One year of Labour - What have we got?

The Labour-coalition Government has been in power for almost a year — so how well has it handled its huge home building plans?

What should property buyers gain, and is there anything to be concerned about after a year of Labour? OneRoof spoke with Housing and Urban Development Minister Phil Twyford and his nemesis, National housing spokeswoman Judith Collins.

Kiwibuild and the concurrent growth plans for state houses is a challenge of monumental proportions.

Here’s some history. After the GFC of 2007-2008, the property sector crashed. Many builders left New Zealand for overseas, and banks refused to lend to spec builders. Fewer houses were built. The economic recovery was based largely on migration. But a property boom made houses unaffordable.

When the Labour Party was campaigning last year, its promises included building 100,000 new homes and fixing social housing, which they felt the Key Government had forgotten. But tight lending and a builder shortage has hampered increases in the housing supply.

The first 18 Kiwibuild houses should now be complete, Twyford says. They are at McLennan Park, a private sector development in Papakura the Government has invested in.

It is these private developments — call them joint ventures — that Twyford says will deliver in the first few years, but with the big schemes on Government land overtaking in year three. With banks tightening lending criteria for developers, the Government has had to step into the breach. Twyford says nearly 100 developers have contacted the Government.

“The point is to kick-start developments which have failed to start because of lack of finance ... due to developments being stalled by the Australian-owned banks,” he says.

Twyford predicts that 1000 new homes will be completed by this year’s end, 5000 by the end of 2019 and 12,000 in three years. In addition to Kiwibuild, Twyford says there will be an increase of 6400 State houses in the next four years.

“It means building a lot more than the 6400, because of the ones that are being knocked down,” he says.

But with just 18 smallish homes being completed on the Government’s first anniversary, Twyford concedes the machine has been slow off the mark.

“You can’t build them overnight. That’s why we have always said there has been a ramp-up over three years,” he says. But the people have been hired, construction begun, and deals have been done or completed.

There’s no question of demand — 41,000 people have signed up on the Kiwibuild website. But they need to show that they are residents and have the money.

Prefab homes

Many houses will be built offsite. It is “no silver bullet”, but large scale pre-fabrication will improve quality, speed of construction and lower costs, he says. Over time, he expects several thousand homes to be built this way, every year.

“It is one of the ways we can build the volume of homes, but also the quality — and ultimately, if we do it at scale, we can drive down costs.”

At a huge development planned for Unitec at Waterview/Mt Albert, up to a third of the homes will be Kiwibuilt.

But Collins holds a red light at Twyford’s bullish stance. The land at Unitec, she says, is low and sewage ends up in the creek.

Construction of so many homes (at least 3000) won’t work until new pipes to the Mangere Wastewater Treatment Plant — at a cost of a billion dollars — for which the Government will have to pay (as Auckland Council has reached its debt ceiling) and that’s why a ‘toilet tax’ may happen.

Collins reckons Unitec won’t happen for 10 years. Twyford denies this categorically. Negotiations are well down the track.

“All development sites require water infrastructure to be built. This has nothing to do with the Central Interceptor project, which may involve a targeted rate as proposed by the former National government. This is a council project and they will make decisions on how it is funded.”

‘Property speculators’ should watch out from the Government’s new laws affecting those who buy and sell quickly or who try to use property ownership as a way of avoiding tax. It is part of a plan to take the edge off the next property boom.

Twyford says that on the Government’s first anniversary, new laws will make it harder to buy and sell houses purely for profit. One measure is the increase of the Bright-line Test (capital gains tax) from two to five years.

Second there is a law, before Parliament, to prevent investors from writing off a loss on a property to reduce tax elsewhere. Third is a law preventing non-residents from investing in existing homes. There may be further changes resulting from the Tax Working Group, he says. National opposes the legislation stopping foreign buyers.

Collins says. “We are always short of capital in New Zealand.” She says stopping non-resident investors will make it worse, and already developers are hurting. Downtown apartment building has stalled because foreign buyers have “got the message” they’re not wanted and have stopped buying apartments off plans.

She reckons this slump has been a factor in Fletcher Building exiting apartment construction.

Twyford disagrees: “The law specifically gives foreign buyers the ability to sell a proportion of an apartment block off the plans. This law hasn’t taken effect.”

Twyford says Housing NZ’s Mangere development, — alongside the planned airport light rail line — is the beginning of a legacy. “Mangere has begun. They are demolishing homes as we speak.”

But Mangere may face a hurdle. Collins says a chunk of land — equivalent to about three sections — is privately owned. The Government can buy it under the Public Works Act, but starting work has pushed the value up. She reckons the Government should focus on East Tāmaki, a huge estate on valuable land.

Is a year too early to say? It has yet to be seen if the Government’s programmes will match the quality standards of Hobsonville, a Twyford favourite. But any big engine is a slow starter and signs are it is slowly accelerating. The devil is always in detail.