New Housing Minister Megan Woods finally announced the long awaited ‘Kiwibuild reset’ yesterday. This included some interesting new headline policies such as a ‘rent-to-own’ scheme, reduction in deposits required for first home buyers, and some targeted relaxation of eligibility criteria. However, this also involved scrapping the target for 100,000 affordable homes.
Kiwibuild has clearly become a major political problem for the government. The promise for 100,00 new starter homes over 10 years was the government flagship policy in response to the housing crisis. On the surface it looked like a brilliant policy:
- broad appeal across the political spectrum to many NZers locked out of the housing market
- stark contrast to National’s do nothing approach to housing, signified by their removal of the position of Housing Minister
- relatively low cost policy, with homes being sold as cost, capital would be recycled as houses were sold
However, Kiwibuild suffered from a variety of issues, which included
- failing to meet very ambitious targets to deliver 1000 houses in 2018, and likely failure to meet the targets for several more years
- The resignation of the CEO of the Kiwibuild unit following a messy employment dispute
- Some early developments (such as Te Kauwhata & Wanaka) ill suited for first home buyers
- Intense partisan criticism over a range of smaller details such as income caps, ability for buyers to sell homes
These issues culminated in the removal of Phil Twyford as Housing Minister in an unusual early Cabinet reshuffle, and the appointment of Megan Woods. The Kiwibuild reset is a chance for the government to refresh the policy, and this reframe the debate.
Many opponents of Kiwibuild, and I’m sure even some in the government would have like to have seen the policy dropped entirely, though Megan Woods appears to have backed the ambition for major government intervention in the housing market.
The key parts of the Kiwibuild reset are as follows:
- $400 million of the $2 billion Kiwibuild capital being set aside for a shared home ownership scheme
- Reducing to 5% the deposit required for a government-backed mortgage
- Changes to eligibility criteria & some relaxation of the commitment period for buyers
- Reducing the amount developers receive for triggering the government underwrite rather than selling to KiwiBuild buyers
- Private market sale of homes at developments where Kiwibuild homes have failed to sell, such as Te Kauwhata & Wanaka
Most significantly the government has scrapped the 100,000 homes total target, as well as any annual targets. The minister noted this had led to poor decisions about where to proceed with Kiwibuild developments.
Overall the changes appear very positive. The government has long been pressured to include a shared ownership scheme as part of Kiwibuild, which would help ensure more lower to middle income people would be able to access Kiwibuild. Though the fact that this need 20% of the Kiwibuild capital to help upto 4000 families shows the limitation of this approach. The 5% deposit has generated good headlines will also help homebuyers into the market, though of course their is some risk first homebuyers will be exposed to a market correction if they do this.
It is also clear from the announcement that the government will be downplaying the importance of Kiwibuild in their housing policy, and stressing the wide range of initiatives they are undertaking in the housing space, and the great progress that has been made. The relevant page on the HUD website notes the “Government Build Programme supports a number of housing and urban initiatives to provide housing support to all New Zealanders, including homeless, renters or families locked out of the dream of home ownership”.
For example this diagram was included as part of the detail released today.
However, the Kiwibuild reset announcement leaves many questions remain unanswered. Statements in the press release suggests the government still has ambition to deliver large volumes of entry level homes, particularly utilising the new urban development agency Kainga Ora. However these will be focussed on large urban areas where there clearly is high levels of demand. The off-the-plans initiative, is not mentioned, so this may continue, or may be scaled back. This has had mixed success with some high profile failures in smaller centres, but also success in bigger markets such as Auckland and Wellington. The release also notes an interesting new plan to “look for opportunities for build to rent with long term institutional investors”. Also not mentioned is other previous plans such as utilising large scale prefabrication to lower build cost and reduce build time.
The ultimate future shape of Kiwibuild is still therefore unclear in many respects. The lack of details means the Kiwibuild program could either be scaled down significantly, or still remain largely unchanged. While the targets have been abolished, the government will surely still feel pressure to deliver high volumes of houses through the Kiwibuild program over the medium term. With the Urban Development Agency (Kainga Ora) scaling up over the next couple of years their is a chance to deliver large volumes of houses, and win back the general public to the merits of the program. However, they will clearly be much more cautious about the types of developments Kiwibuild is involved in to ensure a higher chance of success.