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How $3.8 billion of government funding is expected to get more houses built

Property
How $3.8 billion of government funding is expected to get more houses built
Mt Roskill. Government image: https://roskilldevelopment.co.nz/neighbourhood/roskill-south/

Scale and centralisation are at the core of the Government’s approach towards to increasing the supply of houses.

Housing Minister Megan Woods this week announced $1 billion of the $3.8 billion Housing Acceleration Fund unveiled in March will be used to provide local councils, developers and iwi with grants to build infrastructure to support the building of new houses.

Rather than enable councils to derive funding from new sources - beyond rates and debt - the Government is requiring them to bid for infrastructure funding.

The Government wants councils to come to it saying, ‘We’ve freed up this land and found three developers who together are committing to building 200 houses in this area. Can you give us some cash to pay for stormwater and roading infrastructure to support the development?’

Kāinga Ora will consider applications for funding, but Woods and Finance Minister Grant Robertson will decide who gets what.

Woods said, in a Cabinet paper, she expected demand for the $1 billion to “almost certainly exceed what is available at this time”.

She wants bang for buck, favouring proposals that will support the building of larger numbers of houses where they’re most needed.

Concern a focus on scale could see the regions neglected

While local councils won’t say no to funding, even if it’s being provided through a process that sees them beholden to central government, they worry regional New Zealand will miss out.

A spokesperson for Local Government New Zealand said the group had sought assurance from Woods a portion of funding would be set aside for the regions.

Woods said, in the Cabinet paper, she considered “identifying specific maximum funding envelopes at the outset to ensure regional spread”. But she concluded there wasn’t a sound basis for identifying envelopes of funding and “the loss of competitive pressure would significantly reduce our ability to negotiate for the best housing outcomes”.

What about alternative housing models?

An advocacy group for alternative housing models also wants to see funding ring-fenced to support the likes of cohousing, cooperatives, and community land trusts.

Housing Innovation Society co-chair, Greer O’Donnell, said these developments were struggling to get off the ground, partly due to risk-averse banks, so could do with government support.

She spoke of the long-term social and environmental benefits of people thinking creatively to find bespoke housing solutions, and advocated for the Government deviating slightly from its low-risk approach.

Put to Woods, she said she was open-minded, and encouraged smaller developers to team up with each other and work with councils when making funding applications.

Councils expected to take the lead

Indeed, in the Cabinet paper Woods explained she expected local councils to be the lead applicants for infrastructure funding.

She said they were typically best placed to bring together the likes of developers and iwi, and hold most of the critical planning levers.

Woods said local councils will in most cases also be the ultimate owners of infrastructure assets created by the funding.

But councils will need to play their part too to help meet the Government’s housing goals.

Woods expects them to open up land and enable intensification, particularly through implementation of the National Policy Statement on Urban Development.

More information on a government underwrite expected in coming weeks

O’Donnell was also disappointed government plans, made at the height of COVID-19 last year, to underwrite developments at risk of going ahead hadn’t progressed.

Again, she said this would help those using alternative models secure funding to add diversity to the country’s housing stock.

However Woods said previously held concerns around COVID-19 freezing work in the residential construction sector hadn’t materialised and the pipeline of future work is strong.

She said the $350 million Residential Development Response Fund would be refocussed to support the sector to “deliver affordable housing for purchase and rent on private land”.

Woods said she would have more to say in coming weeks.

Funding ring-fenced for Māori-led projects

Coming back to the $3.8 billion Housing Acceleration Fund, the only carve out that has been made is for a $350 million Māori Infrastructure Fund.

This will be available to unlock Māori-led projects for papakāinga or rural housing developments.

More information will be released in August.

More funding to expand existing government projects

Furthermore, the Housing Acceleration Fund will see funding go towards the Government’s “large scale projects” in Auckland (Mount Roskill, Mangere, Tāmaki, Oranga and Northcote) and Wellington (Porirua).

These are urban regeneration projects that involve knocking down old state houses to make way for higher density public housing, and getting Crown-owned land “build ready” for development by either Kāinga Ora or private developers.

