A baby born in the month in which Labour first launched their KiwiBuild policy in 2012 will turn 7 in November of this year – but the sum total of houses which have been built under that policy, which promised to deliver 100,000 new dwellings in ten years, is less than 150 homes.
To be fair, the clock didn’t actually start ticking until the Labour-led coalition Government took office in 2017 – and there was always going to be a delay in construction during the capacity building stage of the project – but even by the Governments own very conservative numbers, KiwiBuild is around 2,100 homes behind where it should be. And that number will balloon out to a deficit of around 3,500 homes by the end of this year unless drastic action is taken.
The Coalition is acutely aware of this failure of performance and (as I predicted it would back in January) has signalled a significant change in the KiwiBuild policy. The details of this change – which they’re calling a "reset" – are currently shrouded in mystery with Housing Minister Phil Twyford only saying that details will be revealed "in June".
So what went wrong? How did such an ambitious policy turn into such an unmitigated disaster?
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To understand this you need to reflect on the two primary issues which KiwiBuild was designed to address. The first of these – the housing shortage – first emerged as an issue while National was still in Government with a series of reports suggesting that 100,000 more homes were needed ‘immediately’ – which is why Labour selected this figure for their policy. The second issue was wrapped up in the growing gap between household incomes and house prices which was making it increasingly difficult, particularly for first home buyers, to get into their first home. KiwiBuild was intended to resolve both – but has ended up addressing neither.
But here’s where it gets interesting. While KiwiBuild has been struggling to build anything more than a handful of homes – the private sector has been quietly plugging away building, and selling, a large number of homes where they’re needed most. According to a recent NZ Herald article, the top ten housing development companies in New Zealand built over 10,000 new homes last year – a rate at which we’re very close to reaching the KiwiBuild target of 100,000 homes over ten years, but without any Government input or interference.
The second goal of KiwiBuild – to make homes ‘more affordable’ for first home buyers – is equally interesting. According to data from property data company ‘Valocity’, first home buyers represented 24% of all home buyers in March 2016. This number, which measured the number of mortgages uplifted at that time, was while the Nats were still in office and represented around 40,000 homes. By the year to March 2018 the number of homes being purchased by first home buyers had actually dropped to around 32,000 - but represented 27% of all house sales because total house sales had fallen. This is in contrast to Arderns repeated assertions that first home buyer numbers have increased since her Government came into office – a claim that is the result of either misinformation or dishonesty - take your pick. Yet even accounting for this drop – first home buyers are still the single largest home buyer group in every part of the country except Auckland – and have been since at least 2013.
So to answer my earlier question – "what went wrong with KiwiBuild"? Simple – the Coalition (and the National Government before them) misread the market and made the mistake of believing that government intervention was the answer. Instead, private sector developers have quietly gone about their business and are building enough homes to meet our future housing needs over the next decade. And rather than being ‘closed out of the market’, first home buyers are not only active in the market, they’re the dominant buyer group in almost every part of the country.
All of this just serves to reaffirm what many of us already know - that ‘Government planning’ is an oxymoron and that the best thing the Minister could do, to achieve his targets, is to get out of the way and leave the private sector to it. Sadly, that’s unlikely to happen – and the much touted ‘reset’ is more likely to be a whole new raft of misguided interventions and ‘we know best’ platitudes and rhetoric. Lots of noise – but again, no substance.
- Ashley Church is the former CEO of the Property Institute of New Zealand and now writes on behalf of OneRoof.co.nz. Email him at [email protected]
