Why five months into the 2019 financial year none of the $90 million Treasury had set aside for KiwiBuild had been touched

Why five months into the 2019 financial year none of the $90 million Treasury had set aside for KiwiBuild had been touched

The former head of KiwiBuild may have been wasting taxpayers’ money by an “employment issue” keeping him out of the office for a couple of months in the lead up to him resigning on Friday.

But slow going kicking KiwiBuild into gear means the policy as such isn’t currently costing taxpayers.

Treasury had forecast that $90 million would be spent on KiwiBuild in the 2018/19 financial year (ended June 2019).

However, the latest Crown accounts released last week show that none of this was spent in the first five months of the year.

This is largely due to the fact private developers are the ones currently building KiwiBuild houses, not the Government.

In other words, the Government is underwriting private development through its Buying off the Plans scheme. It’s telling developers that if their KiwiBuild houses don’t sell for a set price, it’ll pay the difference or buy the houses.

When the Government in May invited developers to participate in the scheme, it expected 80% of the 1000 KiwiBuild houses it aimed to see built in the 2019 financial year would result from the Buying off the Plans scheme.

It saw the scheme accounting for 50% of builds in 2020 and 40% in 2021.

But to date, only 33 KiwiBuild houses have been completed. Seventy-seven are being built and 4047 have been contracted to be built.

So, while the Government hasn’t been spending up a storm buying land and building houses itself – yet – the Buying off the Plans scheme hasn’t gained enough scale to up the chances of it costing the Government.

The entire KiwiBuild programme, which aims to see 100,000 houses built over 10 years, is expected to cost $2.1 billion.

Asked by interest.co.nz why none of the $90 million allocated towards KiwiBuild in the 2019 financial year had been spent in the first five months of the year, Treasury sort of alluded to the above explanation.  

It also pointed out that being a new programme, it’s difficult to specifically forecast when costs will fall on the Crown. Here’s Treasury’s response:

“At early stages of the KiwiBuild programme significant forecasting assumptions were required around the source and phasing of funding.

“As there was no history to inform the forecasts the Half Year Economic and Fiscal Update forecast reflected the Government's best estimate of the KiwiBuild spend at that time.

“Due to the long life cycle of KiwiBuild operations a number of developments currently remain in progress and will not have any expenditure (if any) incurred until they are completed.

“As the KiwiBuild programme matures, its forecast spending profile will continue to be refined and it is expected that further funding will be drawn down out of the KiwiBuild appropriation.”

See this page for a more detailed update on KiwiBuild's progress. 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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59 Comments

Didn't the govt just pay for the first ten white elephants in Wanaka? So there is about $6m gone, with another 200 houses there still contracted (so $120m or thereabouts to go)

I wonder if we are going to end up moving a bunch of state housing beneficiaries to new state housing in Wanaka?

As long as they were all sold to buyers, then the government wouldn’t have spent a penny.

I don’t think you understand what underwriting means - the government only will be paying for KiwiBuild houses that don’t sell.

Correct, but none of them sold.. so the govt did buy them. Or at least that is what somebody on here commented, I can't find anything quasi official to back it up. But almost none of them sold at the ballot, that was confirmed a while back (hence why I called them white elephants.). there were 4 sales from the ballots for the Wanaka and Te Kauwhata homes.. and that was after they extended the ballot periods).. 20 odd houses, 4 sales.

You have to wonder about govt guaranteed prices for homes built by the private sector. If I was a builder focusing on this part of the industry, I'm not sure I could believe my luck. Some would argue there are no builders down this end of the market. There will be now. Perhaps that's the point.

@LJM its a bloody disgrace that property developers profits are private but their potential losses on unsold builds and stock are going to be carried by a taxpayer -funded handout .

In fact its a scandal, that in most civilized countries would bring the Government down .

So "The policy is failing because we can't execute and not enough people can afford to buy" is now a strength because "We're not spending the money allocated" and that's meant to be good news?

This is a party that perpetuated an incorrect myth that National was 'doing nothing' - they were holding ballots through HLC and HNZ at the same price points as Kiwibuild and rebuilding state houses while adding on private sales as they improved density. Success through failure is indefensible, especially given how central this was to the election outcome.

