Housing Minister Phil Twyford says he's planning a workshopping event for representatives of the finance community and players in the development and construction sector to help crack NZ’s problems around infrastructure financing

The Government is planning to bring together players from the finance community with people representing development and construction interests to hammer out a plan to solve New Zealand’s infrastructure financing problems.

Minister of Housing Phil Twyford says the event will be going ahead “within the next couple of months”, but details are limited at this stage.

Last week, Twyford said lack of access to capital is “crippling the supply of houses,” adding that one of the Government’s biggest priorities is cracking down on the problems around infrastructure financing.

“There is a planet of cash out there that would love to invest in our cities’ growth, but they have no way of doing it at the moment.”

He says the Government is actively exploring the concept of “value capture” – the ability to capture uplift in property values around new transport infrastructure – as well as issuing infrastructure bonds and tapping into longer-term debt financing.

The event, which will happen “quite soon” will workshop these ideas with the finance community and players in the construction and development sectors.

When it comes to the bonds, Twyford says he wants to attract overseas investors from the private, and public sector.

“The trick is to find a balance sheet where that debt can sit, and put together the revenue ideally from the properties in that new development to service the debt.”

Under the Government’s fiscal responsibility rules, Labour promised to reduce net core Crown debt to 20% of GDP within five years and to keep spending at roughly 30% of GDP.

Twyford says himself, Minister of Economic Development Shane Jones and Finance Minister Grant Robertson are doing policy work on the infrastructure bonds and the value capture ideas now.

Meanwhile, the Te Atatu MP is keen to build on the progress of the previous Government’s Crown Infrastructure Partners project – formally known as Crown Fibre Holdings.

Crown Infrastructure Partners aims to bring the investment skills and experience, gained through the Government’s ultra-fast broadband rollout, to the job of attracting private investment in roading and water infrastructure which opens new tracts of land for more housing development.

Twyford says this project is “a useful step forward”.

“But you can’t rely on the government of the day writing a check for hundreds of millions of dollars every few months – we have to set up a pipeline where good quality infrastructure for new developments can attract that investment, as long as the private owners and developers are willing to carry that risk.”

And he is confident they are – “there are a lot of jurisdictions overseas where precisely these types of systems are in place and working well”.

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60 Comments

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Let’s have a working group set up to discuss setting up working groups!

Seriously has anything meaningful and profitable for the country been actioned since the coalition has been in power?

Nah!!

Backtracks and just hot air for months.

Judith is going to have a field day!

Talking of field days - Perhaps an Auckland Crapper Company could fix this issue.....

https://www.stuff.co.nz/environment/101498684/Nadine-Higgins-Auckland-is...

Oh c'mon - if it's not dairy it's not dirty. There's no votes in grand standing about this one as there is no minority to target and virtue signal about...

TM2,

Even the national party is not stupid enough(unlike you),to elect Collins. She is full of hot air and little else and would be a godsend to this government.

... ummmmm Phil ... you're in government now ...

You're the guys with access to the capital for infrastructure spending ...

... there is no need for another " working group " .... 'cos sweet bugger all work usually gets done ... and ...

'Cos you're in the government now , Phil ... you have access to the munny needed ...

You're the guys with access to the capital for infrastructure spending .

That's right. The govt has unlimited capacity to spend, however the risk of pork barrel needs to considered. For all the numptys who are concerned about govt debt and balanced budgets, it's time Twyford to educate the public, if he understands himself. Grant Robertson doesn't. The opposition prefers for the private sector, particularly h'holds, to be up to their necks in private debt. That's the ideology that's trickled down from their favorite flavor of Anglosphere economic models.

Ray Dalio has written an interesting article.
he touches on Infrastructure spending and capacity constraints...
This is all applicable to NZ situation... This govt is doing this at the wrong stage in the business cycle.
At least there won't be any trump like tax cuts , ...

Dalio thinks a recession is 18-24 mth away... I've been thinking 2019 ( which is a best guess)
https://www.linkedin.com/pulse/its-all-classic-main-questions-timing-wha...

