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KiwiBuild vs. what?

Written By: - Date published: 10:04 am, November 21st, 2012 - 50 comments
Categories: housing, john key, labour - Tags: , , ,

Key amuses me sometimes. This is one of those occasions. Key on KiwiBuild:

Mr Key says the plan lacks substance.

“The truth is that it’s a very complex issue … I don’t think some fanciful concept is really going to fix the problem.”

(1) “Lacks substance”. Really? National’s most recent housing announcement consisted of:
• 2,500 to 3000 new houses
• built at Hobsonville in Auckland
• 80% costing more than $485,000, the remaining 20% (500 – 600 houses) described as “affordable”.

This underwhelming prospect was variously described as a “wet bus ticket” and “Package? What package?”. In contrast Labour’s KiwiBuild is proposing:
• 100,00 new houses
• built all over the country
• costing around $300,000

If John Key wants to compare the substance of the two plans, it isn’t KiwiBuild that is lacking.

(2) It’s a “fanciful concept”. Really? It’s 100,000 new homes, bricks and mortar, there’s nothing very fanciful about that. It’s a government partnership with the private sector, creating a massive economic boost and thousands of jobs, there’s nothing very fanciful about that. This is exactly the sort of project that any government with any “ambition” for New Zealand should be promoting. But the best that the useless Nats can manage is to describe it as fanciful?

KiwiBuild is an excellent policy that would make a real difference to housing, jobs, and the economy in NZ. Compare and contrast with John Key’s personal flagship economic policy – how’s that cycleway doing again?

50 comments on “KiwiBuild vs. what?”

  1. vto 1

    I think it is a great idea and it isn’t as if it hasn’t been done before.

    The government is the largest home owner in the country and has been for decades so it already has a foot in the door for this.

    Keep pushing it, loud and clear. People will love it. There will be queues out the door. Remember, housing is crucial to people’s daily lives.

    As for Key, perhaps the line in response to his criticism is along the lines of “what on earth would a money trader know about housing?” or “Key should stick to being a wide boy”

    onwards ….

  2. tracey 2

    Things to be wary of;

    Quality of homes and those building. Builders and designers will have personal liability but will mobie or ministry of housing have immunity?

    In auckland, on average apparently, homes double in value every ten years. Most people will probably stay put for a few years once in IF they have young children. Schools prompt home sales aa children get older.

    Perhaps if you choose to not live in the home, the home has a contracted capped rent, managed by the ministry and rented to those in need?

    Cgt is a good idea if not primary residence OR cgt if home owned by a trust.

  3. tracey 3

    Given his address what cld key possibly know about affordable housing… Its a few decades since he was near one. Except for the family in owairaka of course…

  4. Enough is Enough 4

    Where is the land coming from for these 100,000 new homes.

    Will the government be buying private land on mass and if so where. I am thinking of Auckland as that is the only place where there really is an issue.

    I think it is a daft policy because the right can and are driving trucks through the holes in the policy.

    How do you stop the rich taking advantage of this?

    How do you stop the firt time home owners profiteering fom this? Making 100k over 2-3years in capital gains?

    How can they be sold at cost. Won’t the builders and land owners want to see some kind of profit?

    • Lanthanide 4.1

      “How do you stop the rich taking advantage of this?”
      Limiting it to first-time buyers. I’d suggest if they’re serious about it they’ll need to put some sort of limitation on the title that the property can never be used as a rental and must be owner-occupied.

      “How do you stop the firt time home owners profiteering fom this? Making 100k over 2-3years in capital gains?”
      Capital gains tax?

      • Enough is Enough 4.1.1

        Capital gains tax will not apply to the family home?

        Or is that policy being revised as well?

        Even if a CGT does apply, why would it deter homeowners selling at market rates? A house that cost you $300k in Auckland would have an instant market value of $400 at least. I flick it off pay my CGT and pocket a handsome profit.

