3. Twyford borrows big to build

Updated

Grant Robertson and Phil Twyford. Photo: Lynn Grieveson

Housing was a big winner on Budget day, although not as big as Minister Phil Twyford had hoped, Thomas Coughlan reports.

The Government announced yesterday it will build 6400 state houses - or 1600 a year. Housing Minister Phil Twyford trumpeted the numbers, saying they exceeded the Government’s earlier commitment to build at least 1000 state houses each year. But the announcement was a full 400 fewer houses a year than the 2000 Twyford said he was aiming for.

In November, Twyford told TVNZ’s Q&A he had asked officials whether Labour’s promised 1000 could be doubled to 2000. 

That’s an expensive spend — $4.03 billion to be precise. If the Government were paying for that itself, it would have eclipsed the additional health spend had it opted to front up with all the spending itself. 

But the number isn’t half as interesting as how the build will be financed: $2.9 billion of that funding will come from third parties investing in a new bond issue from Housing New Zealand.

Additional funding will come from Housing NZ carrying over $900 million of its operational funding for the build and an additional $234.4 million allocated in this Budget. 

Housing New Zealand’s ability to borrow was set in train by the previous government.

Robertson confirmed that Housing New Zealand’s debt, as well as the debt issued by Crown Infrastructure Partnerships would be off balance sheet and not count towards the Government’s target of reducing net core crown debt to 20 percent by 2020.

But Robertson had some good news in the Budget Economic and Fiscal Update, or BEFU, which projected core crown debt to fall to just 19.1 percent by 2020. 

“The calculation that we made was that if we added the maximum cap of borrowing that Housing New Zealand and CIP have it would take us to 20.1 percent from 19.1 percent,” Robertson said. 

“Still, I would argue it's within our Budget Responsibility Rules,” he said. 

Back in February, Economist Shamubeel Eaqub made the case for the Government to borrow to more than double the state housing stock to 130,000 over the next decade. 

"I want to see Housing New Zealand ramp up supply like we haven't done in the last 30 years. We have less housing stock today in state housing than we had in 1991, which was the peak. On a per capita level, we're at the lowest level since the 1950s. It is a frickin travesty," Eaqub said then.

Twyford told Newsroom that Housing New Zealand was still constrained in how much it could borrow to build more houses.

“Housing New Zealand relies on income-related rent subsidies on an ongoing basis, which puts a limit on what can be borrowed,’ he said.

These changes will bring the total number of state houses to just 73,000 by 2022.

National had promised to build 72,000 state houses by 2022. But Robertson defended the claim that the housing spend was less ambitious than National’s, saying he took that goal with a “pinch of salt”.

“They hadn’t actually delivered that,” he said.

Twyford also announced a raft of other measures 

"When it comes to Housing New Zealand specifically, we should be gearing that up a hell of a lot to try to create more housing supply. That is under-geared,” he said. 

Twyford said that the register of households waiting for a public house now stood at 7890 plus an additional 1805 waiting for a transfer to a more suitable public house. 

… and the rest

Twyford’s big housing spend arguably came in December’s mini-Budget which announced $2.1 billion for KiwiBuild, his project to build 100,000 affordable homes. 

But this Budget still had some (albeit smaller) announcements.

The Government announced a large insulation programme aimed at improving “tens of thousands” of households. 

The programme will be delivered by grants from the Energy Efficiency and Conservation Authority with $142.5 million in new operating funding allocated over the next four years. 

Tenancy services will have its funding increased by $33.6 million. 

$14.6 million has been allocated to “implement and monitor” the Government’s Healthy Homes Guarantee Act, which it enacted last year to implement minimum standards for renters. 

Transitional housing will be increased by more than 200 places with $68.9 million in capital next year and $101.1 million in operating funding in the next four years. Transitional housing is meant to provide short-term accommodation for people in immediate need.

MSD housing services will get $30 million in operating funding from the housing spend.