How the Labour Government’s housing policy can be implemented

Many people wonder how the Labour Government’s housing policy can be implemented. Can it really build 100,000 homes — half of them in Auckland — in 10 years? Where will they go? Where will they find the builders? And what will it mean for the property market?

Economist Tony Alexander, writing on his blog, says the Government plans so much building, it could ‘crowd out’ the private sector, replacing it, rather than adding to it.

Housing Minister Phil Twyford readily admits it won’t be easy, due to the shortage of construction workers. But the Government plans to address this by working with the sector and training more people, so there will be 10 to 15 Hobsonville-size developments being built at the same time.

The Government will set up a development agency next year, with a working title of the Housing Commission, to put its Kiwi Build plans into action. Twyford says the Ministry of Business, Innovation and Employment (MBIE) has started work on how it will be done.

Labour’s building policy, agreed with New Zealand First, will have three main planks, says Twyford. First, the Government will work with private developers. It will buy off the plans from firms that can produce what they want. This should help developers who have had trouble borrowing enough money from the banks, which have “recently tightened up” their lending.

“We’ve had a lot of interest from developers already.”

Second, there will be an “immediate stock take” of developments where the Government has a stake, including Housing New Zealand land, where it will build more new homes. New houses may also be built on other Crown land.

Third, again working with major firms, iwi, Auckland Council’s Panuku and others and by issuing bonds, the Government will build large-scale urban developments, mostly near railway lines, in suburbs such as Avondale, Manukau, Panmure and Henderson, where Panuku has found available land.

To see what these new towns will look like, Twyford refers to the redesigned New Lynn centre and the development at Hobsonville Point. At New Lynn, a terraced housing estate is being erected on the old Crown Lynn pottery site. It’s close to the train station. Twyford says New Lynn is a good example of “transit oriented development”. In his vision, after the City Rail Link is complete and more people live near stations, trains will depart every few minutes.

And Hobsonville Point, with its “clever shared spaces”, is a best-case example of what he wants to achieve. The Government needs to “lift our game and aspire to that standard”.

With a goal of 5000 houses being built a year on average, in Auckland alone, Twyford expects construction to increase slowly. He plans 16,000 houses to be built nationally within three years, ramping up over time.

What about the builder shortage? “I want us to grow the workforce,” he says. “We can do much better for our young people to have great careers in the construction and engineering sectors. We want to invest massively in apprenticeships and we’re working with the industry.

“Given the scale of our ambitions and the urgency, we know we’ll have to bring in some people from overseas ... I’m under no illusions of the scale of the challenge.”

He wants to train more builders, and to encourage retired and semi-retired builders back into work. The Government wants to work with larger firms, including pre-fabricators, to provide economies of scale.

Finance is another challenge. In addition to the $2 billion already announced, Twyford plans an infrastructure bond.

He wants to free up the planning rules, including adjusting the Resource Management Act, to free up land. Council and Government will “work together so developers can have an idea, over a period of decades, where infrastructure will be built”.

While the Government will make it harder for foreigners to speculate in local property, Twyford wants local and foreign firms to invest in the new towns.

“We welcome foreign investment, but we want to channel it in ways that benefit the community.”

Twyford believes that KiwiBuild and other policies will stabilise house prices.

“There are many cities that are bigger than Auckland — faster growing — that do not have these problems [of high cost],” he says.

Although the Auckland property market has “hit the pause button for the moment”, he believes no one thinks it won’t take off again.

The Government will focus on improving supply first. Only when there are more properties available, will the Government make it easier for buyers.