Funding (along with the ability for Kāinga Ora to issue an additional $2 billion of debt) will also enable it to buy more land.

Woods said, “The [Kāinga Ora Land] Programme has been sized on the assumption that, in most cases, Kāinga Ora will purchase and assemble land, instal key infrastructure (where necessary), and on-sell the land to development partners on condition they complete the development in accordance with the Government’s housing priorities (pace, density, tenure mix, etc).

“Other approaches may be considered on a case-by-case basis.”

Developer and director of NZ Living, Shane Brealey, said the company had bought much of its land from Kāinga Ora, and used it for high density housing, including KiwiBuild.

Brealey didn’t plan to apply for a grant for infrastructure.

He believed this would be more useful for greenfields developments, or for developers with their design and consenting work done, but funding still in need of approval.

Brealey said NZ Living wasn’t interested in a government underwrite beyond the KiwiBuild programme.

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73 Comments

All talk, no action. Not expecting anything happening from these proposals.

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Woods was still blaming the National government on her slot on The Nation this weekend, despite her party being elected on the basis of rapidly and fundamentally altering our housing situation and now being in its second term. What was even weirder was the NBR editor asserting that National didn't ramp up building in the post-GFC era and THAT was the cause of high prices, without acknowledging that prices from 1999 - 2007 were increasing at a clip and the only thing that stopped them from increasing was, ironically enough, the GFC.

No wonder we can't build houses, we're too busy with revisionism and re-litigating the past so we don't have to hold those currently in power to account.

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Looks like 1 billion could buy heaps in this country, enough to pay about 12,000 workers for a year excluding materials and paperwork.

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Off to buy fletchers shares. They'll pillage this like it's the ChCh rebuild fund 2.0

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Unfortunately that is true. And it will always be as such when there is a dirty big trough flowing with other people’s money with plenty of long snouts at the ready. For example within three months or so observed one EQC/Fletchers contractor go from operating out of a beaten up old panel van to a brand new covered Hi Lux all paid up front.

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FG. Lots to like about feeding at troughs. Especially getting to see the undernourished abstemious types wagging their judgmental fingers at you as you waddle contentedly away.

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nktokyo. You've probably missed the boat given Fletchers recent share price run up. Who knows though, they could still surprise with a bit more growth, especially if FBU is reinstated to the MSCI index in the upcoming August review.

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Bribing councils to release land for development? I actually like this idea but it should be an annual and not one-off bidding process. Also there should be a cap on the price for new housing (e.g. the lower quartile price within the city/town/village) to make sure councils don't just develop more luxury property.

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there are plenty of houses but some people own 50 and others have none,they need to take away the implied govt guarantee that house prices will never fall plus a shock and orr statement from RBNZ that interest rates will finally rise significantly.

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How do you ascertain that?

From what I can see there are slightly more dwellings (1.954m) than households (1.865m) but when you take into account property unoccupied due to being new builds, dwellings being renovated or awaiting sale, holiday houses, houses owner by people overseas for employment/tourism etc. it looks to me like supply is very tight.
A quick looks at census data suggests only around 196k dwellings not inhabited (circa 10% of total.) If I think back myself over the last decade we've likely been abroad for more than 10% of the time so our dwelling has also been unoccupied.

The cost of owning a house is not immaterial. Most people wouldn't buy a house and not use it due to overheads (property taxes, maintenance, utilities, security, insurance etc.) and the lost opportunity cost in tying up capital etc.

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The ratio of dwellings to population is greater now than it was in the 90s (and they are larger)...there was no housing shortage in the nineties so whats changed?

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What's changed ????? Do you really need to ask?

1,000,000 imports who buy existing houses, and don't build new

What was the housing inventory in the year 2000 ?

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You have obviously misunderstood the meaning of the word 'ratio'.....even with that extra million people we have more dwellings per capita now than we did in the nineties (and indeed 2000) ...i'd suggest what has changed is the availability.....we now have AirBnB, more 'holiday homes' and vacant properties all made possible by the ever expected capital gains.

