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Despite recent set-backs KiwiBuild says its mass produced housing plans are still on-track

Despite recent set-backs KiwiBuild says its mass produced housing plans are still on-track

With the Minister of Housing and Urban Development Phil Twyford dropping the interim targets for KiwiBuild and the whole programme being criticised left right and centre is there still light at the end of the tunnel?   

In November last year Twyford said over 100 manufacturers had responded to a government call for companies keen to help mass produce housing for KiwiBuild. 

“KiwiBuild is not only about tackling the housing crisis and restoring the kiwi dream of homeownership to young families. It’s also about transforming how we build homes to reduce construction costs, deliver consistent high quality design, increase capacity of the construction sector, and get homes completed faster.

“Offsite manufacturing firms from across New Zealand and around the world have put forward their ideas to help us do that. The KiwiBuild Unit will now work through the proposals from the companies.”

Twyford admitted it would take time to get the mass production housing off the ground. But with all the criticism directed at KiwiBuild recently and the fact Twyford has failed to meet his own construction targets there’s no time like the present.

So what has happened to the offsite manufacturers who wanted to help the government realise its flagship policy?

According to KiwiBuild Unit spokesman Clint Smith 44 different organisations have now been shortlisted and asked to take part in the next stage of the process.

Smith says the companies will present their proposals to KiwiBuild starting in March and the process will run through until early May.

“KiwiBuild will then complete its own evaluation of the proposals and we will get back them by late June.”

He says KiwiBuild will then begin negotiations with the successful parties beginning in July and hopes to finalise the contracts by the end of the year.

“Offsite manufacturing can reduce construction costs, deliver consistent high quality design, increase capacity of the construction sector, and complete homes faster. It is expected that the OSM procurement process will lead to a significant increase in new homes available for KiwiBuild buyers over time,” Smith says.

But he says he can’t disclose who the companies are taking part.

“For reasons of commercial confidentiality, we are unable to comment on specific manufacturers, or provide any further detail on the proposals that have been put forward.”

Dr Arthur Grimes is a Senior Fellow at the Motu Economic and Public Policy Research Trust and Adjunct Professor of Economics at Victoria University. Last month he told www.interest.co.nz that if the government’s goal is to make housing more affordable it will have to build more of them and major housing projects take time.

“They need to be mass produced and that’s what they’re going to have to work on. I think this government and the last government had the right intentions. But housing takes years to build and they’ve been naïve in terms of the amount of them involved in housing developments.”

And the slow progress with KiwiBuild has been picked up by National housing spokesperson Judith Collins who says the government’s decision to drop its interim targets shows it’s in dire straits.

“Mr Twyford has tried to claim he’s only six months into a 10-year project, but KiwiBuild was allocated $25 million as early as December 2017 when he announced the first KiwiBuild houses in Mt Albert. The Government argues it didn’t kick off KiwiBuild until the middle of last year but the programme has been under way for more than a year, and it still only has 47 houses.”

“At her weekly post-Cabinet press conference the Prime Minister said this year is the year of delivery, but the next day she’s admitted the Government won’t be delivering on its flagship scheme. All interim KiwiBuild targets have been ripped out of the picture.

“But even stripping KiwiBuild back to its bones isn’t going to change the fact that the scheme is turning out to be one of the biggest public policy failings this country has seen in a long time.”

Only time will tell. But whether Twyford wants to scrap his interim targets or not, central to making KiwiBuild work is the mass production of housing.

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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50 Comments

So a BUY on FBU then?

Teehee. Royal Commission on corporate bureaucracy anyone? How and why do large centralised bureaucracies encourage systemic failure?

Fletchers have been demonstrating prefab building in Hobsonville for the last couple of years.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=119...

This was their latest (Last year) to put up a duplex in 24 hours.

I would say that this was their business case to the government to say "We got this fam", so I would be looking at the buy on FBU absolutely.

It will be interesting to see how long these actually last. This was done in the US, and within 10 years most of the houses had rotted to the core and were pretty much worthless and couldn't even hold their own roofs up.

Many of our traditionally built houses are full of rot within 10 years so whats different ? At least there is a possibility that they are really cheap instead of $600K for a rot box.

10
up

If they controlled immigration then they wouldn't need tax payers to subsidize new housing to cover the immigrant population explosion (in a country where the average fertility of a kiwi women has been less than 2 for the last 30 years)!

I will be interested to see what mass production the Government can manage and what the real costs per unit are. Will the Government produce at a large enough volume? What will the quality be like? Will they comply or not comply with the Building Code? Will the houses go to those on lower incomes or are they just going to target the upper 50% or 5% of incomes like the current KiwiBuild houses?