There will only be one guaranteed outcome here. Taxes and rates will be jacked up, and that’s before rising interest rates start to kick in. If Labour or National think that govt spending of 30% of GDP is sustainable, then they have some shocks coming their way in the next 2-5yrs. Sadly, the average working person will pay the price for all of this mismanagement, as always...

When an immigrant steps off the plane they get our trillions of dollars of infrastructure for free.
Either stop the population growth or charge an immigration arrival fee of $250.000.
If an employer is so certain that only an immigrant can do the job then let the employer pay the fee,
I don't want my taxes to pay for my deteriorating lifestyle as we get more and more congestion and pressure on our public services and infrastructure.
I want my taxes to pay for improved services, infrastructure and environment. Not spent trying to catch up to what we had 15 years ago.

Under the Government’s fiscal responsibility rules, Labour promised to reduce net core Crown debt to 20% of GDP within five years and to keep spending at roughly 30% of GDP.

I will be impressed if they manage this..
I',m guessing that a recession will be a pretext to , duck for cover, make excuses and adjust "fiscal responsiblity" rules.

No way in hell that they will achieve this, Roelof.

But, if the net debt is increased on the back of productive investment, it's not necessarily a bad thing.
The real question will be whether this is the case, or not.

nymad,

Your comment on debt and productive investment is short,but spot on. There is nothing magic about a 20% debt/GDP ratio. What could be more productive than ensuring that Kiwi kids get well educated? Tomorrow's world will place an increasing premium on employees who are educated,motivated and flexible. Right now,our standards are falling and we need to do better. That will take money-and better teachers.

I like the concept of “value capture”. Anyone who lived in Singapore with recognise the value that MRT stations add to surrounding land. In many cases, the MRT station is the hub with shops etc sited over and around it. The CRL will be similar in Auckland. Why not capture that value in rates that fund bonds? I’d certainly rather that Mount Eden residents funded it that those of us in the Bays that will rarely use it.

Certainly nothing wrong with taxing folk on the betterment and wealth increase that the city has provided to them. Could be well worth applying that to more parts of Auckland. Good suggestion.

The key phrase is

as long as the private owners and developers are willing to carry that risk

And given the recent Fletchers debacle across many projects, and the Leighs-Cockram under-bus-throwing incident with Christchurch's Metro Sports Facility, what 'private developer' is gonna stick their hand in the air, wave, and yell 'Pick Me'?

Useless piece of ...

Funny how the Government wants to talk to people that aren't going to be confident in depending on them. Yet those that have contacted them to present effective options have been ignored. A recipe for success.

Great, let's give away our sovereignty. Whose colony shall we become?

Twyford says he wants to attract overseas investors from the private, and public sector.

Or am I reading too much into it?

Would giving sovereignty away involve having foreign spies as list MPs?

No, you are reading it right Roger, I have to agree with you on this one ....

What happened to banning foreign investment and selling NZ assets? or this is not the case?

Is this any different from leasing out farmlands to chinese or others ?

When investors are involved they will be looking for returns ... he says that these projects will pay for themselves eventually ....ahha !!, so expect hiked water, sewage, and utility prices to skyrocket then... All in the name of new infra ...

“value capture” – the ability to capture uplift in property values around new transport infrastructure .... What does Value Capture mean?
....does that mean that properties and land around these new project will shoot up skyhigh ? and who will benefit from that? ... the Government?

Will all this make houses built around these projects more affordable? ....Or more expensive?? ... and how will that affect average house prices ?

I have to dig the video where PT or someone ridiculed the Crown Infrastructure Partners when introduced by National last year, now it seems it is “a useful step forward” ... !

“But you can’t rely on the government of the day writing a check for hundreds of millions of dollars every few months – we have to set up a pipeline where good quality infrastructure for new developments can attract that investment, as long as the private owners and developers are willing to carry that risk.” ..... lol, good luck with that !!