Actual housing is there, simply misused so all this talk of building more being the only solution is spurious.

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Obviously I did.
Can you provide absolute numbers rather than just a ratio and dwellings per-capita

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End December quarter 2000 1503400 dwellings pop 3873100 ratio 2.57, end December quarter 2019 ratio 2.64, end March quarter 2021 1954000 dwellings pop 5116300, ratio 2.62 Let me be frank.

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Thanks Cowpat

Even using Frankster's inverse method of calculation it's still not higher

2000 dwellings/population = .388
2021 dwellings/population = .382

Deliberate "Fake news"

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1991 population 3.495 million, dwellings 1.307 million , ratio 2.67 p/dwelling

2000 population 3.857 million, dwellings 1.493 million, ratio 2.58 p/dwelling

2020 population 5 million, dwellings 1.928 million, ratio 2.59 p/dwelling

https://figure.nz/chart/bOXOzYWW8RyIotwx

Where's your housing shortage?

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Statas NZ estimated pop as of end June quarter 2020 , ( which corresponds to your quoted June quarters) was 5,089,800. A difference of 89000. Why massage the numbers?

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Key facts
At 30 June 2020:

New Zealand’s estimated resident population was provisionally at 5,025,000

https://www.stats.govt.nz/information-releases/national-population-esti…

Where.s the housing shortage?

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Let me be Frank, Stats NZ regularly update their population estimates and indeed their housing and tenure estimates. Your provided link is out of date. Small movements in these "ratios' without even consideration of any other underlying factors, whether it be demographics , migration, build type can lead to significant shifts in the underlying numbers and provide fodder for shortages or excesses.
https://www.stats.govt.nz/topics/population

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Stats do indeed update their estimates and as at Q1 2021 we observe the following...

Population (est) 5,112200, Dwellings (est) 1,954,000. Ratio p/dwelling 2.61

...as opposed to 2.67 in 1991 when there was NO housing shortage .

.....so again, where is the housing shortage?

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"We have more dwellings per capita now than we did in the nineties (and indeed 2000)' True or false? If you were aware that Stats NZ update their estimates why wouldn't you use them.
More relevant than how a shortage is described for any agenda, is the simple fact that home ownership rates since 1991 have fallen from 73.7 percent to 64.5 percent in 2021.

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So rather than address the point you wish to devote endless energy to insignificant detail.

Who owns the houses dosnt change the quantity, so you further continue insignificance.

Again....where is the shortage?....and since you are unwilling to address the question I'll do it for you...there is no shortage of housing, theres a misallocation, which can be address immediately IF the will was there...no need to wait for additional construction....which is the latest false narrative.

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There are not 50k families out there living in tents.

Plenty of Houses already exist.

The issue is who owns them, and the monetary/industry factors involved that pump the prices above what normal households can afford.

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Fluffy bunny yes there are... you just refuse to see it or don’t happen to come across it.

Go and stay in a campground in the middle of winter and you will see the trailer lifestyle many New Zealanders are facing.

A few months ago I stopped in Toloroa and drove up the hill that overlooks it. Below a campground with close to a hundred really old caravans with people sticking there head out the door as they had there morning coffee... absolutely depressing for these people and our country.

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Woods is full of hot air.

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[comment removed by Ed]

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[comment removed by Ed]

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Appears good on paper but will it produce affordable homes in the two major centers, greater Wellington and Auckland.
What's an affordable home? In both money terms and area and in which city?
Increasing housing supply willy nilly is not the answer.
Are these for FHBs only. Some gaps here.
Regions - few jobs there so not so sure that they need to be specifically favoured.

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Even if you somehow build an “affordable” home it would only be at that price for the initial purchase. As soon as it is sold again it will be at market rate.

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Are there actually people out there who still believe this lot can deliver on a policy? Woods may be one of the very few ministers capable of doing so and I hope she will this time but with the latest Andrew Little debacle over mental health delivery adding to a now very long list of Ardern government policy execution failures, you wouldn't bet on her succeeding. At least in her case I'm guessing she wouldn't imitate Littles cravenly pathetic attempt to blame the officials he is directly responsible for managing.