It's not clear what they are going to do yet. I look forward to a real announcement.

For some reason I am picturing this next to Ex Expat's place. One can only hope.
https://iainmasterton.photoshelter.com/image/I00001c9c2pNGrqs

You wouldn't be the only one hoping, but that's far from my reality. That said, if the Auckland City Council allows Freedom Camping in Kohi, you may have your wish.

As long as it's not an Opal Tower!

If prices go steeply downward, like Sydney and Melbourne, will they call a halt to it? It seems quite likely that will happen at this point.

I dont think prices have gone down steeply, yet, this has not even started IMHO.

Will need to mass produce flat level sections to put these houses on. I have observed the many years - yes years - it has taken Tamaki Development to establish building sites on steep sections.

Tear up the urban limits - seize large parts of the flat level land around Takakini - already adjacent to the main rail line and start building.

Ardmore Aerodrome down the road was built and operational in 90 days by the Seabees.

any the consequences of " seize large parts of the flat level land " ? both legal and macro-economic? Not that I dont disagree but there is no free lunch.

Them’s the trade-offs I guess.

More housing - intervention and acquisition at market prices of course.

Lot’s of precedents.

Legally they might be good. Most of the land is a flood zone and future urban use will create a disaster risk increase. The land perhaps can be obtained for flood protection under the public works act, then resold to developers after the work is undertaken.

There's certainly. currently. a free lunch for land bankers. Hold a rural paddock at rural values of say $50K/ha, wait for the zoning change, sell it for 10x the price, still completely undeveloped. See what the Productivity Commish thinks of this rort here.....

Dunno if this is a free lunch eh, there's sections of the tax legislation that specifically deal with uplift in value due to rezoning. Can you point me to a page number in this thing?

Waymad see my 'land readjustment' response to The Man's detailing of how expensive Christchurch fringe sections and houses are using the current land use regulation system.

You need to define 'expensive'. I don't regard the Faringdon etc house+plot prices of $450k (ish) as 'expensive'. But then Faringdon's in Selwyn District - an area which has shown itself to be particularly adept at eating the dysfunctional Christchurch City Council's lunch. And just down the road from me there's Prestons - a Ngai Tahu initiative which the woeful CCC stalled for decades (read up about Plan Change 30....) but which has sprung ahead thanks to good lawyers, Gerry Brownlee, and a certain earthquake sequence. Apartments from low $500K....compare that with the CBD, where Fletcher Living apartments are priced in seven figures....

Faringdon in Rolleston advertise section prices 'from $165k' https://www.faringdon.co.nz .

I think my land readjustment proposal could match and better those prices for small sections around new train stations on the existing rail corridor in Belfast, Kaiapoi and Rangiora and for a light rail corridor from Halswell to Prebbleton.

Do it the "Waitangi" way and take it for free.

Seems to be a lot of people commenting that haven’t really got any idea about property!
Mr Twyford and Ardern are totally out of their depth in everything!
They are self imploding by the day!

Self hatred can be debilitating

It would appear most of the country don't know anything about property....when they pay $600,000 for the average house! Less actual sheep in N Zud thuse dayz, but more sheeples....

Ardern is good for running the bbq, nothing else

Stop the immigration and get Auckland Council out of the way (regulatory-wise) and the problem will sort itself out.

If anyone knows about policy failings its the nats. All they know how to do is hock bits of the country off to foreigners, they have zero credibility on the issue. The way forward is accquire idle land that is banked by developers and get houses on it asap.

..except this isn't about what National did or didn't do - it's what the Govt promised but has miserably failed to deliver so far. Nice misdirection tho.

There is a cost to building homes apart from the land!!!!!
Building materials will not be coming down anytime soon despite many thinking they should.
In ChCh an average section is around the $280 mark for a reasonable size,you can pay more and for smaller!
To build a reasonable home is approx $2200 per metre, some much more and some cheaper but probably not much under $2000 per square metre.
Therefore a fairly standard home in a new subdivision approx 220m2 is costing over $750k before finishing touches.
Yes some will say that you don’t have to build 220m2 but in most subdivisions in ChCh there are building covenants that have minimum size houses to protect your investment!
There is a new subdivision well out of ChCh that has sections from $100k that are small and you can probably build a shoebox on it.
Reality is though that this development will be a ghetto!

Kiwibuild should look at what land readjustment can do. Section costs could be much cheaper around existing heavy rail corridors in northern Christchurch and southern Auckland and new light rail corridors (SW Christchurch and NW Auckland) using this approach.

Around each proposed rail station, an area of 1-2 sqkm could be designated as a MHUD UDA suburb. https://www.beehive.govt.nz/sites/default/files/2018-11/UDA%20summary%20...

