PHIL TWYFORD Labour MP for Te Atatu - 23rd March 2013 Albany Campus

New Zealand Built Environment Research Symposium

                      3rd NZBERS

                 23rd March 2013
                  Albany Campus
                 Massey University

               PHIL TWYFORD
           [Labour MP for Te Atatu]

  Affordable housing in New Zealand: Labour Party’s
                   Kiwibuild policy

                            Dreams do come true!

Outline
• Introduction.
• Kiwi Dream of owning a home is slipping out of reach.
• First home buyers priced out of the market.
• Reasons why new homes are so expensive.
• Labour Party’s Kiwibuild – the game-changer.
• The Kiwibuild policy and programme.
• Financing the Kiwibuild programme.
• Economic benefits of the Kiwibuild programme.
• Key constraints to housing affordability.
•Healthy Homes Guarantee.
• Causes of the housing crisis.
• Fixing the housing crisis – the real solution.

Introduction

If affordable housing is your thing, then you are living in
interesting times.

As your programme says, the issue has very much taken centre
stage politically.

I’m Labour’s new housing spokesperson and I want to talk to
you today about our Kiwibuild policy.

But let me start by making a few comments about the politics
of affordable housing.

Kiwi Dream of owning a home is slipping out
of reach – a retiree’s saga
I am the MP for Te Atatu, and on Saturday morning I was doing
one of my mobile clinics at a shopping centre in Henderson. I
got talking to one of the shopkeepers, a lady called Sandra
Tobin.

Sandra is retirement age. She has a second hand clothing store.
Without any prompting from me she started talking about
housing affordability.

She said: My husband and I got help from the Government to
get into our first home, as did our parents. But our three kids
have no chance whatsoever of being able to afford to buy their
own home in Auckland.

That means they don’t have a place – a foothold – in their own
country. It makes them feel they don’t have a future here.

Sandra summed up exactly how so many Aucklanders feel. And
why housing has become a red hot political issue.

Kiwi Dream of owning a home is slipping out
of reach – a retiree’s saga (cont’d)
Once we prided ourselves on our high rates of home
ownership. The Kiwi Dream was a guaranteed job if you wanted
to work, and a home of your own if you could get a deposit
together and take on a mortgage.

Now for many the Kiwi dream of owning a home is slipping out
of reach, with hundreds of thousands of New Zealanders failing
even to get on the first rung of the housing ladder.

If you are a young person today, and you look at the cost of
homes, you despair.

It is one of the reasons so many of our young people are giving
up and going to Australia.

First home buyers priced out of the market

Pricing first home buyers out of the market is a trend that
has been well reported. In just a year (2011-2012) there’s
been a 36% increase in the number of homes selling for
over a million dollars. Statistics also show median house
prices have increased by 13.4% since 2008 while wages
have remained stagnant for many

Reasons why new homes are so expensive in
Auckland

There are many reasons why new homes are so expensive in
Auckland and one or two other areas that are experiencing high
growth:
1. Not enough affordable homes are being built due to low
   margin.
2. The national led Government does not want to intervene.

Reasons why new homes are so expensive in
Auckland

Reason 1: Not enough affordable homes

The fact is that we are simply not building enough affordable
homes. I talk to builders and property developers and they say
they cannot make a buck out of the bottom end of the market.

They have stopped building affordable homes.

That’s a business decision. You can’t blame then. But it is why it
is up to the Government to intervene.

In the 1960’s and 1970’s when home ownership was on the
rise, 30-35% of new homes built were entry-level. Today, that
proportion has fallen to just 5%..

Reasons why new homes are so expensive in
Auckland

Reason 2: Lack of intervention by the
Government
The Crown is the only player large enough to make a real
difference here. That’s why Labour will take a bold, hands-on
approach to fix this hole in New Zealand’s housing market.

Looking back, in 1991, three-quarters of New Zealand
households owned their own home. Then, we could boast one
of the highest rates of homeownership in the OECD. But,
contrary to most other countries, homeownership rates have
been falling since then and are predicted to fall further.