        Now many will see that as fine but I am not sure how it is addressing the issue of affordable housing in Auckland

      • Chris 4.1.2

        A capital gains tax will just mean they get a profit of say $70k instead of $100k. It doesn’t stop people making a profit. By definition it is a tax on gains, it can never stop someone making a gain simply lower it. The only way to stop this would be to bond people to the house for say a period of ten years, although this is just delaying the capital gain (presumably would make a gain).

        Also just because people are rich does not mean they have owned a house – sure that would knock out a lot of the older rich people but their children would still be classified as first home buyers. Simplest solution would be to make open to any home buyer who has never had a house or an interest in a trust which has held a house for the last ten years or something. It won’t stop everyone but will stop a lot.

        In response to enough is enough’s third point – presumably it means cost to the government – i.e. builders and land owners will still make a profit, the government however wouldn’t make a profit.

        Edit – also if someone purchased the house with the intention to sell in a couple of years they would have to pay tax on the sale under current laws anyway so a CGT would make no difference at all.

    • Fortran 4.2

      Enough

      Agreed – where is the land coming from at what price.
      Sure most of the major building companies can build at $200,000 – $275,000 but what price land – say $175,000 – so
      Do we have enough physical builders who are prepared to build outside Christchurch at present.
      Are there many spare people available for this cheaper quality building ?

      • mike e 4.2.1

        This could carry on from the CHCH rebuild using up the flood of labour their! smart move by labour land would have to be bought larger sections turned into higher density housing! smaller sections turned into low rise apartments such as Rod Oram talked about like Melbourne!

  5. Richard Christie 5

    “I don’t think some fanciful concept is really going to fix the problem.””

    Isn’t that exactly what Key once said about asset sales?

  6. tracey 6

    Enough, i gather auckland council has been consulted and has land. The land which national wants its developers to make a profit and run fromi assume.

  7. The Gormless Fool formerly known as Oleolebiscuitbarrell 7

    “KiwiBuild is an excellent policy that would make a real difference to housing, jobs, and the economy in NZ.”

    Really, I thought it was a policy that would see the government giving $100 grand to randomly selected New Zealanders paid for by everyone else.

    • Lanthanide 7.1

      “Really, I thought it was a policy that would see the government giving $100 grand to randomly selected New Zealanders paid for by everyone else.”

      Not sure how you get the “paid for by everyone else” part, since the people who buy these houses have to pay for them.

      • The Gormless Fool formerly known as Oleolebiscuitbarrell 7.1.1

        They pay $100 grand less than the houses are worth. That’s $100 grand for free in anyone’s language.

        Here we have a party who claims its primary concern is equity, picking people at random to make rich.

        I just hope they pick me.

  8. Poission 8

    The first problem that needs to be addressed is the unconstrained sale of residential property to non resident overseas investors,here a mitigating tax is necessary to alleviate the AK bubble,

    The Greens seem to be on the case.

    http://www.interest.co.nz/property/62124/govt-needs-restrict-foreign-buyers-nz-property-green-party-says-following-real-estate

    The nz property tax system is a complete basket case under Dunne.

    • insider 8.1

      If you know it’s a problem, no doubt you have some data showing the numbers of sales and their value and how they are driving the market….

      Most of the ‘proof’ seems to be anecdotes that an asian has been seen buying a property at an auction.

  9. Brendon Harre 9

    This is an election bribe, mainly directed at Auckland.

    For better or worse houses are privately sold. Even 100,000 houses provided over 10 years will not change that fact. Houses are expensive in New Zealand for a variety of reasons. Strong demand coming from population growth, migration and foreign buyers. Banks offering easy credit as the more they lend the higher their profits. Supply is restricted by strict planning laws, expensive building consent fees. Building supplies are expensive because of duopoly pricing and property developers have monopoly pricing power for their sections because the length of time it takes to get consent for new sections means their is no effective competition.

    Shearer’s plan ignores these problems because they are difficult. To really change the housing market means upsetting some of the above vested interests. Is Shearer prepared to do that? Or will reward a few lucky ones with cheap houses while letting the rigged system remain for the majority?

  10. gomango 10

    Don’t even call this a policy – it is a politicians desperate attempt to get some attention.