I think Phil is referring to how the MTR works in Hong Kong. Before they extend the metro lines the MTR Company buys the land around where the new stations will be. They then build the line and the uplift in land value due to the line extension means they can then sell the land at a profit and pay off the debt raised to build the extension. All very clever, and doubtless nowhere near as easy as it sounds. So presumably, Phil thinks that anyone can do it and doesn't realise it is not easy to gain the experience to be able to make it work as planned. Gaining experience usually involves taking risks and making mistakes and making a complete fool of yourself, but he belongs to the "We know Best Brigade" and thinks it is easy.

So how are they going to fit that ( if that is what they are thinking of copying) in the Socialist Scheme of things .. where making money and profit is Bad and all hands to build " Affordable " housing close to transport hubs and new Infra dada ?

It just sounds like GR and PT have landed a big new toy and fiddling around to see if they can make it work -

LOL, and WP is nowhere to be seen !!! ... chances are that he is disappointed & ashamed to get involved !!

Very likely NZ will end up with projects going like this one -
http://www.smh.com.au/business/turning-3b-into-618m-brisbanes-failed-cle...

Don't think so Roger

from the government that made plenty of noise about banning foreign investors buying land / houses / assets

was opposed to any public private funding partnerships

and has only just worked out that 100,000 houses may cost a few bob !

Although i do love the openness - " The trick is to find a balance sheet where that debt can sit

Just shut the door!

Private investment in water and roads is the best news I've heard so far from the Govt. and a great start.
However real cost savings and benefits will only happen when councils are privatised and rate payers have choice.

Read between the lines. Also you are making assumptions,

a) such as a MUD would be more efficient and effective.
b) the "choice" would be one you would like. I think you will find that the "masses" will still decide what choices you get just like you have today. So twidle dum or twidle dee , I dont see you being any happier.

During a pre-election campaign, Grant Robertson spoke about the Key-English government investing less than a tenth of their transportation budget on public systems and most of the remainder on roadways (implying private transport). There hasn't been a peep about mass transit systems since the incumbents have come into power. Easier said than done, eh Labour!

"He says the Government is actively exploring the concept of “value capture” – the ability to capture uplift in property values around new transport infrastructure "

OMG....in other words yet another way to increase rates. "oh we have built a bigger road / nw train service to service a far off suburb which as it runs near you just happens to improve your houses's value so you owe us even more $s.

The existing rating system would capture the increased value due to infrastructure improvements in the CV, but it’s a no gain position for Council as the total rates income is static e.g. Mount Eden rates go up and Kohimarama rates go down. However, if they got the right to capture the infrastructure increase in additional overall rates then you have the basis for targeted funding. Sounds like a win to me.

No it is not. The system you suggest is an appalling one. People who live in a house just get a bigger rates bill but no extra income. Yes, their house may have gone up in value, but there is no extra cash flow to them. It is possible to fund infrastructure from value uplift but not that way.

This is the present stupid system on steroids. Government decide "We need more people (to pay us)", on the advice of their Socialist Indoctrinated Bureaucrats and without actually asking the people themselves. The people get more people than we can cope with, crowded roads, schools, hospitals and beaches and then they get the bill for the infrastructure that is now needed due to the extra people. It is appalling. Rule by Bureuacratic Advisor and Snivelling Toadie Politician.

There is no free lunch. Someone has to pay. I think it’s fairer if those that benefit pay. Why should the rest of Auckland pay for it, when many will never use it? If the residents that will benefit don’t think it’s worth the cost, then don’t build it at all.

Indeed there is no free lunch.

2nd, the problem is the residents may well not have the choice not to build it by the sounds of it.

Personally I think I have got to the stage that frankly I do not trust a single MP. As far as I am concerned they are all a bunch of lying so and so's who will twist words and situations to do what they want to do (what ever the sense of it) despite telling / promising you otherwise.

"“The trick is to find a balance sheet where that debt can sit, and put together the revenue ideally from the properties in that new development to service the debt.”"

