Cabinet has refused Housing Minister Phil Twyford’s request for him to be given the authority to adjust the KiwiBuild price caps in accordance with future market volatility.
In a KiwiBuild Cabinet paper, Twyford requested he, and the Minister of Finance, be given the power to adjust the upper price limit of KiwiBuild homes at their discretion.
“Given the dynamic nature of the housing market, I seek delegated authority from Cabinet to amend the proposed KiwiBuild price caps (whether up or down) over the life of the programme, in consultation with the Minister of Finance.”
But his request was declined, a spokeswoman for the Minister told Interest.co.nz.
“He did go to Cabinet with that [idea] because he thought it would make the process more efficient.
“But he didn’t get authority because Cabinet preferred that it goes back to them to make the decision if they do want to change the price caps,” she says.
She adds that the rationale behind the idea to delegate the power to adjust the caps was “a bit of future proofing.”
Speaking to media, Twyford says he was not disappointed by Cabinet’s decision.
“It’s not big deal,” he says. “Anything significant goes back to Cabinet colleagues and I’m perfectly relaxed about that.”
He says he does not expect any changes to the KiwiBuild homes caps “anytime soon.”
Minister of Finance Grant Robertson says the decision was made because Cabinet wanted to make sure it had an overview of the KiwiBuild system and the price caps were a critical part of that.
In Labour’s pre-election manifesto, the party outlined a KiwiBuild home in Auckland would cost between $500,000 and $600,000.
But, because “land prices and development economics in Auckland have shifted further in that period,” according to the paper, the maximum cap on an Auckland KiwiBuild home was increased to $650,000.
In the Cabinet paper, Twyford said he is not proposing any immediate changes to that upper limit.
Risky business
The documents also reveal the Crown has the option to rent out or repurpose for social housing any KiwiBuild houses that a developer is not able to sell.
“The buying off the plans initiative, by its nature, involves the Crown taking on some risks that the market is currently unprepared to take itself.”
Although officials will undertake the appropriate due diligence to make sure prospective developers are credible, “we are taking the sales risk as houses we end up with through any underwrite may not be sold.”
“However, if this is the case, the Crown always has the option of holding these houses, for private rentals, or repurposing it for social housing,” the paper says.
Twyford told the House on Tuesday the Government could also step in and sell any properties developers were unable to offload at an agreed upon price.
National’s Housing Spokeswoman Judith Collins says given the risks outlined by the Cabinet paper, it looks like the Crown could become an unsecured creditor in failed developments.
“This means, all the houses [Twyford] has announced with the KiwiBuild label which have been subsidised by the taxpayer could be at risk.”
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.