Kiwibuild is dead, you got to know when to stop flogging a dead horse.

@Carlos67 , not dead for property developers who have now got a buyer of last resort on any crap they cannot sell themselves .

And , the price is very very good at $450,000 for 50m2 units .......... that's an eye-watering $9,000/m when core building costs for developers is WAY UNDER $2,000/m2 .

Those 50 m2 units should be selling for $150,000 TOPS including builders and developers profits

Of course KiwiBore is dead, in theory it was a good idea, but was never thought out by the Labour Party as
Per normal!
Twyford keeps changing things and is going to look totally incompetent once again this year, and his slimy smile is going to be wiped off his face!
National doesn’t actually have to do a helluva lot to get back in, as the COL will continue to look a rabble Of a government!

The Boy please give us the name of the National Party leader who will get them there and the name of the party that will help them get over the line. Take your time, think about it and get back with your answers.I am not expecting anything from you as they don’t have a credible leader and there is no party they can rely on for support. Eight more years. Get used to it.

Labour will get National over the line. People aren't going to keep looking the other way if they keep failing to deliver on their flagship policy.

It is all about your leader and National has no one that inspires voters. Jacinda might be light on policy but she inspires people of all ages and types. Just like Trudeau.

They do have a few that inspire specimens, unfortunately they happen to be the four legged ones

Sounds like you were in lala land over the last year.. haven't heard that the National is self destructing themselves

If it's a choice between trying and doing a poor job, and not trying at all, I'll vote for the team that at least tries. Not that either got my vote last time, and so far neither are likely to get it next time.

What a mouthful of a comment. Almost as good as apolitician

Grandad, anyone could lead them, as the COL will self destruct!
Won’t need any other party as the Coalition of Losers is los8ng big popularity going on all the comments that I have read and listened to.
The ones that will vote for Labour are people who are on benefits and do not see much of a future for themselves, so they vote for the social left party who they think will look after them better!
Anyone who thinks with their brain can see that this lot in power are deadwood!

That is what happens when you listen to voices in your mind

The Boy you certainly show your lack of education when you say that only people on benefits vote Labour. Another silly badly thought out comment from you. Labour gets at least 30 per cent of the overall vote. Beneficiaries make up a lot less than 30 per cent of the vote. Business people and professionals vote Labour as well as a lot of working class people. Think before you make such silly comments.

Gordon, where did I use the word “ONLY”?
Labour got far less votes than National So was far less popular than National and their popularity will drop,as we get closer to the election obviously because their performance will be abysmal.
Voters would never have voted the way they did at the last election if they knew that they were going to get this
Mish mash of politicians!
As for education Gordon, did very well at High School, no University, but I have done unbelievably well in the school of life financially!

Real Estate agents certainly are a type and you fit in beautifully The Boy. All over the world politics has gone presidential. John Key did it for National. Jacinda does it for Labour. Who will replace JK? No one currently in the National caucus. Eight more years. Get used to it. Learn to calm down and get less angry otherwise at your age you might keel over.

Gordon, not angry, one iota.
We are just fine on all counts, but it is the less fortunate people in NZ that contribute to this country that I feel for.
This socialist government on,y wants to look after those that contribute bugger all!
Eight years more, you are dreaming jones!

What are you smokiing... do you listen to yourself..

How can I listen to myself?
I am writing not talking!

A smart person will be able to listen to what they write.. you obviously don't fall into that category

Nicola Willis is very likely to take over as Jacinda did before the next election Google her she has a interesting background and in a Mp for part of Wellington.

1st class honours in English is interesting. All my friends who loved reading and went to study English at uni changed their course at the end of year one. She must be determined and have an ability to slog her way through boring texts. Ideal MP. What is she doing in the National party?

I think KB will find its feet when the prefabricated process is set in place..

A lot of people have tried to drive down costs with prefabricated construction. Yet no one has succeeded to any significant extent and those companies that have persisted have gone broke. Given that the Government is not willing to drive down the cost of inputs it's foolish to think that the end cost of a house will change.

