English says housing proposals radical

Property

English says NZ Initiative's 'big bang' housing reform plan 'pretty radical', but well focused on supply and affordability; Water review underway

19th Nov 13, 11:23am by Bernard Hickey

English says NZ Initiative's 'big bang' housing reform plan 'pretty radical', but well focused on supply and affordability; Water review underway

Finance Minister Bill English has described a plan unveiled yesterday by the NZ Initiative thinktank to improve housing affordability as a "pretty radical" change to the funding arrangements for councils, "so we're not going to be rushing into that."

The NZ Initiative proposed in its 'Free to Build' report that Councils receive 'Housing Encouragement Grants' for every new house built, funded through the GST raised from the building of the house. It also proposed the private financing of the infrastructure for new developments that would allow companies to effectively levy rates on residents instead of councils, and it proposed water infrastructure be taken off councils and given to five new regional water companies able to set their own levies. See more here in David Hargreaves' article.

English told reporters before a meeting in parliament of National MPs that the Government agreed with the report's strong focus on housing supply.

"I haven't seen the detail of their proposals, but some of them sound pretty radical. In fact they'd change the basis of local government in New Zealand, so we're not going to be rushing into that," English said.

English acknowledged the Government needed to better understand the incentives facing councils, which the NZ Initiative said were currently stacked against Councils encouraging development because Councils were forced to fund expensive infrastructure for such development upfront.

"We need to understand the decision makers quite a lot better than we do. We've come quite a long way by working closely with the Auckland Council through the Housing Accord. I think central government has a better idea, but there's still a long way to go understand just why councils make the decisions they do and get a better understanding of the connection between those decisions and housing prices, because New Zealand has among the least affordable housing in the developed world, and we've got to do something about it," English said.

Water reforms

Asked about the NZ Initiative's proposal to strip councils of the water infrastructure companies and create new regional ones, English said Local Government New Zealand and the water industry "were doing a pretty hard look at the water industry right now."

"Everyone acknowledges it could be managed better. They'll come and tell us what they think and in the meantime we're just focusing on our programme of getting the special housing areas out, getting the Resource Management Act through, and working with the councils on how to do more," he said.

Asked again about the proposal for the effective privatisation of water rates, English said that was a matter for councils.

"The councils control and run water. We don't, and we're not making policy of their behalf."

Health changes?

Elsewhere, English was asked about proposals in a report released yesterday by Parliament's Health Select Committee to spend more on early childhood health to prevent diseases and ill-health, rather than spend large amounts in the last two years of life.

"It has been estimated that well over half of Vote Health is spent on the last two years of life. This report advocates investing an equitable share in the very early years of life where there is clear evidence that it is most effective," said the report authored by retiring National MP Dr Paul Hutchison.

English agreed the Government would look closely at the report and had already introduced a similar 'investment-led' approach in welfare.

"The Government's implementing an investment approach where we're getting a better understanding of the long term payoffs of spending upfront, and clearly with children there will be long term payoffs and a clearer idea we can get about those the more likely we can invest, and that seems to be where the select committee is going," English said.

"In Welfare, we're creating a way of measuring that and we want to take that kind of approach to other parts of the public sector. Part of the challenge is to show that the interventions being proposed actually work, because where they work the government will try and find the money to fund them. Too often though, our interventions skate over the surface of the problem or don't quite reach the people who are in need," he said.

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13 Comments

by Boatman | 19th Nov 13, 11:48am 1384814896

Create LEASEHOLD SECTIONS for affordable housing . This has been used before and after WW11 the UK used the model successfully , as did Canada .

Singapore still uses the model.

Happy to share the broad - brush conceptual idea with anyone interested .

by steven | 19th Nov 13, 1:34pm 1384821276

There is no benefit to the house owner of leashold?....in fact it puts a dampner on the future sale price even making the property un-saleable. There is also a land rent to pay?

We looked at a property in 1996, "owned" by a little old lady who needed to go into care, but on maori owned land with 5 or so years ground lease left. Asking price was $160k, seemed cheap, this was why. The house was worth the wood and fittings, at most nothing more, so maybe 5k. Unless another 99 year lease was negoitiated upfront..and the land rental very low, fat chance of either, walked away.

With all the land in NZ leashold just isnt needed in general.

regards

by Boatman | 19th Nov 13, 9:32pm 1384849964

Steven , you are being blinkered, and are missing the point completely .

I am not suggesting leasing land from Maori , and in fact we dont want commercial interests involved at all.

Sections make up 2/3 rds of Aucklands house prices , so most are excluded from affordable housing

We can house lower income New Zealanders in affordable housing on council leasehold land and they could pay off the improvements in 20 years , having a basically free home by the age of 40

Its a workable formula that will take pressure off Housing New Zealand , ie the Taxpayer .

I am happy to outline the plan

by steven | 20th Nov 13, 7:22am 1384885349

So the council buys the land upfront? Which it then has to pay a mortgage or bond on? Which in turn then means the land occupier will becharged that interest? I see no point or advantage except its a dodge around the LVR. Also it means the council takes on the risk of a land value loss, ie the ratepayer, so no way should that occur.

So yes please explain how robbing peter to pay paul and lumping risk on ratepayers potentially sending councils bankrupt improves things....