So no one wants to, nor can afford to "own" that debt.

"ideally"? so if not existing rate payers pick up the tab, or tax payers.

I think PT is now seeing the problem's National faced (and yes did nothing) and finding out that it is very hard to do anything without throwing shed loads of other peoples money at it.

If on the other hand we reduced NZs population (or at least held it static) a lot of these expansion problems are far smaller.

'Lets do it"
Lets shut the door!!

I just read that in fact we need 500,000 new houses and not the 100k the Govn says we might get. Wait a minute 500,000 new houses at 2 or 3 ppl per house is staggering increase in population projection.

... no , it's not a population projection ... 500 000 is the estimate of how many houses we're short right now ... for the current population ...

One very wise mathematician amongst us calculated that by the time Phil " the Tool Man " Twyford had built 100 000 affordable homes ... our population increase would mean the current house shortfall then would be 515 000 ...

... slip sliding behind ...

Hmmm, I think it was a projection. URL? proof its current? I kind of suspect you are wrong, 50k maybe yes.

Meanwhile, NZ's population, 4.7million.

Present growth estimate is 5million by 2030.

300k extra people and say 3 per home = 100k "affordable" homes needed in 12 years.

Then yes there is the homeless backlog as well, lets say its 100k

Meanwhile just who is going to pay? as clearly no one wants (or is able) to pay.

Shamubeel Eaqub said that NZ had consistently underbuilt houses every year since the 1980's ... and that we were currently 500 000 houses ( apartments , flats .. whichever ) short ...

Oliver Hartwich claimed that our house building had been constrained by local council and central government bungling since the 1970's ...

... 500 000 short ... in 10 years time , when the Tool Man has built his 100 000 affordable homes ... the shortage will have ballooned out a further 15 000 ... and stand at 515 000 .... slip sliding away ... the closer to your destination ... the more you're slip sliding away ...

With current population growth of 70,000 immigrants and 28,000 more births than deaths a year we will gain another million people in 10 yrs or less.

a lot less , it took 30 years 1973 to 2003 to go from 3 to 4 million then only 15 years for the next million, on that rate we are looking at 7.5 years.
imagine Auckland then, forget about buying a car be quicker to walk

I think that National saw the cart and knew how heavy it was and needed huge horsepower to pull it - they opted to get the money first and start the economy on a jump start like every other country did by tapping into foreign investment and prop-up the economy push down unemployment etc ... all that translates in the extra revenue the country is enjoying ATM ....

This Gov has a narrow window of opportunity to invest that extra revenue in improving the country and should get its priorities right before the next recession hits ...and start moaning again.

Investment is money, trust, and positive sentiments ... not just looking for someone to carry the risk !!....
" we have to set up a pipeline where good quality infrastructure for new developments can attract that investment, as long as the private owners and developers are willing to carry that risk.” ... what a naive turn off statement !!

Please explain your comment better. I am confused by it.

How did National tap into foreign investment? How did that translate into extra revenue for the country? What extra revenue does the government have now?

Seems to me like National allowed the sell off a lot of NZ land and houses to overseas buyers, cut taxes so the government had less revenue, sold off the last of the cash positive government assets (power companies), and also presided over extremely high immigration rates, making all problems bigger. I am not sure how we are supposed to "invest" with that sort of legacy.

You seem to be equating "extra revenue for the country" with "extra revenue for Government". They're not the same thing.

If a foreigner buys a house in New Zealand from me (a Kiwi), money comes from overseas into New Zealand. Yes, it goes into my pocket rather than to Government (in the first instance), but it's still revenue into New Zealand. It's money that I will now either save, or invest, or spend on goods and services. All of these activities by me, make a contribution to the NZ economy as a whole; and the Government gets a tax take from most, if not all of them.

BTW the Government is now getting more revenue from the state owned enterprises than it was before the part sale, as well as the one-off income it received from the sale.