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Show me things that Woods has actually delivered on.

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Destroying NZ extractive industries.

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[comment removed by Ed]

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Your comment should be removed.

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Thanks Ed

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Why not look to the 1930s to 1950s and just actually build 1000s of govt houses, by the govt.
Surely better than the millions spent on motel rents.

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Exactly. Leasehold.
But no, that's too obvious for these muppets.

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How does leasehold help? Unless it is very long term and a fixed ground rent fee so there is certainty of costs. But I understand that with many leaseholds currently, the ground fee changes when the value of the land etc increases, and it is reviewed on a regulars basis. So some people can face big increases, especially due high house price inflation times. That then affects it's value when selling.

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Time the govt gets sh*t done & takes ownership to solve the problem...

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Where's the large scale prefab production they were waffling on about 4 years ago?
Useless.
I wonder how much of this lack delivery is down to having a hugely bloated and incompetent bureaucracy?

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You are sounding like Angry Andy; blaming the people who report to you for failing to deliver the results you are personally accountable for.

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Well, I think it's both. But yes the accountability falls on the government.
And they are the ones who have set up a mammoth, convoluted bureaucracy.

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The column by Andrea Vance recently in Stuff identified the problem that being the massive build up of bureaucrats in the immediate vicinity of each minister. That evidences not only questionable competence but also lack of confidence. Astonishing to see that we have a Minister of Justice without a law degree. That was shown up starkly in the interview of said identity re the hate speech. The law of our land is a hell of lot more important than parliament itself, yet that responsibility has been downgraded to that of any one lay person.The bureaucracy has not only got the bit between its teeth it has been placed there willingly by this government. Said it before, say it again, a bureaucracy that is opinionated, self-serving and unaccountable is a threat to both society and democracy

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Faafoi has shown glimpses of genuine talent, rare in Ardern's cabinet but I laughed out loud at his shambling responses to attack dog Tova O'Brien. Her questions on the hate speech changes were typically unreasonable in demanding the minister make judgment on selected hypotheticals but he ought to have been able to easily bat her away. Amateur hour but highly entertaining. Coming on top of Ardern's recent and astonishingly ignorant insistence that 'we know hate speech when we hear it', it is becoming clear that the government is not across the far reaching and potentially serious ramifications.

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You know as well as I do that you cannot control a horse if you are frightened of it. For example the MoH were given clear instructions by the then minister about testing of MIQ staff. Not only did they ignore them, they lied. They said they were doing as instructed. That demonstrates nothing but arrogance and hubris. Good luck in reining in a horse that’s got the bit between its teeth. Bureaucracy out of unaccountability is the favoured starter today punters! This government is failing to gain any respect from the civil service. For example the cosy snuggly back scratching relationship with the Director General of Health transgresses all protocols of an independent public servant. There has never been anything like it, nothing of this nature before, that I can recall.

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I am with HouseMouse...... it seems like new Zealand is stuck in a bureaucratic doom loop when it comes to getting anything done. You could bring in any political party you like and the results would be similar. National did well to promise nothing and deliver little in their 9 years, they understand how hard it is to get things done.

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I think prefab here is severely compromised by the lack of flat sites in akl and wgtn. And without those there's no scale.

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Prefab can mean prefabricated components, not just a house constructed off site and delivered complete to a site.
If they got their act together the government could be making prefabricated components for standardized townhouse designs. By doing so, there is the potential to deliver housing twice as fast.

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You're right. Prefab only works on suitable sites. I was involved with building 8 HNZ houses in the BOP about 5 years back, we provided the 2 bed 1 bath flat pack houses landed on piles for about 100k each, contract value of about $800k, we then did the drainage, driveways, sheds etc for about another $400k. Our contract value (incl. Consent) was about $1.5M + GST. Engineer and Geotechnical consultants sourced by HNZ fees were about the same value for the 8 units...

