feb 21, 10:55am 1613598956

Well said. I get frustrated when people try to discount certain factors that all contribute to a very complex problem . Don't just look at tax treatment of investment properties in isolation and say "changing this won't fix the problem". Don't look at immigration and say "just changing this won't fix the problem". Its a problem with multiple contributing factors and they ALL need to addressed at the same time.

by PocketAces | 18th Feb 21, 7:22am 1613586167

Then clearly it's likely to be investors manipulating the market, how many empy houses are there, how many AirBnBs where housing is needed. How many builders are constructing small affordable homes in new subdivisions (answer, none). Construction is going 19 to the dozen here yet still prices climb. Investors needs their wings seriously clipping.

by powerupkiwi | 18th Feb 21, 12:40pm 1613605220

Is there any real proof that immigration was ever a significant contributing factor?

by karl seastrand | 18th Feb 21, 4:05pm 1613617504

Fritz...And clearly when our immigration is now made up largely of penniless economic migrants there is a lag between immigration and its effect on house price inflation as it takes them at least a few years for some of them to get onto the property ladder. Not so for rent as all migrants need a roof over their head from day one thus the effect of higher demand has an immediate effect on rents.
I am sure that posters like Ginger and politicians like Jacinda and Grant understand this (most probably far better than me) and I would be very interested in knowing why they are reluctant to admit it is one of the major factors driving both rents and houses prices higher. And more importantly seem reluctant to even discuss it. Self image? Vested interests? Open borders ideology? Only they know.

by Fritz | 18th Feb 21, 7:37pm 1613630276

Exactly.
Early 2000s we had many English and Kiwis escaping to NZ in the wake of 9/11 with their pounds (then 1 pound = $3), contributed to the house price boom.
In recent years comparatively poorer immigrants have contributed to the rent boom.
Why won't they acknowledge it? Not the woke thing to do?

by powerupkiwi | 18th Feb 21, 8:28pm 1613633300

Because there’s no evidence it’s true

by Fritz | 18th Feb 21, 8:39pm 1613633943

No evidence doesn't mean it's not true.
Hasn't exactly been a hot topic of research.

by karl seastrand | 18th Feb 21, 9:36am 1613594215

gingerninja.... TBH it is difficult to believe that you truly do not think adding 100K extra people PA (into a comparatively small population) needing somewhere to live does not increase rents (instantly) and house prices (with a lag of 5 or 6 years)? There are other factors, of course, but I would have thought a massive and continuous (artificial) increase in demand would have a major effect. You seem very knowledgeable and smart so maybe you could explain (in simple terms) why the basic rule of supply/demand is not applicable to housing? Enjoy your posts. Thanks.

by Miguel | 18th Feb 21, 10:23am 1613597027

This is overly simplistic view. Immigration policy has resulted in a large shortfall - there is a reason we have some of the highest levels of homelessness in the OECD and highest rents in relation to income. All of this underpins house price growth due to added competition for buyers and renters.

There structural imbalances, built up over 6-7 years, can't be undo in 6 months - the fact with the borders closed for a significant period and we still had a net gain of 40k people in the 12 month period (this is still well above long term averages) shows that we didn't really "stop" immigration at all.

I completely agree its certainly not the ONLY factor, or possibly even the biggest factor. But it has had a big impact in laying the foundations for the issue of price rises, but also being a bigger factor in our homelessness problems. But the supply/demand imbalances laid the fuel for the fire, the LVR and interest rate changes just poured some extra gasoline and a lit match on the situation.

by Fritz | 18th Feb 21, 12:00pm 1613602832

Well put.
I often find immigrants dismiss the impacts. They probably feel they are scapegoated.
But it's not about individuals. It's about overall policy. They won't be kicked out if we halve levels of immigration!