    It fails on any test of economic reality or fairness. Even a year 1 NCEA economics student knows what the effect of a subsidy is on demand and price. Any subsidy just gets capitalised in to the price (failing the understanding economics test) and the gain is captured by whoever is lucky enough or connected enough to get the subsidy (failure of the fairness test).

    And do the math: 1.5 billion divided by 100,000 homes = $15,000 per home. How does that equate with building new homes in the place we need them – Auckland?

    False advertising to call this a policy. A desperate attempt by a desperate politician to capture the votes of stupid people. Who will love a stupid policy like this is property developers and building companies. They will be the real winners.

    Lack of housing affordability is primarily due to restrictions on land use leading to low density rather than high, expensive RMA process and the fact almost no-one in NZ wants to live in said high density housing. But allow the build of decent high density housing stock (as opposed to the corruption based shitboxes built around Auckland city in the 2000’s) close to where people want to live and that would go a long way to resovling the shortage and hence the high prices.

    • insider 10.1

      it’s the new interest free student loans – remember when they were only going to cost $300m a year….

      • Lanthanide 10.1.1

        For as much bleating as there is about interest free student loans, without it there would be a hell of a lot more graduates leaving for Australia. My partner would likely be among them (Phd, Mechanical Engineering).

        • insider 10.1.1.1

          I’d rather education were free in the first place… but the point was that the cost was vastly underestimated and this will probably go the same way (although loans was actually done while this may never happen)

          • KJT 10.1.1.1.1

            Complaining about student loan cost and then saying education should be free. Which is it?

            • insider 10.1.1.1.1.1

              read carefully. The comment was about the underestimation of the true cost. This is not likely to be a 1.5b policy any more than interest free loans was likely to be only 300m a year.

              Note that interest free loans have also been criticised as a middle class rort/buy off, similar to the criticisms of this housing policy.

    • Lanthanide 10.2

      “And do the math: 1.5 billion divided by 100,000 homes = $15,000 per home. How does that equate with building new homes in the place we need them – Auckland?”

      Funnily enough, they don’t intend to build 100,000 homes with $1.5b. Instead, the plan is to build houses, sell them, and use the money recouped from the sale to build more.

      • McFlock 10.2.1

        I guess NCEA Level 1 got a “not achieved”.

      • mike e 10.2.2

        Lanthanide they are going to issue govt bonds to finance these houses the $15,000 is probably the equivalent to the existing home start loan.

  11. Seti 11

    Don’t developers usually have to fund roading, drainage etc for new subdivisions? Has this cost been factored it?

    What effect will 10 years of inflation and land price increases have?

    100,000 homes over 10 years is 27 every day. You would need an army of builders, which would delay and increase the cost in the non-Kiwibuild construction sector. Tradesmen would then be drawn away from Kiwibuild as costs rise in the private sector.

    The numbers involved are not realistic.

    • mike e 11.1

      Seti so the equivalent numbers are required for the CHCH rebuild those builders will go overseas after the main build has finished its better they stay here and add value to our economy than some one else’s!
      Besides most modern economies are having jobless recoveries its time the govt stepped in and did something as all the Manufacturing jobs are going and Nactuf are doing Zilch!
      We have an old housing stock also a shortage of 13,000 new home in Auckland, Queenstown’s growth is being hampered by the shortage of reasonable priced accommodation for workers,Northland has a huge problem!
      Its time we did something about it !
      The greens were wanting 6,000new houses each year this works well for labour!
      Its going to provide more than the 400 jobs the cycle way provided!
      Most of the materials will be NZ made .
      The money will probably come from Kiwisaver via Govt bonds cutting overseas debt as well!
      Where is Don Brashes productivity commission when you need them!

  12. KJT 12

    This is excellent policy for many reasons.

    1. It is finally a move by Labour away from the Neo-Liberal meme. “The market will provide”.
    2. It will help to gradually lower house pricing.
    We need prices to lower gradually over time. The effect of too fast a lowering, unless we get banks to take a haircut at the same time, would be too recessionary.
    3. Overall lower house pricing helps new home owners and poorer people the most. It is rubbish this will just help the middle class.

