In today's email we looked into the detail of the first big KiwiBuild project, announced over the weekend by Jacinda Ardern and Housing Minister Phil Twyford.
1. The first Kiwibuild project
Finally, the first tangible and big announcement.
Prime Minister Jacinda Ardern and Housing Minister Phil Twyford yesterday announced plans to build between 3,000 and 4,000 homes on the 29 hectare site of Unitec's Mt Albert campus, including up to 40 percent KiwiBuild homes costing up to $600,000. The site is next to the motorway interchange just before the Waterview tunnel.
Twyford told Q+A the homes would be two to three bedroom apartments and townhouses costing $500,000 to $600,000, with the homes initially awarded through a ballot and with limits on people on-selling early to collect an easy capital gain. Building could start after a year, he said.
"In the early years, until the market dynamics change sufficiently, you are going to see the potential for windfall gains. That’s why we’re very likely to have, for example, a requirement that you stay in the house for a certain number of years," Twyford said, adding the number of years had yet to be decided.
But eventually, the Government's measures would reduce the potential for quick capital gains, he said.
"The first thing is we’re going to be flooding the market over time with these houses. We are going to change the market dynamic, not just with increasing supply through KiwiBuild, but also the demand side tax changes that we’re making, so you’re not going to see the kind of year after year high levels of capital gain that have been a feature over the last 20 years."
2. 'Don't expect carparks'
Twyford confirmed many would not have car parks, but talked up the train and bus links nearby.
The plan already faced opposition from local residents' groups, who said the extra residents would worsen traffic congestion, particularly if their homes did not include car parks.
"We’re at a very early stage right now, but ensuring good transport links will be a critical part of this exercise, but the amazing thing about this site is that it’s going to have superb transport links," he said.
"It’s got the Mt Albert rail station at one end. It’s going to have light rail at the other Pt Chev end."
He added it would have cycle lanes on all sides of the site.
"This could well be the first big developments we’ve ever seen where you don’t need to own a car to live," he said.
Former New Zealand Herald Deputy Editor Bruce Morris wrote about the issue for Newsroom this morning. He edits a hyper-local site called MtAlbertinc.
"The mere mention of potentially 4000 homes – on top of the several hundred likely to rise on the Ngati Whatua land on the western boundary of the block – will certainly raise concerns because 3000 was always seen as the upper limit. In the end, Auckland Council, with its eye on traffic congestion, will have the final say after working through the required Integrated Traffic Assessment (ITA) before consents are granted," Morris wrote.
"Up to 4000 homes on 30ha is the sort of density Auckland is moving towards, but the impact on traffic flows will be substantial. The quiet side streets and the cul-de-sacs that will be turned into through roads will never be the same again once the hammers start swinging," he wrote.
The project will essentially be one of the '10-15 Hobsonvilles' that Twyford has talked about. There will also be questions about who pays for the pipes and roads and master-planning needed for such a development. The Hobsonville project had around 80 percent 'non-affordable' market-value homes to help pay for that master-planning and infrastructure. The Mt Albert project will be closer to 60 percent market-value homes, which would leave less margin for the underlying infrastructure.
3. Shared equity fund plans
Twyford also confirmed the Government was looking at offering shared equity for first home buyers.
"We want a big group of young kiwi families to have access to the amazing opportunities that KiwiBuild will offer, and so shared equity, where, for instance, the government or another investor retains a share of the equity, and that means a much smaller mortgage for the homebuyer, but over time you get the opportunity to buy out that equity stake," he said.
He said the Government was working with other investors on creating a fund to sustain a shared equity scheme and he specified that the shared equity component would not be funded from the $2 billion allocated to kick-start Kiwibuild.
Twyford said the first Kiwibuild homes would start rolling out later this year elsewhere, predicting a "flood of announcements."
"We’re working with private sector right now. We’re looking at buying properties, or underwriting them, off the plan in private sector developments. We’re also providing vacant government land to developers so that they can develop them on a deferred-payment basis and build KiwiBuild homes on that land," he said.
The announcement's fact sheet also included that: "We expect to be going out to market soon with an invitation to participate in the KiwiBuild procurement process."
4. 'Pulling numbers from your arse?'
Forgive the plain language, but an Infometrics paper published earlier this month challenged Twyford's KiwiBuild plans, describing them in an article headlined "Pulling numbers from your arse."
Infometrics argued the plan would crowd out private sector development and the indications from Twyford had been confusing, giving he had downplayed any crowding out but also reiterated plans to buy from private projects off the plan.
Twyford was challenged about the paper by Corin Dann on Q+A.
"I’ll tell you what, that’s a lot better than sitting on your arse for nine years, which is what the former government did on housing," Twyford said.
Twyford added the advice from Treasury and the Reserve Bank about crowding out did not take into account the Government's ability to remove restrictions that caused a previous market failure.
"Our philosophy is that when the market fails, it’s time for the Government to roll up its sleeves and get in there and fix the problem," he said.
"That’s the whole philosophy of KiwiBuild. The second thing is that some of the earlier advice from Treasury and MBIE in the first couple of weeks in the Government didn’t take into account that we’re going to remove some of the obstacles that are currently stopping industry from scaling up.
"Now, pre-fab or offsite manufacturing, that’s one of the ways we can get around the workforce shortage that we have. So if we can contract large volumes of KiwiBuild homes. Let’s say thousands of homes over multiple years, to a firm that has a factory that can churn out high-quality homes at a better cost, we get around some of those workforce issues."
5. Finally, a PTA too
Finance Minister Grant Robertson and new Reserve Bank Governor Adrian Orr (who formally starts tomorrow) are scheduled to announce and release their new Policy Targets Agreement later this morning.
Questions had been raised about when it was due, but it is clear it will include elements of the results of the first phase of the Government's review of the Reserve Bank Act, which is due to released at the same time.
We will cover the announcements on Newsroom Pro this morning and I'll do an interpretative piece later in the day.
6. Coming up...
Prime Minister Jacinda Ardern is scheduled to hold her weekly post-cabinet news conference in Wellington at 4 pm today.
Energy Minister Megan Wood is due to make a speech at the PEPANZ conference in Wellington this week.
Statistics New Zealand is due to release building consents data for February on Thursday at 10.45 am.
7. One fun thing...
The Onion is often on the mark and better than just funny.
"Study: 90% Of Americans Strongly Opposed To Each Other."
8. This morning's political links
These are available in the morning subscriber email.