On from which, houses become too expensive for locals and the bit of the deal the government ends up with gets paid out in accommodation supplements etc so that the now outpriced local has somewhere to live. Nuts.

The the foreigner sells the house for a profit, let’s say they sell for $750k and make a $100k profit.

That $650k then leaves the country $100k heavier, what if it’s a first home buyer with a mortgage? They’re paying interest on that extra $100k they had to borrow and then send straight overseas.

Ok, I am not talking about legacy or the last 30 years as some like to mix issues to win an argument....We are talking today and tomorrow, not last century, or the one before !!

In the last 5 years, The world started rising up from the effects and ruins of GFC .... National opened up immigration as it needed addition revenue to support the mounting demand for growth ... consequently opened up the gates, sold land and houses to foreign investor most of which decided to come to work and live here ... they opened up the Investment Category in immigration where people can seek residency by investing large sums of money ( Millions each, in addition to buying a house) in businesses and employ locals (whether they are white, black, yellow or otherwise) ---

More people is New $$Billions brought into the economy, it is more employment, more income tax revenue , new houses and apartments, more rates, more GST, .... more visitors by friends and families, more spending, more students, more GST ...more local business turnovers more construction work and activity, more business tax, more GST .... more household confidence, more cars and consumption more goods, more tax, more GST ... I think you get the picture now !! this is how surpluses were made !!

All that resulted in better than expected tax take.... as recently announced by Treasury, an unexpected $800M EXTRA in the last 6 months alone .... National would have given away $2B tax cut to all workers in the country next April - that is money in hand made by the above and didn't grow on trees..or as some claim came came from selling houses to each other !!

Now, something usually has to give way to this success and not everyone will benefit and be happy, no need to list all the negatives associated with this success, they are all known - However, once that great base was founded and the machine was working it was time to use that in USEFUL projects as announced last year and fix issues like housing, more health and more everything ... etc

Should all of us moan and groan like beggars at the doors of a church as to how expensive and how scarce things are and how much equal we need to be with the rest - then we will stay put while the world is running by like a supersonic train !!

Close immigration taps, lower tourism, Increase minimum wage, impower unions to "improve" employment bargaining, introduce more taxes, create consumer and business confidence dismay and then get someone to tell them to suck it up ...do everything possible to fight property investment then you get a recipe for disaster especially when we discover everyday that we are lead by managers who seem to be stabbing in the dark without any valid business experience or past mistakes to lean on.... the proof is in all these silly and ridiculous steps we daily hear about the biggest two issues they are supposed to get on about ASAP Infrastructure and Housing ... and we are getting to the end of month 5 of this legacy with almost nothing .

So, regardless of any political affiliation, in the larger context and scheme of things, some of us would be forgiven to be pessimistic , watch the future fading away, and feel sorry for a wasted term under this Gov who seems to have lost the compass and the plot.

More people is New $$Billions brought into the economy, it is more employment, more income tax revenue , new houses and apartments, more rates, more GST, .... more visitors by friends and families, more spending, more students, more GST ...more local business turnovers more construction work and activity, more business tax, more GST .... more household confidence, more cars and consumption more goods, more tax, more GST ... I think you get the picture now !! this is how surpluses were made !!

Surpluses take money out of the private sector (inc h'holds). Govt deficits spend money into the private sector, thereby reducing private debt and / or increasing savings.

Do yourself a favor and educate yourself. This explains sectoral balances quire nicely, even though you might not like the narrative.

https://www.newstatesman.com/politics/economy/2017/08/were-racing-toward...

Chalk and cheese !!.. What a load of irrelevant rubbish and a BS link from a crooked country where looting is legal and manipulation is the Norm ....

We only need one educated guru like yourself here ... the rest of us are just illiterate spectators and know nothing about high level economics ... lol

Maybe irrelevant to you, but the proof is in the pudding: you cannot dispute sectoral balances if you accept the basic accounting relationship between aggregate spending and income or (G – T) = (S – I) – NX.

I very much doubt you bothered to read it.