by karl seastrand | 18th Feb 21, 4:13pm 1613617992

I think you are right. They feel scapegoated. But I also feel a big part of it is that so many new NZers have vested interests. Many of them want to be able to employ cheap and compliant labour (from their country of birth) for their businesses, get friends and family on the pathway to residency and some even to continue to profit by charging complete strangers for helping them to become citizens.

by Fritz | 18th Feb 21, 7:38pm 1613630330

Yep

by Brendon | 17th Feb 21, 8:14pm 1613546045

The KiwiBuild initiative of buying off the plans (KiwiBuild attempted to buy houses from developers) was a complete failure. A failure that destroyed KiwiBuild's brand. Wouldn't underwriting (subsidising) private developers schemes produce the same failed result?
The government underwriting private developers schemes means the underlying housing rule book does not change. If the underlying inputs remain unchanged how can the outcome change?

by PocketAces | 18th Feb 21, 9:49am 1613594982

All kiwibuild houses in an up to now undesirable area of New Plymouth have been snapped up. More due to be finished in April and same results expected. Maybe all kiwibuild needed was the time to be right.

by Miguel | 18th Feb 21, 10:16am 1613596593

Kiwibuild was always doomed to failure as it was just buying up existing sections ready for development, and paying existing developers to build them. This doesn't actually increase supply, it just changes who builds and sells those houses.

What was required was actually developing new parcels of land, not already earmarked for development. It required increasing the and improving the construction methods (prefabrication etc), rather than repurposing existing construction resources. But instead the government focused on "quick wins", rather than doing something meaningful.

by PocketAces | 18th Feb 21, 1:21pm 1613607710

You missed one, it changes who can buy them, and that extremely important if there is to be a reset. Also there will be more dwellings on the same land, which is tantamount to opening new land, without concreting over your food basket, which is dumb

by bw | 17th Feb 21, 5:13pm 1613535235

"Finance Minister Grant Robertson had committed to announcing a set of measures to address the demand-side of housing before the end of next week (but) there is a possibility the announcement might be delayed."

Boldness at its very best. 90% of those who expect 'something' to happen next week will assume nothing is going to if there is no announcement! "What do we think that will do to the market, Form 1 Economics Class?"

Abandon all hope ye that enter here.

by Fritz | 17th Feb 21, 5:20pm 1613535607

They are a f$%&en basket case. Useless.

by Lanthanide | 17th Feb 21, 5:28pm 1613536106

However Robertson on Tuesday told interest.co.nz there is a possibility the announcement might be delayed, as he’s been tied up with COVID-19.

Seems completely reasonable that he would take time to focus on the unplanned resurgence of COVID-19 in the community. They also passed under urgency this week a loosening of the rules for financial support for businesses affected by this latest lockdown, which surely he would have been involved in.

by northman46 | 17th Feb 21, 5:39pm 1613536779

Yeah. And we've been waiting for action for nearly 4 years. What's another week/month/year?

by Nifty1 | 17th Feb 21, 5:42pm 1613536945

Can't believe that he said that. WTF is going on. Robertson & co have had plenty of time to come up with some BOLD solutions. Covid can't be used as a cop out for addressing pressing issues.

by Fritz | 17th Feb 21, 5:53pm 1613537615

Exactly.

by GV 27 | 18th Feb 21, 7:22am 1613586139

Apparently government can't do more than two things at once after all. At least we know now. So we can judge them on the importance they place on things by how quickly they get to them. With that in mind, here's a list of things that don't matter.

1) Housing
2) Light Rail
3) Tax reform.

Bit inconvenient that these were the policies they touted to as being super critical and what they pushed to actually get elected into power, but apparently that was more important than actually following through.

by Hook | 17th Feb 21, 7:12pm 1613542370

So Robertson and Ardern et al throw some crumbs to the chooks whilst the country runs headlong into ever increasing private debt for housing - yeah totally reasonable

by powerdownkiwi | 17th Feb 21, 8:12pm 1613545943

So you'd make it public debt instead?

