By Alex Tarrant
The biggest opportunity for brownfields housing development within Auckland's city limits is in the hands of central government, Finance Minister Bill English says.
As the biggest landlord in the city via its land ownership for state housing, the government had the opportunity to do its bit for intensification in Auckland to boost the supply of more affordable houses there, English told the New Zealand Council for Infrastructure Development Building Nations symposium on Tuesday.
However, that did not mean forcing the highest possible number of houses onto state land - the government needed to be careful about its approach to development as it would affect some of the most vulnerable members of the community, he said.
The government needed to work with outside interests to better leverage the Crown's NZ$15 billion state housing investment, about half of which was in Auckland, English said.
Of the NZ$15 billion, about NZ$5 billion of the state housing stock was "in the wrong place, in the wrong condition, and the wrong size," which meant the government was "determined to get a better deal and get people who know how to manage the capital [better] doing it."
Managing the state housing stock in a different way to access that stranded NZ$5 billion may cost the government more than it expected, but it had to find way to recycle that capital to provide a more efficient social housing stock to better meet people's needs, he said.
Problem in Auckland
"We clearly have a problem in Auckland with a lack of supply of housing, particularly lower-income housing," English told interest.co.nz after his speech to the symposium in Wellington on Tuesday afternoon.
"The government is the biggest landlord in Auckland by quite a long way. So in addition to more greenfields development, there are opportunities for intensification within the city, and the government land represents the biggest opportunities to achieve that," English said.
The front end of that process was in Tamaki. In July, Housing Minister Phil Heatley announced the government was setting up a joint venture with the Auckland City Council to source private investment to help redevelop its state-house holdings in the area and increase the amount of affordable housing there by subdividing some larger plots.
"Now you've got to be quite careful about this kind of development, because we're dealing with state housing tenants, who are among the most vulnerable people in our community," English said.
"But I think everyone's starting to realise that we could do better with the government assets that we already have, to contribute to housing supply in Auckland," he said.
Finding the capital
The government needed to be more creative about how it recycled the Crown's capital, English said.
"The traditional model of everything being done by Housing Corp as a monopoly has left us with some good stock, and some very poor stock, and some people living in unacceptable circumstances," he said.
"So we need to work with others who have a better set of skills.
"Particularly [around] the risks of development - the financial risks, the construction and operational risks - so that we can do more, faster, to both give us a more efficient housing stock to enable us to help more people in housing need, at the same time as to meet the needs of Auckland for more housing in the city," he said.
Use capital better
The government did not help nearly enough people with the very vast lump of capital that it had invested in state housing, English told the symposium.
"We have essentially a monopoly provider of state housing services, and there’s now a broad consensus across the housing sector, within government and outside it, that we need change," he said.
“So over the next few years the government will be looking for viable capital recycling models which will enable us to deliver much more efficient housing services for those who are most vulnerable, and alongside that, provide our cities, and in particular Auckland, with its largest brownfields housing opportunities."
Capital in the wrong place
The government owned somewhere between NZ$6-7 billion-worth of houses in Auckland, English said.
"There’s plenty of opportunity there to alleviate some of their supply problems by the government making those assets available for, in the first place, meeting housing need, but in the second place, allowing development of housing well within the city boundaries," he said.
About NZ$5 billion worth of the NZ$15 billion state housing stock was "in the wrong place, in the wrong condition, and the wrong size."
"You have to ask yourself, what kind of government system we run that allows NZ$5 billion worth of PAYE - because that's what it is; people paying over their NZ$180 a fortnight to give to the government - that we'd managed to get NZ$5 billion of it stranded," English said.
"And you've seen the pictures on TV. We're still the biggest slum landlord in the country by a long-shot. So while it's complex, because you're working with vulnerable people, we are pretty determined to get a better deal and get people who know how to manage the capital doing it," he said.
The government "may have to face the reality that could actually cost a bit more than we might expect, to run that kind of housing stock."
"That's probably the area [in terms of infrastructure] where we've got the most to learn, and where we could get the most benefit from what are actually pretty straightforward diciplines out in the market, but have never really been applied to this asset," English said.