All the existing landowners could be offered an exchange of titles -their big rurally zoned titles (farms, lifestyle blocks etc) for multiple much, much smaller residential zoned titles. The new titles would come with infrastructure provided -congestion free rail, 3 waters, roads and parks etc. Because of the value created existing landowners would only need to be offered something like 25% of the created residential titles back to be better off financially. (MHUD have already indicated land owners may be compensated with an equity share in the development project - land readjustment would effectively turn land owners into developmental partners). The remaining titles could be given to Kiwibuild, HNZ for State housing and the rail provider (for rental to give it another revenue source).

A targeted rate could pay for the infrastructure provided -including a good proportion of the rail infrastructure.

I estimate that infrastructure would cost about $120k-$150k. So Kiwibuild section prices could be half The Man's Christchurch section cost of $280k. Build modest sized housing on this i.e 1 bedder 50-60 sqm, 2 bedder 70-80 sqm and 3 bedder 100-120 sqm and get the construction cost per sqm rate down below $2000 and Kiwibuild houses could easily be built for half The Man's $750k cost.

If the market still wants 200+sqm houses then there would be nothing stopping the property titles that are given back to the original land owners being used to make a profit from that top end of the market.....

Rail lines in Greater Christchurch would be congestion free i.e. travel times would not be affected by slow peak time car traffic. The effect of this would be to increase the size of Christchurch agglomeration population. This could have a significant productivity benefit for the city.
The full argument based on UK cities can be read here
https://www.citymetric.com/transport/birmingham-isn-t-big-city-peak-time...

Brendon: fairly interesting. I used to live in Birmingham (50 years ago) and have family in Bradford and Lille so I'm familar with these places. It seems to have left out the odd historic quirk. Productivity in Birmingham and Lille may or may not be influenced by very high immigration that is not blending in - so you get the congestion of a double city with the productivity of two half sized cities. Leeds and Bradford used to be similar big cities but now Leeds is booming and sucking all the life out of Bradford, Halifax, Wakefield, Dewsbury, even Huddersfield. Leeds and Birmingham have inherited heavy trains and run effective commuter services. Lille has a much higher population density and their unmanned metro is wonderously effective - if you happen to live along the two main routes.
I don't know Christchurch (but yes I do have family living there) but it must make sense to develop whatever rail already exists - link to new housing in satellite town and if there is no way to get the rail working then the advantages of busways over trams seem obvious - just so much easier to implement and readjust after emergencies. I do know Christchurch is mainly flat so all forms of transport are cheaper to build: cars, buses, trams, heavy rail.
The big mistake would be trying to get Christchurch to have the density of Lille or Barcelona - it may make great sense for agglomeration and productivity and be attractive for youngsters looking for night life but eventually everyone who starts a family wants a place of their own - their own castle.

Yep real easy brendon, you have it sussed not. Do the rural property owners get a say? I cant see many of them would want a stack of HNZ tenants in their neighbourhood and over their back fence or become a partner in a useless govt backed development

For the last 15 yrs I've had HNZ tenants just over the fence. No problem that side but the other side with non-HNZ tenants have had problems. Maybe Auckland has a better set of HNZ tenants than Christchurch? Build enough houses and employ competant property managers and their is no reason for state tenants to be any problem. I grew up on a UK council estate and I'm told John Key survived state housing too.

Lapun, you are kidding about having better quality state tenants in Auckland aren’t you?????
Seriously, there are some good state tenants in both Islands and there are a helluva lot of shockers, that shouldn’t be given a house by the tax payer.
Yes there are bad tenants that aren’t state tenants as well, and yet this Coalition want to make it even harder landlords!
We need to be trying to encourage people not to be state tenants and get off their butts and do things for themselves to improve their lot rather than build more State houses!

What is the alternative to state housing? The accomodation supplement is highly flawed. It is more a subsidy for landlords than a benefit to low income earners. Even worse in tight property markets the supplement is just capitalised into house prices.

For me the self entitled and elitist attitude of landlords is more objectionable than the actions of state house tenants.

The AS question is a red herring and what do "elitist" (your word) landlords attitudes have to do with the rights and feelings of farmers and lifers ... that's lifestyle blockers not those sentenced to life in prison.
Your overall proposal definitely has merit brendon. If its viable then probably the govt should use its vast resources and make the investment rather than writing up land value gains for themselves with the stroke of a pen whilst relying on the farmers to fund the holding cost.

Sure AS is not central to solving the housing crisis. But Landlords like The Man who take an elitist approach of criticizing state house tenants whilst they are almost certainly benefiting from the accomadation supplement system is galling.