Sections make up 2/3rds? of the value in some exceptional areas maybe, otherwise I find that hard to believe, ie a $500k house has $300k worth of land value?.....that seems strange.

regards

by Bobbob | 20th Nov 13, 10:38am 1384897080

Also my understanding is the banks only loan 60% on a house if there is no land, all the value is in the land and you would need a 500 year guarenteed low cost rental on the land or you get the fiasco in Akl right now where land rents have gone through the roof so people are walking away form their houses!

by Basel Brush III | 19th Nov 13, 11:53am 1384815183

Why is English even bothering to comment about NZI's ideas because he doesn't appear to notice or comment on anything else that has been suggested by others who actually come from the left of Genghis Khan.

by steven | 19th Nov 13, 1:36pm 1384821398

Its good because it shows his mind set to the voter.

The good part is it should be clear if you are not right of Genghis Khan or an Act supporter you should not be voting National.

regards

by Kumbel | 19th Nov 13, 1:08pm 1384819707

"The councils control and run water. We don't, and we're not making policy of their behalf."

Bill should blow the dust off his copy of Local Government Act 2002 occasionally. LGA 2002 s. 130 prevents councils from privatising water services. They can create a council-controlled organisation (jointly with other councils if they want) to run water but water services ultimately stay inside the tent.

If the 5 regional companies were to be anything other than shared services companies owned by the councils it would have to be a matter of government policy to amend the legislation.

by John H | 19th Nov 13, 2:20pm 1384824016

S. 130 did NOT stop the Kaipara District Council from using the private route for the Mangawhai EcoCare wastewater scheme in 2006!!!

The report from the Office of the Auditor General is due out on 3rd Dec. It will be interesting to read how Audit NZ, agent for the OAG managed to miss spotting this off balance sheet debt that grew to much north of $65 million while the ratepayers had agreed to a fixed price contract of $30 million.

So if they want to move water into a big comglomerate, they better have auditors who know what they are doing or the whole of the country will be shafted!

See www.mangawhairatepayers.org for the background to this sorry tale, and the High Court action we have coming up on 3rd Feb challenging Local Authority and Bank assumptions about protected transactions. This could change the face of LGA funding arrangements.

by Kumbel | 19th Nov 13, 2:44pm 1384825446

Like you I am looking forward to the release of the report. Unlike our politicians and most commentators, the Auditor-General and the Ombudsman pay very close attention to the law in their reviews. I am really looking forward to their assessment of the legal environment in which these decisions were made.

Although these works were a 'design, build, operate' arrangement - the assets are the property of KDC and KDC are the sole entity who set and collect user charges (rates). Earthtech just get paid fees for services. In other words the water was not privatised but some services contracted out. Damn hard to tell at times where the boundaries are though.

by Stephen Hulme | 19th Nov 13, 1:09pm 1384819776

I guess the lessons learnt from foreign ownership of Thames Water in the UK will be ignored because it is too profitable for the banking conglomerate owners to deny them access to New Zealand.

Thames Water's request to raise customers' bills by 8% in 2014 has been rejected by the regulator Ofwat.

The UK's largest water company is accused of "ripping off the taxpayer" after revealing it paid no corporation tax and pocketed a £5m credit from the Treasury in a year when it made £550m in profits.

Thames Water, which serves more than a quarter of the population and had a turnover of £1.8bn, saw pre-tax profits slide 9% from £604m the previous year.

At the same time bills went up 6.7%, 646m litres of water a day were lost through leaky pipes and hundreds of ratepayers saw their homes flooded with sewage. Read more

by philthy | 19th Nov 13, 11:18pm 1384856282

English would love bit about removing democratically elected people and sticking whoever he wants in, isn't that how they are railroading Canterbury into doing what they want with the water?

Stuff anyone else who has an interest in the waterways other than the farmers.

Put a few guys in who want what he want's and Bills your uncle, who cares about decmocracy anyway? cleary not English and Key.

by David McCall | 21st Nov 13, 1:32pm 1384993934

Where are all these new houses to come from? Where are all the teams to build them? When there are only 1,900 [Ministry of Building and Construction figure] buildable sections available how are all these Houses Apartments Units to be built.

The Minister of Housing and Construction will most lokely achieve the same stiring result that he did when he was Minister Of Communications...

kind of nothing...

Huge Wave Of Hot Air the headline should read

'Huge wave' of building work on way

By Isaac Davison

5:30 AM Thursday Nov 21, 2013

Building and Construction Minister Maurice Williamson said the "huge wave" of work was expected to peak in 2016. Photo / Thinkstock

Making houses more affordable in Auckland will require far more land to be freed up after a new Government report showed an unprecedented construction boom that builders say will stretch the building industry to its limits.

The Construction Sector Report revealed that the industry was concerned about whether it had enough skilled tradespeople to meet the demand created by the rebuilding of Christchurch, housing demand in Auckland and leaky building repairs.

In releasing the Ministry of Business, Innovation and Employment report, Economic Development Minister Steven Joyce unveiled plans for a new $13.6 million school of construction based in Wellington to help increase the number of "work-ready" construction and engineering graduates.

Building and Construction Minister Maurice Williamson said the "huge wave" of work was expected to peak in 2016 and it was important that the building was done by trained professionals and to a high standard.

The ministry found that the construction workforce had increased by 30 per cent, or 10,000 firms and 32,000 workers, in the past decade. But many firms were small and had workers with low skill levels.

Masterbuilders Federation chief Warwick Quinn said the peak would put huge pressure on his industry.

"I am not optimistic we would be able to grow our sector fast enough - we'd have to import labour."

If labour costs were high and land supply was not increased to contain values, it would be difficult to create more affordable homes, he said.

"The key component around house prices ... revolves around urban containment policies."

If a developer was building on a $500,000 section in Long Bay, they had to build a $500,000 house on it to make the project pay.

"So if you can produce land at $100,000, you can put a house on it for $150,000 to $200,000."