Opposition hype and Government reality

Kiwibuild factsheet 2012

There is a very well reasoned and researched paper available at The New Zealand Initiative that sets out why Kiwibuild fails against all the objectives set for it.

Reading it will help you to understand the reason for the look on Minister Twyford’s face whenever he has to appear in the media defending the indefensible.

These bullet points are from the Executive Summary of that research note. Quote.

  • KiwiBuild cannot hope to materially increase home ownership proportions ? the original 2012 objective. Additional housing, if achieved, will likely lift renting and ownership more or less in tandem.
  • It is not about social housing to help those at the bottom.
  • Nor is it about helping struggling first-home buyers. They cannot afford KiwiBuild homes at current costs. KiwiBuild is for the relatively well-off.
  • It is intended to be subsidy free, since wealth transfers to the well-off are hard to justify. But its inducements to attract private developers are subsidies.
  • Even more paradoxically, if there were no subsidy, there would be no gap for KiwiBuild to fill. Private developers will meet unsubsidised market demand.
  • It cannot hope to increase the housing stock sustainably. Only enduring lower property prices can induce people to own more dwellings than otherwise. KiwiBuild reduces neither land values nor construction costs at the margin.
  • The enduring effect of the policy is a changed composition of the housing stock by decree rather than by public demand. 
  • KiwiBuild is floundering having no clear public interest objective. It constitutes a massive political and bureaucratic distraction from what is really needed ? direct action to reduce land values and construction costs. End quote.

Let’s refresh ourselves on Labour’s intentions as set out in their 2012 Kiwibuild factsheet: Quote.

The housing market is failing thousands of Kiwis. The biggest barrier to home ownership is the difficulty of getting on the first rungs of the housing ladder

Labour will oversee and invest in a large-scale 10 year programme of home building focussed on modest entry-level houses for sale to first home buyers. We will partner with the private sector, community agencies and local government to build these houses. End quote.

Three and four bedroom houses for around $600k do not really sound like modest entry-level houses. Quote.

Our target is to ramp up to building 10,000 houses a year by the end of our first term (or as swiftly as the availability of skilled labour allows), and to continue at this level for around ten years. End quote.

It seems that the current target is 300 by July 2019 (down from 1000) which leaves 9700 to build between July 2019 and November 2020. 9700 homes in approximately 16 months. The tradies will be putting in 6-day weeks at least so that is around 415 days for 9700 houses or, say, 23 houses completed per day, every day (except Sundays) after 1 August.

Hmmmm…. I think we may need to ‘adjust’ another target? Quote.

Estimates of the cost of a modest entry-level home suggest they can be built for less than $300,000, especially when building is undertaken on a large scale (which can bring the cost of materials down).

End quote.

$300K is a 2012 number. StatsNZ say the CPI purchase price of new housing has increased by around 27% since the Dec 2012 quarter, which increases this estimate to around $380K.

Twyford wants a cap on Kiwibuild in Auckland of $650,000. What’s a mere $270,000 between friends? Quote.

Around two-thirds of the houses built over the first five years are likely to be in Auckland. End quote.

Kiwbuild Factsheet

This was reduced to “half of them in Auckland” in the November 2017 Speech from the Throne.

Photoshopped image credit: Luke

One could continue; but it was all talk, smoke and mirrors when in opposition and now the reality has hit. One could almost feel sorry for the poor sod lumbered with this portfolio having to defend this stupidity, but any sympathy that may be gained here is more than lost when he puts on the Transport hat.