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You can take as much 'ownership' as you want. You can have all the dreams, ambition and plans in the world. But if, as in this governments case, your top team has a dearth of talent and experience you will fail at execution. Over and over again.

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But first we need to have a world war and mobilise our young men overseas to fight. When they return we can start building houses.

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Your tongue in cheek comment highlights the flaw in a common belief that because the govt successfully ran a mass building program post WW2, we ought to be able to do it again; as though the same economic and industrial command/control systems and bureaucratic capability were still available. The bombastic Twyford eventually learned the hard way that world long ago disappeared.

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Yes, which is why the Targeted Training and Apprenticeship Fund is a step in the right direction. Kiwibuild should have been a mass apprenticeship scheme providing trades training for youth from say fifth form onwards. Have the apprentices build the houses, under supervision from builders (current/semi retired or retired). Pay the apprentices a fair wage, and provide an incentive for skilled retired builders to earn a little extra pocket money.

https://www.tec.govt.nz/funding/funding-and-performance/funding/fund-fi…

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The question left unanswered is, how does this make housing more affordable?

This only works if the restriction to supply is removed and the biggest restriction is land supply, not infrastructure. The only reason infrastructure is an issue at present is because it also is under a council-controlled monopoly which means the council wants it to be developed off the back of the present system.

The ability to extend infrastructure on from the last connection does not remove the monopoly advantage that land has so land prices will not fall, and could even go up as the saving of any free Govt. money gets captured by the biggest restriction which is the cost of land.

What I expect will also happen is councils will use this money to upgrade existing infrastructure in existing areas so higher density developments can occur.

Of course in the rush to spend this money, many overpriced sections could flood the market, and since a lot of the future demand in sections or houses has already been purchased off the plan, then there could be an excess of supply over demand, sending many developers broke, and/or off the plan house purchasers with negative equity properties, that they have yet to settle on, or secure funding on.

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We are constantly told that councils are reluctant to develop new housing infrastructure because of limits to the debt they can incur. This new facility should test the validity of that excuse.

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Yes, I agree. That's why I think they will try to use it to replace existing systems and layer higher density on top of that.

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Just the usual bureaucrat lolly scramble approach so that when nothing turns up you can claim culpable deniability. See DHB's, mental health, regional growth funding, all types of welfare........'Oh, but we tried, look....'. Maybe one day we will see results based incentives. For example local bodies paid for how many additional dwelling units (not houses ) they can demonstrate they have provided in a prescribed area that were not there previously. So many of our towns and cities have broken down neighbourhoods which should be retired. Incentives to do so should be the first option, reduced fees, rebates, accelerated planning. But I would lament at the unwillingness of local bodies whose generational mantra of "lower rates" just to get elected has left us with grot flowing down our streets into the waterways when it rains. It's really too simple, but just so painfully hard with political inertia so entrenched. The cycle bridge proposal was a predictable response, "..just throw them a bone so expensive that it will never fly, no don't bother planning anything just tell them we can't do it any other way and get the CAD brats downstairs to photoshop something pick a number and multiply it a few times...". Political bread and butter.

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Megan woods is not up to the job. Labour has taken so long, cost so much, to do so little. If we look at most infrastructure under taken by this government the performance is abysmal. Mediocrity is this governments benchmark.

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MBIE should be publishing the total annual infrastructure spend (actual)

Why dont they? Have a guess

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Does anyone know where we can find the NET number of houses built by the government? They usually trot out the gross number, but usually lots of houses need to be demolished to build new ones.

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Yes. It's almost enough to convert a leftist like me to neoliberalism....if governments can't do it, maybe good ole human greed can!
But I am not going to give in to that. Leftist governments in northern Europe have shown that well organized government CAN deliver.