Where KB is failing is that it's providing houses for the top 5% income earners. It's the 50% lowest income earners are not finding themselves in a better position, and of those there doesn't seem to be anything going on to address homelessness (which requires specifically targeted help).

Given how MBIE have operated I don't see anything inspirational happening with their staff being moved to the commission. I hope that they don't drag down HNZ.

"A lot of people have tried to drive down costs with prefabricated construction."

What is your definition of lot of people..

A lot of developers. Those who have tried to tackle the issue seriously. I've even been involved in a number of projects. So perhaps a lot of capable people, yet there hasn't been any significant success.

What will happen when less capable people try?

Isn't it foolish to compare developers to the current effort, where by even banks are coming on board..

Think before you make comparisons

There's no need to insult me by claiming I haven't thought.

Will the banks bring down the costs? No. They know nothing about the cost of construction.

Will KB bring down costs? So far they are unwilling to bring down costs.

Will MBIE reduce the requirements of the Building Code to bring down costs? So far it's unlikely and it would need political will for this to happen.

There is nothing that is happening right now that will bring down costs (unless there is massive oversupply being created). So far Labour do not want to crash the housing market, but you never know there may be some hope of that happening in the future.

"unless there is massive oversupply being created). So far Labour do not want to crash the housing market, but you never know there may be some hope of that happening in the future."

That exactly is the epitome of what KB is intended to achieve, with prefabricated processing one of the levers..

National did bugger all for 9 years.. as of today there are 47 FHBs that own their own home.. under national that would have been less than 10% and having to pay more for exactly the same..

The rate of completion is low right now. If they managed to hit large volumes the government would end up holding a lot of property. I'd like to see the new build areas used for social housing in the event of massive oversupply. However it won't be money efficiently spent. It would be interesting though.

I just don't see them building enough, nor are there the resources to in NZ to build on that scale. Perhaps if KB has a boss that turns up to work instead of being a complete loser.

It's people exactly like you that thrived under the national government, and hate the fact that there is a government trying to break your dreams..

Is the building code the problem? Or is it all the consents and paperwork. The minimum requirements in the building code in some ways are barely adequate as it is.

But the current effort is still developers.. only difference is they now have gauranteed sales at a certain price point if they tick the right boxes, regardless of whether the end consumer is getting what they want. (Regardless even of if the end consumer can even raise funds to buy)

The problem is the building code stifling innovation and competition. Everything has to be done the NZ way for NZ conditions, BRANZ certified, yada yada - as if they don't have rain in other countries! Anyone who wants to build a proper house is told they have to arrange the sticks in a certain way that allows plenty of cold air in and heat out. And the kicker - you must pay $$$$ for it because 3 companies corner the market for any material you can think of. Pile on some safety costs and consent fees as well. How can Phil Twyfool achieve any competition when his own laws forbid it!

If Labour were serious about housing they'd:

1) Open up the building code so kiwis could import quality kit-set housing from let's say Poland. This would screw down Fletchers/Carters or maybe put a nail in their coffin.
2) Make builders etc actually accountable for serious defects like leaky buildings - both financially and reputation wise.
3) Tax land so people have somewhere cheap to erect said houses without covenants. How many people are living in satellite towns commuting past acres of banked land?
4) Stop importing living breathing "GDP growth"

Sadly they don't have the balls. If anything they'll probably:
1) Add more regulations
2) Refill the toner on the wet bus ticket printer
3) Implement another fake capital gains tax everyone and their 3 family members can escape.
4) Import more of Chinese, Indians and their grandparents because the Chinese Herald published another sob story.

Kiwi Build would be best spent developing houses in Christchurch, not subsiding Christchurch though, we don't need any of that inflation here!

.

Zack, we don’t need any KiwiBore houses in Christchurch.
We have enough houses being built here at the moment, as plenty of new subdivisions have opened up, probably enough land for the next 10 years!
We certainly wouldn’t want the crap that is being built in Auckland that they call KiwiBore!

There needs to be more 1-2 bedroom homes built in Christchurch. Not everybody wants to buy a 3 bedroom, 2 bathroom, double-car-garage styled property in Wigram. Lots of people rent and the rental stock in the 1-2 bedroom market is gross/non-existent.

