Housing Minister coy on actual numbers of houses to result from the Kiwibuild 'Buying off the Plans' tender

By David Hargreaves

Housing and Urban Development Minister Phil Twyford  says the Government's Kiwibuild 'Buying off the Plans' initiative attracted "overwhelming" interest - but he's not giving specifics about exactly how many houses might result under the proposals the Government has received.

He says "almost 100" proposals have been received from developers in response to the tender conducted by the Government, which closed last Friday but appears reluctant to be drawn on how many actual houses that might produce.

In effect the initiative is an underwriting scheme - with the taxpayer to provide the underwriting. The outcome of the tender is therefore important for the Government, with Kiwibuild being a flagship policy.

Asked on Wednesday by interest.co.nz's Jason Walls how many actual houses the proposals received may amount to, Twyford said the proposals "could result in anything up to a few thousand new homes”.

The Information for would-be applicants that was prepared by the Ministry of Business, Innovation & Employment (MBIE) outlined the following targets for the new underwriting scheme:

• 800 Kiwibuild dwellings in Financial Year 2019;
• 2,500 Kiwibuild dwellings in Financial Year 2020; and
• 4,000 Kiwibuild dwellings in Financial Year 2021.

So, according to those documents, about 80% of the 1,000 Kiwibuild homes planned for the 2019 financial year would come from the Buying off the Plans Scheme.

Across the first three years of Kiwibuild some 7,300 of the 16,000 planned homes would therefore come from this initiative. Twyford's response on Wednesday though was that in total the Government had received proposals that  "could result in anything up to a few thousand new homes”.

Asked specifically on the number of houses that might result from the initiative in 2019 (given that the stated target was 800), Twyford suggested, "several hundred".

This was his full answer to that question:

“In the first year of the Kiwibuild plan from July 1 we’re planning to build 1,000 affordable homes and we are doing that in a mix of ways – one is by Housing New Zealand building Kiwibuild homes in their redevelopments, we’re also looking to deliver several hundred through this buying off the plans, but there are also large scale development projects and the Land for Housing Programme where we repurpose Government land and have third party developers do that work.” 

Asked how many overseas companies had put in proposals, Twyford said: “I’m not aware of that number.

"I know I think roughly half were based in Auckland and others from around the country.” 

In his earlier statement on the tender outcome, Twyford had that while said the Government's early market testing indicated  it would get a healthy response "I did not envision this level of interest".

"It shows that the people who actually know how to build the homes this country so desperately needs are right behind Kiwibuild."

Easier funding

The implication from the buying off the plan scheme is that developers will find bank funding easier to get because they will be able to get guaranteed prices for the houses in their developments that are designated as 'Kiwibuild' homes - either by directly selling those to the Government, or by getting the Government, AKA the taxpayer, to cough up the difference in any shortfall they may have to take when selling Kiwibuild houses. 

Twyford said the Buying off the Plans initiative is one of four ways the Government will build modest starter KiwiBuild homes for families.

As well as buying off the plans, Kiwibuild homes will also be built by:

• Converting existing Crown land and purchasing additional land from the private market (under the Land for Housing programme), which will be on-sold to development partners who commit to delivering KiwiBuild homes.
• Identifying and leveraging opportunities to deliver KiwiBuild homes through existing Government-led housing initiatives, such as those being undertaken by Housing New Zealand (e.g. McLennan development)
• Doing the groundwork to enable new urban development authority (once established) to undertake major urban redevelopment projects in partnership with iwi, councils and the private sector. Investigations into the first large-scale projects are underway.

“A common challenge faced by developers is the need to sell a significant proportion of dwellings off the plans in order to secure funding for construction, which means that developments can sometimes stall or be shelved," Twyford said.

"By underwriting or pre-purchasing homes in a proposed development, the Government can provide developers the certainty and backing they need to proceed. In return, we’re accelerating the speed of these developments and ensuring they offer more affordable housing, so more first-home buyers can get onto the property ladder."

Twyford said the next step would be for the Kiwibuild Unit to evaluate all the proposals and advise which ones were suitable to progress to commercial negotiation.

"While it’s unlikely that all 100 proposals will proceed, I want to thank all the developers who clearly put a significant amount of effort into preparing these detailed proposals and still back the Kiwi dream of affordable housing."

It will get worse before it gets better

Speaking to media on Wednesday, Twyford said he felt that things were going to get worse before they get better in housing affordability in this country.

“...And we need the kind of massive intervention in the market that Kiwibuild offers.”

He didn't believe the challenge was insurmountable though.

“I don’t think that anyone’s under any illusions that this is a crisis. Even the Opposition now use the words ‘housing crisis’ that’s why we have a bold reform programme, but it will take years of work across a number of different fronts to fix this thing.”

And he said that people should not give up on being able to own a home.

“I’ve never been fatalistic about this for the reason that there are dozens of cities and countries around the world who don’t have these problems and they build more houses – they build better houses and they build more affordable houses. There’s no reason we can’t do that.”