The government is engaged in some “pretty gritty” discussions with certain councils about whether the local bodies do in fact have housing infrastructure plans that can be kick-started with central government funding, Prime Minister Bill English says.
The PM effectively called out New Zealand’s fastest-growing councils Monday, saying they had been complaining projects could not get underway due to infrastructure financing constraints. It appears that the councils do not have projects ready to go that are conditional on financing he said.
English announced the government’s $1bn Housing Infrastructure Fund in mid-2016. It was opened to applications from councils in New Zealand’s highest growth areas at the time: Auckland, Hamilton, Tauranga, Christchurch and Queenstown.
Speaking to media at his post-cabinet press conference Monday, he said use of the fund would help local councils tap funding for projects required to alleviate housing supply pressures.
“They’ve talked for quite some time about how the infrastructure financing is a constraint, and now we want to see them produce projects where it is a constraint, where they can bring supply forward,” English said.
“The real challenge is whether councils actually do have projects waiting for infrastructure funding. The initial indications are that they don’t,” he said. Councils now appear to be “sharpening their pencils” for efforts to receive financing from the fund, he said.
The government was being clear with councils that the fund was “not just a sort of subsidiary financing mechanism for their general plan, it is specifically bringing forward housing supply by overcoming constraints they said they have.”
“We’re just testing them against the claims that they’ve made about their financing constraints, and finding that a very constructive discussion,” English said.
There was a lot of discussion about how the financing would be structured, in relation to concerns councils would not take it on because it would sit as debt on their books, English said: “That can be resolved.”
'No particular evidence of credit constraints'
English was speaking after ANZ economists said earlier that growth headwinds were intensifying for the supply of new dwellings in Auckland as escalating costs and capital constraints started to squeeze the market.
There was no particular evidence of this happening, English said.
“Of course the ANZ are the main financier of house buying – they may be signalling some of their own choices about risk, about how they’re willing to lend. We’re happy to hear their story about that,” he said.
Anecdotally, the main constraint seemed to be around getting financing for some types of apartment buildings which the banks regarded as quite risky to lend against, he said.
“Otherwise we haven’t seen any broader sign of credit constraint.”