Best start building what people want, or risk your properties sitting empty.

Auckland's market is unsustainable and Wellington is due for an earthquake - two reasons why Christchurch will increase in population and therefore demand for accommodation. Let's not drop the ball, clearly building up Christchurch is wise.

A lot of the 1 - 2 bedroom places in Christchurch tend to have interior painted block walls that condense even the smallest amount of moisture in the air.

There are plentry of 2 bedroom units around!
They won’t be building 2 bedroom homes in subdivisions as they won’t comply with the covenants of the subdivision i.e they will not be big enough!

"There are plentry of 2 bedroom units around!"

Here in Christchurch we must have higher standards. We don't consider old rot boxes to be suitable accommodation.

Zack, 2 bedroom rot boxes?
We have a few 2 bedroom units and they certainly are not rot boxes!
We have no problem renting them and probably average around 380 per week so pretty affordable for people.
Fully insulaTed with at least one heat pump and never have complaints that they are cold

But to date, only 33 KiwiBuild houses have been completed. Seventy-seven are being built and 4047 have been contracted to be built.

Government gets elected on a platform to build houses. And in 18 months they're up to 33. Farout.

Don't let them trick you Davo. They've built exactly ZERO. Being a middleman between the Jim the builder and home owner isn't building. Jim the builder would have been building a house regardless of PT's vote buying scam. What difference does it make if Jim's house is sold with a GJ Gardener logo or a KiwiBuild logo‽ Twyford is just as bad as red face Nick Smith.

That's what i was thinking. It'd be like me going out and saying I'm going to build 100,000 Toyota Corollas in 10 years, then sending out a letter to Akio Toyoda telling him I'll personally underwrite any cars that fail to sell.
Of course none of the cars fail to sell because they're popular, and I still claim to have built 100,000 cars?

And bonus for Toyota, they need not worry about condition with a guaranteed buyer. Why put on two layers of paint when one will do? Glass windows? Plastic will do. Toyota engine? Briggs and Stratton will still pass the WOF.

Could be a Corolla facelift version, Toyota Corolla Trabant.

https://en.wikipedia.org/wiki/Trabant

In other words, the Government is underwriting private development through its Buying off the Plans scheme. It’s telling developers that if their KiwiBuild houses don’t sell for a set price, it’ll pay the difference or buy the houses.

Phil Twyford operating a price floor to stop housing from becoming affordable?

Want to make a real difference with the 90 million. Find 138 hard-working families with good employment and rental history. i.e they pay rent on time all the time. Then loan them 100% of the 650k for a house and fix the interest rate at 3.5% for ten years. It costs the government nothing

Better still put Shanes Jones happy fund to work in the same way. $1,000,000,000 a year equals $100,000 x times 10,000 a year according to my calculator. It seems there is plenty of money to waste, but an inability to actually solve problems.

So Kiwibuild is underwriting property developers who cant sell their crap , cook-and-push houses .

What an utter fiasco to have speculative business being given a taxpayer funded feeding scheme

Kiwibuild is no FLAGSHIP policy ................. more like a TITANIC fiasco full of hubris and folly

wow, you're getting good with the Ouija board, such a good channeling of The Man its scary. Just need to remember to finish each sentence with a ! and you'll have it down pat.

Spivs and flickers still massively distort the housing mkt and will continue to do so, just as they do in the UK and Aus despite CGT. The reason? because people register their other properties in the name of family members thereby making them all "family homes". CGT and other specific measures will work but only if the CGT is applied to all housing, simple. And it must happen or when the mkt does finally dive so will the economy. Apply CGT on all housing plus remove the other incentives to speculate on housing now before interest rates rise too high, wait and we are stuffed.
Kiwibuild as a laudable attempt to improve the situation might will fail without the affore mentioned measures. Builders and building materiel suppliers serve the 250sq m 2 toilets on 300sq m brigade. NZ is a tiny country, don't allow the spivs to continue to hold us back! The answer bring back a govt. owned constructor, along the lines of the MOWD.
Westie