Government buys Kiwibuild houses

Phil Twyford Photoshopped image Credit: Pixy

The government’s flagship policy, Kiwibuild is more laughing stock than housing stock. First, after 18 months, only 80 houses have been completed, after promises that 1,000 would be built by July 2019. It is fair to say that this target is not going to be met, and the government has given up on its targets anyway, citing them as ‘unhelpful’.

As if that isn’t bad enough, the government underwrote the building of Kiwibuild houses, meaning that it would buy the houses off developers in the unlikely event of them not being sold. With a housing crisis, and so many first time buyers ‘locked out’ of the housing market, this would never happen, but just in case, the guarantee was there.

Well, guess what? quote.

The Crown underwrite for unsold Kiwibuild homes has been triggered for a second time.

The first was in April for five homes in Wanaka’s Northlake development.

Now lack of sales in Mike Greer’s development in Canterbury and Auckland means the government has had to buy back seven more.

end quote.

Canterbury and Auckland are both areas where you might well expect there to be a significant demand for housing, particularly Auckland. quote.

As a way to encourage developers to work with the government to build Kiwibuild homes, the Crown provides an underwrite.

If the houses remain unsold after 60 days, the developer can trigger the underwrite and require the government to buy them back at a discounted price. end quote.

So, 80 houses have been built, and so far the government has had to buy back 12.

Not exactly a roaring success, is it? quote.

Four are in Auckland, and three in Canterbury.

A Kiwibuild spokesperson said the programme should be looked at in its entirety, for example strong sales in Tauranga.

RNZ. end quote.

Maybe, but nothing alters the fact that 15% of the Kiwibuild houses built so far have fallen under the government guarantee. If the project was ever successful enough to build its promised 100,000 houses, that would be potentially 15,000 that the government would have to buy back.

Fortunately, the project will never get anywhere near building 100,000 houses, so the losses to the taxpayer are mitigated purely by the government’s incompetence.

That is really scary when you think about it.

The problem was that the government campaigned on private housing during the election, and completely forgot that the housing market is cyclical. High demand means high prices, but that demand always tails off at some point. By the time the fanfare had died after the announcement of the grand scheme of Kiwibuild, the market had already begun to soften. Some of this was due to projects started by the previous government coming to completion, during their ‘nine years of neglect’. Some of it was due to softening of prices and demand in key residential areas. For all that we heard of the myriad of people ‘locked out’ of the housing market, just about everyone I knew who wanted to buy a house managed to do it, and not one of them bought a Kiwibuild house. The market took care of itself, as markets always do.

The government sailed ahead with its interventionist policies, convincing themselves, and anyone else who would listen, that they were the saviours of the downtrodden. The fact that the downtrodden have turned up their noses at Kiwibuild properties in Wanaka, Canterbury, Auckland and by all accounts, New Plymouth is unfortunate.

I have always said that the government should stick to funding state housing, and leave the private housing market to it own devices. Instead, they blundered ahead blindly, at what will obviously be a considerable cost to the taxpayer. There does look to be one silver lining though. With over 11,000 people on the waiting list for state houses, there will probably be a few more available than the government was expecting… thanks to Kiwibuild. That is all very well, but this was never the government’s intention. What a bunch of incompetent fools they really are.