How Twyford failed with Kiwibuild and how he will now help resuscitate it
By Richard Harman (author)
The future of Kiwibuild is going to very largely depend on Phil Twyford even though he was cast yesterday none-too-subtly as the reason for its failure.
The new Housing Minister, Megan Woods, repeatedly dumped on Kiwibuild’s performance (and by implication Twyford) in a lengthy press conference unveiling a series of changes the Government is making to the scheme.
But she conceded that getting more crown owned land to build houses on would be up to Twyford and the work he is doing in setting up Urban Development Authorities.
Otherwise, she is at the mercy of the same private developers who failed him.
And how it failed.
So as part of her "reset" Woods is abandoning the 100,000 houses in 10 years target.
“One of the things that became really apparent to me when I lifted up the hood and had a look at was going on with Kiwibuild is that the targets were providing some perverse outcomes,” she said.
“It became about chasing the target rather than thinking carefully about what was the right house in the right place.
“It all became about quantity
“it's how we got into the situation of buying large numbers of properties that haven't sold large numbers in places like Canterbury.
“When a target is driving a policy, I think it's time to call time on that and actually settle into something that is about delivering on the policy and that is getting homes for New Zealanders.’
And that was just for starters.
She went on: “This is actually about calling time on something that hasn't worked.”
Houses in places like Te Kauwhata and Wanaka were “not the right houses in the right place.”
Last October Twyford called Te Kauwhata "one of the most vibrant, fast-moving parts of the country".
That was not the case according to Bob Brereton First National Real Estate chief executive in the district who said there was not enough demand for first home buyers in Te Kauwhata and the houses would not sell.
"The reality is in the Waikato there's a number of jobs in dairying and various sectors around that, but the bulk of the jobs lie in the immediate surrounds of Hamilton,” he said.
Announcing last September that there would be 211 Kiwibuild houses in Wanaka over the next two years, Twyford said KiwiBuild was restoring the Kiwi dream of homeownership to thousands of families who had been priced out of the housing market in the Queenstown Lakes district and across the country.
By April this year, ten houses had been built, and six had been sold.
“These were not the right houses in the right place,” said Woods yesterday.
It was a theme she kept returning to during the press conference.
“It is absolutely clear that some of the early deals were not the right house in the right place.
“We've learnt a lot in the two years that we've been doing this and today is actually about making sure that we are making changes based on those learnings.
“There is certainly deals that we signed up to early on that many of them we wouldn't sign up to today.
“But look we've learned a lot over that period of time.”
“I've made my expectations really clear to officials around the fact that we need to be building the right house in the right place where there is clear and demonstrated market demand.”
So she has scrapped the targets, was having them a mistake in the first place?
“Yes, I think that it drove perverse outcomes in the policy and that's why we're removing them today.”
The “reset” unveiled by Woods includes
- New ways for people to become homeowners, such as shared-ownership schemes. The Government has set aside $400 million from the overall Kiwibuild budget to allow for these programmes.
- Boosting supply by building more homes where evidence shows they are needed
- Letting friends and family join their $10,000 deposit assistance together
- Reducing to 5% the deposit required for a government-backed mortgage
- Reducing the amount developers receive for triggering the Government underwrite rather than selling to KiwiBuild buyers
“What we are doing is returning to the historic commitment that governments have had with New Zealanders that they will be an active player in making sure there are expanded opportunities for homeownership and New Zealand housing affordability,” said Woods.
There was immediate criticism from the Taxpayers’ Union who said that the decision to adopt a similar approach to the United States Fannie Mae organisation by offering taxpayer-backed mortgages to households who could only scrape together a 5 per cent deposit was “an uncomfortable echo to those easy credit policies which induced a housing crash overseas.”
But the big issue remains; can the new policy stimulate the building of more houses.
In July, two Kiwibank economists calculated the current housing shortfall at 130,000 houses but said that would rise to 150,000 next year.
House building is stepping up but at nowhere near a high enough rate to meet the shortfall.
StatsNZ says In the year ended July 31, 2019, 35,472, new dwellings were consented; up 8.0 per cent from the July 2018 year.
In a pre-Budget paper from October last year, Treasury warned that if systemic issues around land and housing supply were not addressed, the pressure to increase expenditure on housing was likely to continue, and become fiscally unsustainable
And Treasury warned that the Government’s overall housing package (including Kiwibuild) had not improved housing affordability, as poorly-functioning housing markets – “most importantly inelastic land supply – lead to government expenditures leaking into increased costs rather than more and.or cheaper housing supply.”
The Government response to this is to provide more land for housing development through its proposed new National Urban Development Policy Standard which would override the Resource Management Act and direct Councils to allow cities to grow “up and out”.
As Urban Development Minister, Twyford is playing a lead role in the development of the standard.
Woods said yesterday that RMA reform would be part of the solution but that she was talking to Twyford about the Urban Development Authorities finding more land for Kiwibuild housing.
“I'm actively talking to Minister Twyford about that,” she said.
“It's obviously something that fits within Minister Twyford portfolio, within urban development.”
The big challenge for Twyford will be to come up with large tracts of crown-owned land that can be developed for housing.
The previous Government’s track record on this was not a success as the current occupation and protest at Ihumatao shows.
But though Twyford will now play a lead role in the “new” Kiwibuild programme, Woods was diplomatic when she was asked how much responsibility he should take for what has clearly been a major Government policy fail.
“I don't think that's a particularly useful line of inquiry,” she said.
“I think the most important thing is that as a government we have a commitment to not bloody mindedly pursuing a policy because we've set it a few years ago but actually having the courage to call time on to say it hasn't worked and make the necessary changes.”
For Phil Twyford’s sake, the new policy had better work.