Election stoush building over housing

00:29, Jan 06 2014
MEASURING UP: The main political parties have differing views on how to bolster the country’s housing stock.

An election is coming and Housing Minister Nick Smith is well aware that housing policy is going to be one of its key battlegrounds. He calls it a clash between "sound bite versus substance".

On one hand, the Labour party's solution is simple and clear: a capital gains tax on secondary homes to cool prices, a ban on foreign buyers to keep supply for Kiwis, and the state-funded building of 100,000 houses over 10 years.

On the other, you have the Government pulling various levers to help stimulate the market without embarking on a huge state-house building programme.

Smith says it's a complex issue.

"The political ground of housing next year is going to be between the sound bite and the substantial and I am confident that on the substantive issues - land supply, development contributions, materials, the compliance costs - the Government is going to have a solid story to tell.

"And it's more than just telling a story. I want to do things as Housing Minister that are going to make a material difference to my kids and their generation having access to more affordable homes and I'm unconvinced the proposals being put up by the Opposition would have any real difference."


Taking its cue from the Productivity Commission, the Government has tackled many of the areas it identified.

It is reviewing the cost of building materials, proposing legislation to reduce developers' fees, and taking a critical look at the consent and resource management systems.

And instead of funding 100,000 homes like Labour, the Government has set a target of 39,000 houses over three years in Auckland, and more elsewhere, through its special housing areas.

These are areas where consents will be fast-tracked, a move the Government hopes will stimulate the market on its own.

The big question is whether this rather complicated approach will be clear enough for the voter to understand.

Enter Labour's housing spokesman Phil Twyford, who claims the Government's plan is unbalanced.

"The Government is almost exclusively focused on supply and yet everyone understands instinctively, and certainly all the economists will say, that house costs and housing prices are determined by interplay between supply and demand."

That's why, he says, a capital gains tax is needed, to take the heat out of demand. He cites the surplus of rental houses and stable rents as evidence that investors have taken over.

"Auckland is basically a speculator's paradise and it's those pressures which have driven prices so high."

On the supply side, Twyford claims the Government is just tinkering with planning rules, fast-tracking consents and opening up greenfields land.

"But that's precisely the approach they've taken in Christchurch . . . You've seen significant numbers of new builds coming into the pipeline but they're all on the fringes of the city and very few, if any, are in the affordable bracket."

There would still have to be some building on Auckland's far-flung fringes under Labour's plan, but it would include greater emphasis on inner city development and on urban renewal. He points to the urban revival of New Lynn as an example.

Twyford also combats the charge that the Kiwibuild plan is simplistic.

"We are not talking about subsidising these houses, we're talking about stimulating the construction of new affordable housing and then on-selling them to new home buyers.

"But in order for that to work, we are going to have to tackle many of the things that the Productivity Commission identified as problems."

Building at scale would increase productivity and reduce costs by using prefabricated and modular building techniques.

"If we're building 10,000 homes a year, then we can procure 10,000 bathrooms in one go."

However, all these plans hinge on one question: will there be enough builders or developers to carry out the plan? Many of those resources are at present based in Christchurch.

Smith answers that with an anecdote. He says the "game-changer" in its stoush with the Auckland Council as they hammered out a housing accord was the arrival of proper information.

The data included analysis on the number of sections in Auckland available for development, future land availability and the number of developers.

"What that analysis showed was the number of developers in Auckland had reduced by three-quarters.

"I've been quite encouraged, particularly in Auckland, by the number of previous players who had exited the industry, who have seen the legislative and culture change and have advised me that they are now getting back in the business."

This year has seen some serious issues arise in housing.

Auckland's median house price soared nearly 15 per cent. Christchurch has struggled to replace lost housing stock.

The Reserve Bank put "speed restrictions" on low-deposit mortgages, raising questions about access to home ownership.

And the cost of earthquake strengthening and the rental "warrant of fitness" concept became issues that refused to go away.

In 2014, all those issues remain on the table. It is also likely that the Government's relationship with councils will not be smooth, as they hammer out more housing accords and as councils scale back their dependence on development contributions.

Smith describes the temperature between central and local government as one of "constructive tension" at the moment.

But he believes its "accord" with the Auckland Council is already changing attitudes. A case in point is a clearing house to handle all the consents Auckland residential developers need simultaneously.

However, the biggest game-changer in housing in 2014 is likely be out of the Government's hands.

The Reserve Bank's loan-to-value ratio (LVR) restrictions are credited with already slowing house sales and economists believe they will begin to have an effect on prices from around March.

By then, higher interest rates are also on the cards.

Also bubbling up in 2014 is the prospect of more special housing areas, and the results of the Government's building materials inquiry. The Commerce Commission has already begun one prosecution case over price-fixing in the Auckland timber market.

Expect to hear more also about the "rental WOF" idea, as councils in several major cities trial it on a voluntary basis.

The Government will follow suit with state housing providers, telling them to meet certain standards if they want their share of $40 million in contestable subsidies.

Whichever side of the housing fence voters sit on, it's certain that the quality, price and availability of housing will continue to dominate people's thinking for some time to come.

Fairfax Media