    More policies such as restrictions on foreign land ownership and banker/speculation pushing up prices, more State rentals, sweat equity, CGT and maybe changes to the RBA are required, but this is a good start.

    • Herodotus 12.1

      So when will the 1st house roll out ??? Not in the 1st term of a Labour govt.
      What happens if there are overruns in costs, does the tax payer pick these up or the unfortunate 1st home owner?
      Westpac economist believes that Auck property will increase over the next 2 years by 6% and 8% in the following year. 15% in 2 years !!! so if I am right that it will take 3 yrs to implement this policy we start on 15% and should the bubble not burst go higher. $300k today = $350+k in 2017. I bet that real wages will not improve over this period.
      And where are these 10k new home owners p.a. coming from ? or 100k in 10 years ?
      Better to spend the $$ on HNZ stock.

      • millsy 12.1.1

        Increasing state/social housing (as wells as ditching the renewable tenancies) (perhaps also subsidizing people into buying their state house), would probably achieve what KiwiBuild and a CGT would set out to acheive for cheaper rate.

        Providing warm, clean and secure accomodation to those at the bottom without gouging them in rent would push the slum lords and speculators who target them out of the market, and will improve the standard of rental accomodation, as well as bring house prices down. It is no co-incidence that when state housing was sold off back in the 90’s house prices rose.

        KiwiBuild is an interesting idea though. I think these also offer a chance to experiment with grassroots democracy/localism. Imagine every KiwiBuild development being represented by a neighbourhood council elected by residence in that development. This council would also be responsible for things like parks, schools, libaries etc…

  13. CJA 13

    Okay just running the numbers : 100,000 new houses in a ten period meaning 10,000 a year meaning 192 a week or 27 houses a day being built. Come on guys seriously. Okay I understand housing is an issue in New Zealand as well as house prices but coming up with an unrealistic policy is not the way to fix it. Come up with something realistic then pitch it to the voting public.

    • McFlock 13.1

      Seti got there first with that line. 
             
      And that’s 27 houses+units+apartments per day on average.  
      2,000 apprenticeships. Let’s assume 10% operational at any time: that’s 200 apprentices, plus additional labourers and qualified trades staff.
             
      Doesn’t look quite so outlandish now. Oh, there is plenty of room to quibble, but the “unrealistic” call is a bit strained. 

      • Seti 13.1.1

        Doesn’t look quite so outlandish now. Oh, there is plenty of room to quibble, but the “unrealistic” call is a bit strained.

        Unrealistic is a huge understatement. 27 houses a day, on top of Christchurch reconstruction and all other housing and building projects? Considering this from Stonewoods homes website –

        How long will it take to build my house?

        90 working days (approx 20 weeks) Build time for a single storey 105 working days for a two storey

        That’s without admin, code of compliance, accessible roads, external drainage etc. So 5 months just for construction from a professional building co. Sure, some synergies will be gained with a mass rollout but 10,000 additional houses a year? NF way.

        • PlanetOrphan 13.1.1.1

          Check out the Pre Fabricated walls etc numbers before you call it impossible Seti.

        • mike e 13.1.1.2

          SETI VINI RAMPUKA Its been done before and its 2 years from the election in which time Canterbury will be well and truly under way what are we going to do with the labour force when Canterbury will be starting to wind down !

        • McFlock 13.1.1.3

          dude, you don’t build them one at a time.

      • CJA 13.1.2

        Sorry don’t quite get what your point is and yes Seti did get there first but I guess it’s more a case of reiiterating the point that the policy is unrealistic.

  14. Of course Key calls it fanciful , How can you asset strip KiwiBuild M8?

    Key would have to wait for the “Free Market” to claim them before being able too do anything M8!