Sounds like theft, to me.

by treadlightly | 17th Feb 21, 10:11pm 1613553072

A government deficit is equal to a private sector surplus and so It creates our private savings. (sectoral balances). The government cannot borrow anything before it has first created it.
The Gower Initiative For Modern Money Studies tells us this,
"Starting with the basic rules of accounting for every financial asset there is an equal and offsetting financial liability, this means that deficits and surpluses must always cancel out across the financial system. If the private sector is in surplus, then by the rules of accounting, the government sector must be equally in deficit".
"If the government always runs a balanced budget, with its spending always equal to its tax revenue, the private sector’s net financial wealth will be zero. If the government runs continuous budget surpluses (spending is less than tax receipts), the private sector’s net financial wealth must be negative. In other words, the private sector will be indebted to the public sector"
https://gimms.org.uk/fact-sheets/sectoral-balances/

by powerupkiwi | 18th Feb 21, 12:44pm 1613605449

Looks like you have your way. It’s funny how MMT went from bat**** crazy to mainstream consensus within the space of one year

by youngdumbandbroke | 17th Feb 21, 11:07pm 1613556477

Surely your not that naive??

by karl seastrand | 17th Feb 21, 5:36pm 1613536568

bw... it is a good bet that Robertson will completely ignore the huge part of demand that is the immigration settings. The smart money would be on none of the measures he announces being immigration related. If he is feeling extremely frisky he might possibly mention (in a sentence or two max) that the Govt intends to look at the effects of mass immigration on our housing crisis. But my gut tells me that although immigration is clearly the biggest factor in the massive growth in demand, it will not even be mentioned at all. But God do I hope he proves me wrong!!

by Fritz | 17th Feb 21, 5:55pm 1613537743

I don't expect anything meaningful in terms of demand.
I think they might increase the income and house price caps for Homestart. Playing at the margins.

by karl seastrand | 18th Feb 21, 9:49am 1613594995

Fritz... doing stuff like that is the equivalent of Jacinda speaking a little Te Reo and wearing Maori attire while doing nothing to prevent a disproportionate number of Maori from paying excessive rents and being shut out of the property market. It is all superficial (faux) signposting which allows her to appear to care while, at the same time, leading us down a path that leads to fewer and fewer Maori being part of an inclusive society. And the really sick part of it is that the people she is ensuring stay down on the ground (through the club of high rent and house prices) are some of her most ardent supporters.

by CWBW | 17th Feb 21, 6:07pm 1613538447

Maybe he's not acting the way you want because he wasn't a baptised flat earth theorist?

by Computer | 17th Feb 21, 10:04pm 1613552645

So immigration plays no part in the runaway house prices?

by powerupkiwi | 18th Feb 21, 8:35pm 1613633756

Not according to Motu Economic and Public Policy Research. It’s returning New Zealanders that drive prices up, not migrants.

by Fritz | 18th Feb 21, 8:56pm 1613634961

The Motu study is simplistic and flawed. For example, they don't look sufficiently at the composition of migrants and buying power.
They acknowledge large house price increases from 1991-1996 and 2001-2006 but don't dig deep enough to consider the impact of cashed Up Asian immigrants in the 91-96 boom, then English immigrants (as well as Kiwi returnees) in the 2001-06 boom.

by karl seastrand | 18th Feb 21, 9:55am 1613595354

CWBW... you need to pull yourself away from that mine craft game and deliver a few more Watchtower booklets.

by J.C. | 17th Feb 21, 7:03pm 1613541839

But my gut tells me that although immigration is clearly the biggest factor in the massive growth in demand

No. It's mortgage credit.

by Jonny.Foe | 17th Feb 21, 11:04pm 1613556297

Your gut is telling you porkies. Cheap credit + high rents + buy confidence drive house prices. The same happens in countries with declining populations.

by imhenry | 18th Feb 21, 8:16am 1613589393

dont hold your breath

by northman46 | 17th Feb 21, 5:21pm 1613535678

A NZ housing minister? About as useful as an indicator on a realtor's Mercedes.

by treadlightly | 17th Feb 21, 6:07pm 1613538475

No doubt Grant Robertson is scouring the world for a new supply of NZ Dollars at this very minute but it seems to be that nobody is manufacturing them at the moment.

by EdwardD | 18th Feb 21, 12:36pm 1613605000

I could give him some - they are almost worthless to me (TDs).

by Dale Smith | 17th Feb 21, 6:22pm 1613539353

The whole article does not even give one little bit of rationale as to how they will make housing more affordable without having to subsidize the hell out of it.