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Looking around Auckland suburbs there’s clearly heaps of development in existing suburbs adding to the supply of houses in Auckland. For example they will pull own an existing house and add 3 or 5 or more houses. Or renovate the existing house and add one or more new houses onto the section. The unitary plan is certainly stimulating intensification across Auckland. Same will happen in Wellington now they have passed a Spatial Plan that increases the ability to develop the inner suburbs. And the recent changes to the bright line test and interest deductibility rules for investors will inventive even more intensification as the proposed rules mean existing the above type of developments will be considered ‘new builds’. Unless net immigration rises sharply in the near future, we are going to see an end to any housing shortage in Auckland at least fairly soon. What will happen to prices then?

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Is that hate speech?

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Only in China…

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Maybe the cancel culture means that we can no longer allow ‘poor areas’ with cheap sections?!
If the Govt could offer 1000s of sections at $120k each then the low income people could easily house themselves.

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This is all academic as their are not enough people in this country to actually build this infrastructure & houses, this government is so determined to stave the productive sector of imported labour in an effort to force wages it just won’t get much done.

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All designed to be arms length and politically safe when nothing results. They have missed the point that nothing will happen until they get off their over feed backsides, roll up there sleeves, risk their necks and do something real for a change. This will lead nowhere and they will have nothing to show by the next election, in which case they will have a strong chance of loosing. God help us, we have no sane political choices.

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As others have noted, it will take a very large social house building programme to address the ridiculous low quality / high price housing challenge we have. Social housing at affordable rents is only viable if (a) the housing management company can take a 50 year plus view; (b) the infrastructure required for the development is heavily subsidised; and (c) the supply chain for labour and materials is managed effectively. It may also take some compulsory purchasing of land and properties.

I just wish that this Govt would be brave enough to commit to a 20 year housing strategy - with realistic timeframes and milestones.

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"... DO or DO NOT ..... there is no TRY ..."
and that was said long time ago in the galaxy far , far away .....

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I think the idea is good but that the design of the implementation will be overly complex. That the complexity and fish-hooks in the implementation process will be such that developers will avoid having anything to do with an application for this subsidy.

Take a small town council in the Waikato who would like to access govt funds to upgrade water and sewerage pipes so that new developments will not put a strain on existing infrastructure. Does this scheme help?

If the town has development proposals of less than 30 houses in one area but has 3 developments of 10 houses, 13 houses and 8 houses in the same general area can the town council add the developments together and submit an application for funding to support general water and sewerage infrastructure?

Generally with these schemes there is a bureaucrat loitering with intent to say 'no, that is not what this scheme was intended for'.

It might have been better to have advanced funds to councils on a per capita, use it or lose it basis, specifically for infrastructure for new builds. So that councils would have the money for needed upgrades but would have to allow new builds to access the funds. X number of dollars per new house to be spend on water, sewerage or roading. No new builds, give back the money.

The more new builds you allow the more funds you retain.

A different approach to the usual well first you have to apply, then you have to jump through some more hoops then maybe you'll get the money or maybe now that we've wasted your time and money doing all the research and costings for the project we won't give it to you.

So in the example above the small Waikato council has wasted time and energy on the process and delayed approval for developments currently in the pipeline until they see whether or not the govt funds will be made available.

I know I'm being such a pessimist, but the only schemes that have worked for this govt are the wage subsidy and the IRD loans, which were simple and trust based. Every other carefully designed scheme they have tried has failed it's supposed purpose.

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Another Bailout/Subsidy ploughed into the private sector because? They don't have the necessary capital needed? If that's the case I would be concerned that they're not a good investment with taxpayers money.

That's we'll over 65 billion dollars in 18 months of subsidies!!
What do they have to show for it all?
Reams, and reams of policy statements and promises since 2017!

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I have said this before, but one of the problems relating to property development in NZ is that while developers do have to bear quite a lot of the infrastructural costs, a lot falls on the councils. So a significant factor is that the profits fall to the developers but significant costs fall to the council. My German friends tell me that in Germany the councils are responsible for land developments so all costs and profits fall in the same place. It is a very lucrative income stream for them, however first home buyers receive a half price plot of land. What a great start for a young family, just the opposite of what happens here. I note that this would also completely overcome the iniquitous problem of land banking.

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