    DunnoKeyo obviously doesn’t know how to “Print Money” …. Bleedin Moron M8s

    • mike e 14.1

      PO the free market you would think would put enough pressure on in the Auckland market to meet demand but its not happening !
      Market failure is whats happening and shonkey and his b(W) anking m8s are having a field day those banks that are lending in Auckland’s bubble are creaming it for no extra risk or work.These speculators are also seriously damaging New Zealands productive sector as well . Whats Shonkey the mrerchant B(w)anker doing nothing zero zilch stuffing farmers manufacturers the Tourism sector etc!

  15. AAMC 15

    My fear, please correct me if I’m wrong…

    Won’t this be a speculative boom for early purchasers? Is there some sort of means testing to establish who is “allowed” to purchase?

    Won’t this be another win for the banks who will be the ones giving mortgages to those buying? It’s in their interests for the houses to inflate in value so they can create some more money and to increase their interest yeild.

    When the Ozzies subsidized people into houses to ward off the worst effects of GFC1, all it did was further inflate their bubble, will this do the same?

    Assuming more supply will solve the problem just illustrates we are still stuck in a neo-classical supply & demand model, not having learnt that, around the world, even with supply and Gapital Gains Taxs, bubbles grew as banks pumped debt into the system.

    Is anybody ever going to talk about the root problems?

    • The root problem is base price escalation/overvaluation.

      KiwiBuild will fix that by introducing fixed price housing and rentals.

      KiwiSaver already has good checks etc, would be hard to extend.

      A good basic idea that, can only truly be defined completely when implemented and would have to be “maintained” periodically (At the mo at least once a year)

  16. AAMC 16

    The root problem is an un-managed endogenous monetary system which has inflated assets out of sycnc with income for 30 years.

    All of these other things are factors, sure, but until there are some measures to reign in the banks, it’ll be a very short lived band aid. We have to start having that conversation if we really want to tackle property prices, there are more than 100,000 of us, and it’s a societal systemic issue, which prevents even those on high incomes from participating in the broader economy as all their income is tied up in mortgage debt.

    If they’re being released onto the market that is, rather than being State houses. I don’t know the details of the policy, that’s why I’m asking

    Are there measures to stop an investor from buying as rentals, or to flick once they inevitably inflate to meet the rest of the market?

    Here’s Keen yesterday on Capital account > http://www.youtube.com/watch?v=KXGqnu5RA-E

  17. Binders full of women 17

    Since a lot of this will be aimed out west ..here’s some Waitakere-man thoughts.
    Pros- Govt can be involved in housing & building as it has size and regulatory clout and we are at the mercy of a duopoly of suppliers for building materials now.
    Cons- Annette King looked weak when challenged on where the 50k sections would be found in Auckland..her reply “some will be more expensive” so others will have to be less expensive to balance out..hmm less than 50k sections?? There is NOTHING in this that stops a wealthy parent bankrolling 2 or 3 kids into the ladder, or renting them out to ‘flatmates’.. oh I see we are gonna need a Ministry of Inspections to go along with other pointless ministries. Final con- there is no crisis, just people who are too picky to go to the working class suburbs or move to the provinces. No one has a right to live in the now over-priced suburb in which they grew up in.

    • karol 17.1

      Picky?  I am in a “working class” suburb, out in Waitakere.  I and a few other middleclass, not-so-young people I know have had difficulty finding rental accommodation, at an affordable price, and near work.

      • Binders full of women 17.1.1

        Fair call- overstatement. I just also really worry hugely about the loss of greenbelt (out west esp) and the motorway grind. Do we now have to realise that if you want to/have to live in Auckland then the 1/8 acre paradise is no longer an option? The provinces could do with another 100,000 houses and 400,000 people.

        • karol 17.1.1.1

          Actually Bfow, I didn’t think it was so much an “overstatement”, as insulting.  It’s my guess you have not had to look for rental accommodation in Auckland recently, and/or have no idea how difficult it has become for people on low incomes to find somewhere affordable, safe and secure to live. 

          There IS a noticeable shortage of affordable accommodation. 

  18. pete 18

    100,000 in ten years. 27 per day.

    You’d have to be barking to believe these numbers. They’ll be lucky if they manage one per day.

    Where are they all going, anyway?

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