A TRUE increase in supply, especially of land, would see the price drop.

Otherwise, all that will happen is in trying to create more finished housing supply, more demand will come those individual short of supply components that make up the product being supplied and prices will go up as supply increases.

The true marker is more, cheaper, high-quality supply. All three.

by PocketAces | 18th Feb 21, 9:51am 1613595106

So long as it is NOT good food growing land. Concreting over the food basket is just dumb

by Dale Smith | 18th Feb 21, 12:35pm 1613604905

All that needs to happen for elite soils not to be used is for farmers to covenant it for only that use. Developers would not buy it if they did so. It's all in the farmers' hands to solve this problem.

by PocketAces | 18th Feb 21, 1:23pm 1613607808

You know that is not going to happen, almost ever. Greed and self serving will always win out, it will only happen if legislated

by Fritz | 18th Feb 21, 2:01pm 1613610113

Exactly.

by Dale Smith | 18th Feb 21, 7:58pm 1613631531

But, But.... the farmers say its the developer's fault for paying them so much.

by powerupkiwi | 18th Feb 21, 12:45pm 1613605556

Allowing a housing crisis to drive the next generation to Australia so that we can grow some potatoes is dumb.

by PocketAces | 18th Feb 21, 1:25pm 1613607919

There is plenty of inner city land that can be intensified, it is already stuffed where production goes.
I'd like to see you go without food.

by powerupkiwi | 18th Feb 21, 6:17pm 1613625449

We should build up and out.

Lol I don’t think anyone is going to starve if we get rid of rural-urban boundaries. Grow up.

by PocketAces | 18th Feb 21, 6:27pm 1613626062

Here, educate yourself, sounds like you need it, about how much actual prime growing land there is in this country. https://www.rnz.co.nz/national/programmes/ninetonoon/audio/2018784120/p…

by Dale Smith | 18th Feb 21, 8:09pm 1613632168

Yes, and any loss is due to council policies and the farmer's willingness to take the money

Councils insistence on making you join to their last connection point irrespective of whether it means using good land when it would be cheaper to 'jump' further out to less productive lands.

The irony of course is farmers do not like Govt. interference but are basically asking Govt. to pass laws to control their own greed. Strange.

by PocketAces | 18th Feb 21, 10:03pm 1613639028

And such laws need passing asap

by Brock Landers | 17th Feb 21, 6:35pm 1613540137

The same people that can't even balance their calorie intake think that setting a price floor on new houses is somehow going to make houses cheaper.

Geniuses.

Meanwhile Adrian Orr goes brrrrrrrrrr.

by CWBW | 17th Feb 21, 6:42pm 1613540530

Free money coming to Fletcher building and their likes? Looks like a good time to place your bets and roll the dice.

by Mountie | 17th Feb 21, 7:15pm 1613542517

FBU is getting close to a 52 week high.

by Fritz | 17th Feb 21, 7:18pm 1613542698

Ha!
Yeah maybe Fletchers is going to become an extension of Kainga Ora.
Wouldn't bet against it.

by Hook | 17th Feb 21, 7:07pm 1613542076

Wow.. yet another example of Labours dither, delay, obfuscate and defer. Hardly surprising but immensely disappointing in respect to housing. Expect to get something concrete announced about July/August '23. The orchestra is deafening whilst Auckland burns.
Meanwhile, even with border restrictions we still imported at least 10K new households this year (Jan 20 - Jan 21, migration nett 44K +)

by Jonny.Foe | 17th Feb 21, 7:10pm 1613542218

Invest a pile of money in building thousands of good quality warm homes for rent to NZ residents - dotted throughout towns and cities. Set the rent at 30% of income after tax (reviewed annually). Let housing management and tenant support contracts to not-for-profit social housing organisations. Watch in wonder as the assets boost the Govt balance sheet and the savings from accommodation supplement surpass the ongoing maintenance costs.