The simple fact is, we need more affordable homes.

It is time for government to step up, and Labour will.

Labour Party’s KiwiBuild Programme: The
game-changer
Last year, we announced our KiwiBuild programme which will
help Kiwis into their first homes by building 100,000 modern
affordable homes over 10 years.

That’s the sort of big change we need to make a difference to
people’s lives.

We will oversee and invest in a large scale 10 year building
programme of the entry level homes Kiwis are crying out for.

Yes it’s a big commitment. And it will take a couple of years to
ramp it up, but we can do it.

Labour will not stand by and watch as the dream of home
ownership slips away from future generations.

At the peak of last decade, about 30,000 homes were being
built every year. Now it’s less than half that.

We will partner with the private sector, community agencies
and local government to build these houses.

The KiwiBuild policy and programme

The benefits of KiwiBuild will be substantial, and the policy has
already received widespread support.

Considerable interest has also been shown by the construction
industry as well as by local government and community housing
providers.

Estimates of the cost of modest entry-level homes suggest they
can be built for around $300,000, especially when building is
undertaken on a large scale. This can vary between regions and
further policy work on the details is still under way

The KiwiBuild

The homes will be a mix of flats, terrace houses, town houses
and stand along bungalows. Some will be in new master-
planned housing developments, others will be included in
urban renewal projects.

We will bring the best of New Zealand and international design
to build homes that are healthy, attractive places to live that
will appreciate in value over time.

KiwiBuild houses will be sold as they are built, so over the full
course of the programme there will be no cost to the Crown.
Once the build is underway the programme becomes self-
sustaining within the first term as the sale of one batch of
houses finances the development of the next.

To kick-start the programme, there will be a one-off $1.5 billion
investment.

Financing the KiwiBuild programme

We will finance this by issuing government stock called Home
Ownership Bonds.

This represents a fraction of the $41 billion National has
borrowed over 4 years, and is substantially less than the $12
billion National has committed to the Roads of National
Significance. Because this is capital investment, it will not affect
our path back to surplus.

Economic benefits of the KiwiBuild programme

Substantial economic benefits will also flow from KiwiBuild.

These include creating a significant number of new jobs in the
New Zealand construction industry – 7000 according to the
independent economic modelling we’ve had done.

It will provide 2000 apprenticeship opportunities and generate
$2 billion a year in economic growth through extra jobs and
spending on construction materials.

The programme will help halt the ever-increasing costs of the
Accommodation Supplement, which has grown by over 75%, or
more than half a billion dollars, over the last decade, and is
projected to keep growing strongly.

The main response of our opponents has been to say it cannot
be done. It’s too bold. The problem is too big and there is
nothing we can do.

Economic benefits of the KiwiBuild programme

You know what? I’m tired of the Government saying this
problem is too hard. I’m tired of them saying Kiwis cant have a
home of their own.

Building 100,000 modest affordable homes will take us back to
the rates of home building seen in the 1950s, 60s and 70s.

From 2002-2004 consents increased by 10,000 a year.

Between 1972 and 1974 the number of homes being built
increased by 10,000, largely in response to the housing policies
of Norman Kirk’s Labour government.

So that is Labour’s plan.

Economic benefits of the KiwiBuild programme

You know what? I’m tired of the Government saying this
problem is too hard. I’m tired of them saying Kiwis cant have a
home of their own.

Building 100,000 modest affordable homes will take us back to
the rates of home building seen in the 1950s, 60s and 70s.

From 2002-2004 consents increased by 10,000 a year.

Between 1972 and 1974 the number of homes being built
increased by 10,000, largely in response to the housing policies
of Norman Kirk’s Labour government.

So that is Labour’s plan. It is based on a belief that the market
has failed.

And just as the Government is prepared to intervene and use
its powers in the wake of the Canterbury earthquakes, we
believe it is time government showed similar resolve in tackling
the failure of the housing market

Key constraints to housing affordability

A complex array of factors has conspired to give us some of the
most unaffordable housing in the western world.

