Risk? Pffttt…no worries, Phil’s on the job

Labour’s Kiwibuild plan is full of risk, but that isn’t stopping Phil Twyford, he knows best.

Housing Minister Phil Twyford was told by officials that his signature KiwiBuild plan will be risky.

Officials from several ministries prepared a briefing for the new Minister to be delivered as he entered office on achieving Labour’s housing policies. It was publicly released on Thursday.

By far Labour’s biggest plan is KiwiBuild: 100,000 new affordable homes delivered within the next ten years, half in Auckland and half elsewhere.

Officials note that delivering those homes would require a greater level of building that a huge peak reached in the 1970s, when just under 40,000 new homes were built a year -?but say that it could transform the construction sector for the better.

To achieve KiwiBuild on top of already projected private construction the sector would have to hit around 44,600 homes a year in 2022.? ?

There is no capacity to do this, and one of Twyford’s much vaunted companies who apparently know how to do it is about to tip over.

At no point in the briefing do officials say this will be impossible, but they do indicate how difficult it might be with an already constrained labour market.

“Regional labour market stickiness and high housing costs may also reduce the flow of labour to high-demand locations, especially Auckland,” the officials write.

Other risks include the public developments crowding out private development, a loss of momentum on other existing housing programmes, and inability to meet the “affordable” price point without losing taxpayer money.

Twyford has promised homes in Auckland at $600,000 and outside of Auckland at $500,000.

Good luck with those promises.

But the scale of the challenge – and the risks – means changes brought about by KiwiBuild would transform the construction sector, the officials wrote.

Whatever approach was taken it would need to overcome the current constraints, likely using its huge scale to increase efficiencies and certainty.

“Large-scale contracts could support a market for manufactured housing (MH) solutions from domestic and international suppliers. MH could reduce time to build each dwelling (by 60 per cent) and total construction costs per dwelling (by 15 per cent),” they write.

“Greater certainty in the sector will support already rising residential building apprenticeship sign-ups.”

With an almost monopoly in most instances or a duopoly on building supplies suggested costs savings are a mirage. Then there are the rorts within building companies, for instance one major player buys all of its materials from companies associated with the owner of the main company…while the house prices look like they are only barely making a profit, the supply companies are racking up the profits.

Officials talk down a “dole for apprenticeships” scheme as they said employer concerns about the workers could be an issue.

A “KiwiBuild Visa” to bring foreign construction workers into New Zealand is seen as a winner.

Except Labour campaigned against more immigration, and so did NZ First.

National’s Housing Spokesman Michael Woodhouse says both him and Twyford want more houses built, but he’s not confident it will actually happen.

“He’s got no evidence and can take no comfort from the development community at the moment that they will be responsive to the invitation,” Woodhouse said.

“In order to get any of KiwiBuild done he will to take some capacity out of the private market.”

“We wanted to set up and environment for the developers to get on with it and then get out of their way. He obviously takes a more interventionist view.”

He’s a socialist, of course he takes a more interventionist view. But that is OK, because when he fails there is only one person to blame.

Twyford said the constraints were well-publicised and the Government had a plan to meet them all.

“There are constraints around work force, around land prices, and a lack of firms operating at that scale. These are all givens,” Twyford said.

Actually having a clear plan would help with developer certainty and direction within the industry, greatly “derisking” the investment, Twyford said.

“This is about using the levers of the state to encourage private investment. The result will be the building of more homes.”

He said a plan was exactly what the last Government lacked.?”Instead of a housing policy all they?had was spin and excuses. Even in opposition they deny there is a housing crisis, it’s staggering.”

Twyford said?KiwiBuild would be transparent with regular updates for the public on the number of homes built. His aim is 16,000 within the first three years.

There is a clue that things aren’t right…a government minister promising transparency. Twyford needs to build a lot of houses and he’s already used up over two months. Labour are already 1251 houses behind schedule and by the time you read this it will be even higher.

But, Twyford knows best, and his arrogance will undo him.