Or, alternatively, try to induce the market to meet the needs of the poor by offering them a nice fat margin whilst throwing ever greater sums of money at the rentiers.

by PocketAces | 18th Feb 21, 7:24am 1613586265

It's called state housing and yes it is the answer and for more than just poorest. It needs to be provided till there isn't a single renter having to have their landlord subsidized by the state

by nigelh | 18th Feb 21, 7:22am 1613586168

"Government underwrite would help stimulate the construction sector " Which construction sector? The residential construction sector is going flat out and I don't see that changing for at least six months. Try and get any get key people in the residential construction side, even if you say two to three months is OK.
Unfortunately to get affordable houses the govt in the main areas is going to have to own the land on 1000year lease type arrangement. This occurs in the UK although I think the leases are in private hands.

by Fritz | 18th Feb 21, 8:10am 1613589034

I talked to them about that last year and Woods dismissed it. I will laugh if it's one of the policies they announce.

by dago | 18th Feb 21, 8:05am 1613588754

Robertson on Tuesday told interest.co.nz there is a possibility the announcement might be delayed, as he’s been tied up with COVID-19 - he probably gets brownie points from the banks for every day he delays things. Expect this guy to get a top level role with a bank when he is finally head-rolled from govt

by Li quid | 18th Feb 21, 8:39am 1613590784

It is time for everyday people to economically disincentivise landlords. Whatever that means..
People do not stop behaviours (investing in property) by asking them to be better people, they can be economically driven overtime however.
Until the pain outweighs the gain these 'king of the ashes' types will continue their behaviour.

Governments repeatedly have shown their inability to achieve results. Time for the common people?

I'm not advocating trashing every rental until landlords quit, but it is one of many interesting thought experiments.

by Nzdan | 18th Feb 21, 9:36am 1613594204

See how much power Landlords truly have when 100k+ tenants collectively stop paying rent.

100k divided by 37 tenancy tribunal locations would take a fair while to get through the backlog.

by boreddad | 18th Feb 21, 5:30pm 1613622634

Couldn't agree more.

by Takere | 18th Feb 21, 3:30pm 1613615421

They should 'employ' the Ngati Paoa Development Act? It's basically the old Ministry of Works Act where the Government can confiscate land. A kind of 'Pre-emption' mechanism.
Unrestricted confiscation of land for housing at a fixed price.

by Fritz | 18th Feb 21, 3:35pm 1613615738

They have compulsory acquisition powers under the Urban Development Act.

by Takere | 18th Feb 21, 3:40pm 1613616011

That's specifically for HNZ. The NP Development Act is for all New Zealanders! :)

by Fritz | 18th Feb 21, 7:41pm 1613630494

Wrong.
They can use it for wider reasons. Eg they could buy 10 hectares and then build affordable (not state) housing and sell it at no profit.
It's not confined to state housing.
It's time a decent journalist asked them why they aren't using their powers.

by Dale Smith | 20th Feb 21, 1:48pm 1613782100

Yes, they could buy the land, but that doesn't mean they could build affordable housing on it because they would have to pay the prevailing market rate for that as residential land since that is the intent. They are bound by their own stupid rules to get a valuation at today's market value, which of course is using past sales data.

The only way they can reduce the land price is to remove restrictions to supply and let 'willing seller and willing buyer negotiations happen in a truly free market transaction.

If they did this they won't need the Govt. to put its clumsy boot anywhere near housing supply except for those people that cannot even afford a truly free market house.