Ki­wiBuild killjoys wrong on two counts

The Press - - Business -

If there’s one thing New Zealan­ders love to do, it’s hav­ing the­o­ries about why a thing won’t work. The naysay­ing is par­tic­u­larly strong around Ki­wiBuild – the ad­mit­tedly am­bi­tious gov­ern­ment pro­gramme to build 100,000 ‘‘af­ford­able’’ houses over the next 10 years.

Hous­ing Min­is­ter Phil Twyford is so fa­mil­iar with his own in­tri­cate pol­icy that he seems oddly re­laxed amid a ris­ing clam­our of mis­in­ter­pre­ta­tion that risks both the cred­i­bil­ity and the po­lit­i­cal mo­men­tum of the scheme.

So here, as a pub­lic ser­vice, are re­but­tals to two of the big­gest Ki­wiBuild myths do­ing the rounds.

Myth #1: ‘‘Buy­ing off the plans’’ means Ki­wiBuild isn’t build­ing new homes – it’s just buy­ing houses that were go­ing to be built any­way.

Wrong. Barely 5 per cent of all homes be­ing built to­day qual­ify un­der the Gov­ern­ment’s def­i­ni­tion of af­ford­abil­ity – a fig­ure that seems to slide be­tween $500,000 in a re­gional cen­tre and $650,000 in Auck­land.

By of­fer­ing to buy dwellings off the plans, the Gov­ern­ment hopes to use its buy­ing power to push devel­op­ers to build a larger num­ber of more af­ford­able dwellings than they would most likely oth­er­wise have done.

In other words, the ‘‘plans’’ will need to be new plans. The Crown won’t stump up a cent to­wards big, un­af­ford­able homes. That would be ab­surd.

Myth #2: Get­ting rid of the ru­ral-ur­ban bound­ary will pro­mote ‘‘sprawl’’.

No, it won’t. This pol­icy is re­ally about col­laps­ing the ar­ti­fi­cially in­flated price of ur­ban land, es­pe­cially in Auck­land.

As long ago as 2013, the Pro­duc­tiv­ity Com­mis­sion pointed out that ‘‘pres­sure on land prices has been par­tic­u­larly acute in Auck­land and land now ac­counts for around 60 per cent of the cost of an Auck­land house, com­pared to 40 per cent in the rest of the coun­try’’.

The value of land just in­side the Auck­land bound­ary was ‘‘al­most nine times greater than the value of land just out­side the bound­ary’’.

Chew on that, those who ar­gue that ru­ral land is more ‘‘valu­able’’ than ur­ban land.

Since then, Auck­land land and house prices kept ris­ing, reach­ing an av­er­age sale price of about $1 mil­lion.

That up­ward march has fal­tered re­cently, only thanks to sheer un­af­ford­abil­ity.

Lower house price in­fla­tion may also re­flect ex­pec­ta­tions that the new Gov­ern­ment’s poli­cies will re­duce im­mi­gra­tion, in­crease hous­ing sup­ply, and put a spoke in ur­ban land val­ues.

While there’s not much sign of the first of those, and Ki­wiBuild – the sec­ond – is only just start­ing to be vis­i­ble, the third –blow­ing up the ru­ral-ur­ban bound­ary (or RUB) – is es­sen­tial to more hous­ing sup­ply emerg­ing.

Iron­i­cally, re­mov­ing the RUB may have its most pro­found ef­fect within ex­ist­ing ur­ban bound­aries.

It should en­cour­age own­ers of un­de­vel­oped city land to stop ‘‘bank­ing’’ it, a prac­tice that adds to the short­age of land avail­able for – as op­posed to zoned for – im­me­di­ate de­vel­op­ment, push­ing val­ues high.

The fear of sprawl comes from a wide­spread mis­ap­pre­hen­sion that devel­op­ers seek­ing to use land out­side the RUB can ex­pect lo­cal and cen­tral gov­ern­ment to pay for the roads, wa­ter, sew­er­age, parks and other es­sen­tial ser­vices those new de­vel­op­ments would re­quire.

Not so. Build out­side the bound­ary and those costs will be borne by the de­vel­oper.

In other words, the in­cen­tive to build in­side the ex­ist­ing ur­ban en­ve­lope im­proves – es­pe­cially if land bank­ing is less at­trac­tive and more city land be­comes avail­able at a more af­ford­able price.

Add in some rules that en­cour­age hous­ing den­sity – such as Ki­wiBuild buy­ing smaller, more af­ford­able dwellings off the plans and in­vest­ing in high-ca­pac­ity pub­lic trans­port cor­ri­dors – and the stage is set for denser, more af­ford­able, more live­able cities. Let’s hope it works.



Labour wants to re­move the ru­ral-ur­ban bound­ary around Hen­der­son in west Auck­land, to stop land-bank­ing on the fringe.

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