Smith vows to tackle housing costs

Newly appointed Housing Minister Nick Smith says land costs will be his "No 1 target’" as he takes on the challenge of making the dream of home ownership a reality for more New Zealanders.

The Nelson MP, who has just made a controversial return to Cabinet after nearly a year on the back benches, had a strong focus on housing in his annual speech to Nelson Rotary.

New Zealand historically had one of the world’s highest home ownership rates, but for the past 25 years that  dream had been slipping away, he said.

‘‘No-one should doubt the Herculean task that is required to bend this curve of history and make home ownership more affordable.’’

Recalling ‘‘the panic I felt in my stomach’’ when told in the late 1980s that the mortgage interest rate on his first home was being raised to over 20 per cent, he said such rises had been  an ugly experience for hundreds of thousands of families.

Under National, interest rates dropped consistently during the 1990s, he said. They crept back to 9 per cent under Labour, but were now at a 40-year low.

Dr Smith said increases were the quickest and surest way to snuff out home affordability.

House prices rising significantly faster than  incomes had created a boom enjoyed by many existing homeowners but had created a huge hurdle for first home buyers, he said.

 ‘‘I’ve got my eyes focused on all components of the housing cost equation – the land, the infrastructure, the building materials, the labour and the compliance costs.  We are going to need improvements in all five if we are to make genuine progress on housing affordability.’’

The price of sections had gone up disproportionately, and the Resource Management Act was not working to support home affordability, he said.  Councils had not seen housing affordability as an important consideration. ‘‘I have had mayors, councillors and planners tell me that’s not their worry. Well, that is simply not going to fly when they hold the critical lever of land supply.’’

Dr Smith said that in Auckland and other cities, there was a real failure in urban development strategies.
Outraged communities blocking attempts to allow multistorey and infill development resulted in ‘‘the worst of both worlds –  limited intensification, limited green fields development, and land prices going through the roof’’.

Dr Smith said there were two myths:  that growth in cities would compromise agricultural production, and that dense housing was needed to combat climate change by reducing emissions. If all New Zealand’s expected population growth of 50,000 a year was in typical stand-alone houses, only 50 square kilometres would be needed over 20 years, while studies showed that those living in higher-density housing had greater emissions, he said.

He would also examine councils’ approach to subdivisions.

 ‘‘I’ve seen well-meaning but impractical and very expensive rules imposed on developers, that just drive up section prices. Nobody is going to build a $150,000 home on a $250,000 section.’’

He planned to take ‘‘a hard look’’ at the  Local Government Act and development contributions, which had grown enormously, and investigate the cost of building materials.

‘‘I will need to be satisfied that we have sufficient competitive forces at work to ensure good value for money for everything from cement, framing timber, cladding, Gib, roofing, plumbing and electrical supplies.’’

Labour costs were significant, he said, with opportunities for to make savings by upskilling the workforce and having greater specialisation and scale, as in Australia, rather than ‘‘one builder, one house’’.

Dr Smith said cost savings could  be made in the regulatory and compliance costs of house building.

‘‘I am aghast at the level of paperwork now required for building even a simple standard home.’’

On state housing, he said he wanted Work and Income and Housing New Zealand to work far more closely together, and for the Government to develop stronger partnerships with community housing organisations.

He was also determined that Housing NZ and the ministry  ‘‘plays its full part in Christchurch’s recovery’’.
Dr Smith was also given  the conservation portfolio last week.  He said he would be championing a ‘‘Blue Green’’ agenda of wanting to marry sound conservation policies with those that would grow the economy and help to create new jobs.

His wide-ranging speech, his 18th annual address to Nelson Rotary,  touched on a number of local issues and initiatives, and he opened it with a quip:  ‘‘I hope 18, as for young adults, marks a new, mature era of fewer dramas and troubles in my career.’’