1. Low wages.
2. Low productivity in the construction industry.
3. Lack of competition in the building supplies industry – 30%
   more expensive than Australia.

Key constraints to housing affordability

Then several factors over which there is an argument:
4. Land supply.
5. RMA and consenting.
6. Development contributions.

Add to that several factors that seem to constantly steer us into
housing bubbles, and stimulate speculative activity, lifting
house prices ever further out of the reach of Sandra Tobin’s
children:

7. The privileged tax treatment of property.

8. And the love of investing in residential property that we
share with the other Anglo-American democracies.

9. The unregulated financial sector that allowed during the last
boom a firehose of international credit into the home lending
market, that has had calamitous consequences for our current
account deficit.

All of these factors that make our homes so expensive have to
be tackled.

They won’t be easy. They require both boldness and caution

Kiwibuild programme: Implementation

But in the mean time Labour will deliver 10,000 affordable
starter homes per year for 10 years.

We will use the levers of government, and the Crown’s balance
sheet, to apply 10,000 volts to the affordable end of the
housing market.

Labour did it in the 1930s. You think we have a housing crisis
now? It was tough then.

And in the 1950s and 60s, Government policies stimulated the
building of affordable starter homes. I live in Te Atatu which
was built entirely by Neil Homes.

Now it is time to renovate the Kiwi dream, and make affordable
housing a reality for another generation of first home buyers in
the 21st century.

Healthy homes guarantee

Too many Kiwi families are living in cold, damp and mouldy
homes.

This affects their health and their quality of life.

Because of this we are seeing a resurgence of third world
diseases like Rheumatic Fever that disproportionately affect the
children of the poor.

This cannot continue.

Labour is not prepared to stand by and have families and
children living in these conditions.

EECA (the energy efficiency agency) estimates around 900,000
homes in New Zealand have inadequate insulation.

Independent research has shown that up to five dollars worth
of benefits arise from every dollar spent on insulating homes.

Healthy homes guarantee

While the home insulation scheme started by Labour has been
very successful, it has had limited impact on the quality of
rental houses. Of the 185,000 homes insulated with a Warm Up
NZ subsidy, only 26,000 were rentals – only 5% of the country’s
rental housing.

Eradicating poverty will be a top priority of the next Labour
Government. That is a moral and economic cause.

We will introduce a Healthy Homes Guarantee so landlords
have to ensure every rental property is a healthy home that is
insulated and has efficient heating.

It is time poor quality homes were brought up to scratch.

This is about smart government pulling the levers to make New
Zealand a better place.

We will take action where the market has failed.

Causes of the housing crisis

I mentioned before that the housing crisis has a number of
causes.

Because while Labour will kick start the affordable housing
market with your Kiwibuild programme, we will also tackle the
underlying reasons why new homes are so expensive.

First, there are a number of cost drivers: lack of competition in
the market for building materials, low productivity in the
construction industry, slow and expensive consenting
processes, and some would argue lack of land supply.

Second, there are a number of other factors that tend to
overheat our housing market.

Residential rental housing has enjoyed privileged tax treatment,
encouraging investment at the expense of more productive
sectors of the economy. Labour’s capital gains tax, excluding the
family home, will go some way to creating more of a level
playing field for investment.

Also the Reserve Bank is looking at new tools to control
inflation, and one of those is called Lending to Value Ratios
which would for instance require banks to require a deposit of a
certain size before making a home loan

Fixing the housing crisis: The real solution

Fixing the housing crisis requires a broad and coordinated
approach.

It will also take boldness.

Blaming Councils, tinkering with the consent process or
“looking at” productivity in the construction sector - which are
the only measures National has committed to – won’t cut the
mustard.

KiwiBuild will be the largest public building programme in over
50 years.

It will increase the number of houses being built over time by
up to 50% and truly tackle the barriers faced by hopeful
homeowners.

It is ambitious, but it is achievable and it is needed. A Labour
Government will be a player, not a spectator.

New Zealand is facing some big challenges, we need some big
changes.