KiwiBuild 'almost no chance of success' in current form

Housing and Urban Development Minister Phil Twyford said parts of the KiwiBuild plan had not worked as well as expected in the early stages and houses had not been built as fast as planned.
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Housing and Urban Development Minister Phil Twyford said parts of the KiwiBuild plan had not worked as well as expected in the early stages and houses had not been built as fast as planned.

Major changes will be needed if the Government's flagship KiwiBuild policy is to succeed, commentators say.

Labour campaigned on the policy to build 10,000 "affordable" houses a year over 10 years.

But it now only expects to build just 300 houses by its first interim target this year and has scrapped its target of 6000 by next July.

The Government has spent nearly $5 million on contractors and consultants for the Ministry of Housing and Urban Development in its first four months, including KiwiBuild functions. 

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A spokeswoman for Housing and Urban Development Minister Phil Twyford said changes to the scheme were still being worked through.

Twyford told Parliament parts of the KiwiBuild plan had not worked as well as expected in the early stages and houses had not been built as fast as planned.

"I am currently preparing options for Cabinet to consider and Cabinet will make decisions on specific changes in due course.

"However, I can confirm that we are considering how we can better support builders to build more KiwiBuild homes and accelerate large-scale projects and acquire land faster.

MORNING REPORT/RNZ
Developers still sceptical about Kiwibuild.

"Changes to the underlying system are also required to address the dysfunction in the housing market, that's why we are going to reform our planning rules, establish the Housing and Urban Development Authority, and progress infrastructure funding and financing reforms."

Gareth Kiernan, chief forecaster at Infometrics, said the Government had no real chance of building 100,000 homes over 10 years.

"The construction industry remains severely capacity constrained so it is unrealistic for the Government to think that it can increase the supply of housing by 10,000 homes per year as it might initially have hoped. At the same time, it seems that the Government does not properly understand the types of housing that are generally being demanded by potential buyers. With the broader housing market having gone soft over the last 18 months, this latter point helps explain the difficulties the Government has experienced in selling its KiwiBuild offering to date."

He said the Government should instead focus on three key things: Why land prices had become so expensive and whether regulatory changes could help to bring them down; the funding model for infrastructure provision, which he said was not working well; and the potential for prefabrication.

"The Government could have a role to play in helping prefabrication become more established within the residential construction industry. I know that the Government has been considering each of these aspects as part of its broader housing policy. However, I suspect the flagship KiwiBuild policy has attracted too much effort and resources, at the expense of addressing these more fundamental issues in the broader housing market and construction industry."

AUT deputy head of the school of engineering John Tookey said the scheme as it is designed would only help people who were relatively well off, anyway. Those who could afford to service a mortgage on a $650,000 house were already doing "quite nicely", he said. "You're enriching a small number of individuals."

Work should be outsourced to organisations such as the not-for-profit New Zealand Housing Foundation, which offers shared-equity options to help first-home buyers in.

The Government says it has already contracted and committed 10,000 houses over the next decade, including 10,355 already planned for the year to June 2028. Tookey said that was hard to believe.

"Can you imagine a builder saying in 10 years I'll be doing that – most are saying am I going to be in business next year."

It was impossible to know what the economic conditions would be like so far into the future and at what price building would be possible.

Economist Shamubeel Eaqub said the scheme could not work in its current form because there were not enough people who could afford to buy the houses.

It should instead focus on creating more rental homes, he said.

"Ownership is not the only way of giving the outcomes we want like security and stability and the ability to put down roots in a community."

Stuff