Eco bird. Thank you for putting the facts for what has happened to New Zealand for the last 9 years..
The lollies were in the jar for redistribution as you say. BUT the other side of the Political arena think they can do a better job of re-distribution of the lollies we have seen it time and time again, but the average Joe New Zealander gets brain washed. and will end up receiving nothing once all the money has been wasted and we are then tod taxes will have to rise because all the money has been washed down the drain. There are no free lunches

The coalition need working groups as they have no idea whatsoever of running any business let alone a country.

Many have stated this on here and the coalition supporters will regret the day they opted for this incompetent bunch.

Smiles and promises are easy but following through with them are a different story!

Hopefully we have an early election because 3 years is going to be too long.

I find it unbelievable the double standards at play here regarding overseas capital by this government. On one hand we want significant offshore investment to assist with infrastructure investment while on the other are in the process of banning offshore investment into other asset classes. I like having my cake and eating it too!!

Am I being an optimist for once. He is using big words that most of his voting faithful would not understand. I think he is suggesting that banning foreign money / owners is not such a smart idea.
Lets hope he has started joining the dots and figured out hammering the property investors who provide shops, factories and offices for the workers to create things in and houses for them to live in is counter productive. Come on Phillip. How about removing the tax and regulatory burdens that are hurting decent working class citizens of New Zealand. Stop hating and punishing tenants. Every new tax on the worker's landlords hurts the tenants more than it hurts the investors.
Every government in the world needs property investors.

what a complete moron. This is the same government that wrote off the finance sector 10 years ago. I recall sitting in a meeting of financiers in 2009, listening to the rbnz telling executives from all the large finance houses that mezzanine finance was "dead" in the water. Someone in the audience passed a comment that the regs would effectively stop all future property finance and was this the intention. The reply from the rbnz was an unadulterated "yes"… however the rbnz thought that investors were resourceful and would "find another way" to fund developments. Roll forward 10 years and this Muppet (from government) is pleading with industry for funding. laughable

The biggest issue is the incredibly high cost of appeasing all the various interested parties in infrastructure development - from adjacent land owners, to taniwhas, to safety wallahs, to greens and Nimbys. Govt could eliminate most of these costs at the stroke of a pen - and do things China style, but that won't happen, and neither will the necessary infrastructure. Get out of the big cities now - they can't be fixed under our current bureaucracy.

1) The NZ government should be legislating to force local government to only spend on the essentials (water, roads etc) and not the nice to haves. All the spending should be backed by business cases. There is undoubtedly local government efficiencies to be had. This will provide some additional revenue for infrastructure.

2) Why value capture ? - difficult to define & requires artificial boundaries eg around a rail station & overall revenue wont be that high. Far better to force local government to rate on land value only and for central government to add a land tax as an outcome of the tax review (& reduce other taxes).

3) The land tax and rating on land value only will drive demand for densification reducing the demand for greenfield infrastructure. Existing infrastructure can then be better utilized.

4) Free up the RMA - remove land zoning and go effects based only as originally envisaged. This will allow the densification to happen.

5) Reduce the immigration rate. The need to look at infrastructure bonds and value capture etc is mainly driven by the need to cater for excess demand into Auckland that is occurring at a rate above that, that LG can fund through rates and stay below its debt ceiling.

Let us not forget who has gotten us into the do do's that it looks like it is going to be very, very difficult to get out of. At least someone is trying, now.

Sorry Phil but this is small potatoes. ACC and Superfund have huge funds you could tap for infrastructure and Superfund CEO even said he would welcome enquiry on this a year ago on TV. Also, Japanese are getting virtually nil interest on their bonds - offer them 50 year bond at 2% and you would have a queue. This is NOT DEBT it is INVESTMENT. Get with it man. And do same for rail investment up North Shore. Enquiry and working group itis this government has!! Business borrow for investment. Classify it as something else.. Stop being terrified of "business" labelling you Red and a worry. They will reap the benefits. Get on with it.