If farmers/landowners are going to benefit from public decisions like rezoning and infrastructure provision then they should wear some of the costs.

Given they are effectively equity partners then they are likely to view the development positively.

It completely absurd.

The government should get out of kiwibuild. It is no more than middleclass welfare. The policy is complete incompetence.

NZ is meant to be a first world country. The government's job is to provide housing now for the poor who are currently living in garages & motels. The kiwibuild funding should be going into Housing NZ and to community organisations providing affordable housing solutions for the poor.

The market will not provide housing for the poor, just like the car market doesn't provide new cars for them, and it will take forever for the housing supply to catch up to provide enough rental accommodation for the poor if the only policy is to increase supply.

The market isn't providing for anyone other than the uber well-off. At the moment, you are crystalising capital gains for a landed gentry and the middle is feeling the squeeze as well as the poor. We already below replacement population rates sans immigration, if you entrench house prices then you're basically signing up to import the next generation of New Zealanders, because your kids won't be able to afford families of their own.

House prices don't need to be entrenched, but its up to the government to pass sound policy to better balance supply & demand.

Worldwide interest rates are at all time lows from their highs in the 1980s. Asset prices such as houses have been driven through the roof as economies have been deregulated & population growth has supported demand.

As interest rate start to rise again house prices will come down in response, however the government also needs to:
- Manage the net migration rate at a sustainable level. Most of the immigration goes into Auckland and we simply cant build at a rate fast enough to keep up (we should be aiming to maximize gdp/capita growth not gdp)
- Free up the RMA - land use response is almost completely inelastic (most of the price increase is land)
- Improve the competition laws to provide more competition (in this case building supplies)
- Remove developer contributions to bring down the upfront capital cost of housing and use targeted rates etc
- Capital gains tax will help if passed.

You know, why is there always a stink about building materials? I use a group loyalty card, not hard to guess which one and get really decent discounts at the bunnies warehouse. Paint from resene is similar. No complaints from me, about materials prices. I have more trouble with the rates and quotes of many contractors. Some quotes are a complete and total joke but every now and then you get good contractors and it feels like a breeze. I'm not talking about Irish scam artists but they also come to mind

Do you get 1/3rd off gib board? Because that's roughly how much it needs to go down from NZ retail to match Aussie retail prices

I think so, will check it. What are they paying in aus? I think you also have to realise that nz is a much smaller market so you could expect prices to be relatively higher compared to a larger market. If nz is higher than the price in fiji then I would be worried. There are structural differences by us having 15 percent gst and higher fuel levies, or do you just think that it's only the materials suppliers should have to drop their margins till they go broke?? No dont answer that pragmatist

https://buybuildingsupplies.com.au/sheeting-10mm-aquachek-c-3305_303_304...

vs

https://www.kiwitimber.co.nz/index.php?route=product/category&path=94_10...

Aqualine/aqua check 10mm
2.4 x 1.2 AU = $27.65, NZ = $37.36 (+gst)
2.7 x 1.2 AU= $30.70, NZ = $42 (=gst)

So yeah, the gst difference means its only needs a 25% discount to match Australian prices

Good as gold cobber.
Proroc 10 x 2400mm Aquastop Plasterboard | Bunnings Warehouse
https://www.bunnings.co.nz/proroc-10-x-2400mm-aquastop-plasterboard_p002...
37.77 incl 15 percent gst which would be 36 based on 10 percent gst
Of course those are retail prices, so could improve on that even with small quantities. Houselot quote will be cheaper again. So there are lots of factors, I dont think any difference is a big deal. Just overdone hype. The bigger issue is with labour charges and contractors quotes. What nz probably needs is something much more streamlined than piecemeal construction. And unless you have experience with the building process incl council and their inspections you have no idea how cumbersome it is.

"do you just think that it's only the materials suppliers should have to drop their margins till they go broke??"

No but they shouldn't be allowed to stifle competition via bodies like BRANZ. Which is exactly what happens. Although this may hange : https://www.nbr.co.nz/article/knauf-takes-fletcher-plasterboard-market-n...

But supposedly Winstone Wallboards make the best plasterboard in the world, Tasman Insulation make the best recycled glass insulation in the world. Why would we want to compromise quality for cost savings?

Can't really see how capital gains taxes will help much given the poor rates of returns of other investments and that loss ringfencing is already a thing. If anything, capital gains taxes risk being even more inflationary given constrained supply and escalating demand; vendors will simply pass the margin lost onto buyers who will be expected to borrow even more. Almost all of the other options were hinted at or campaigned on by Labour in the lead up to the 2017 election, yet only the extra tax avenue has been pursued. I can't imagine why.