Archive | Politics

National promise of 34,000 houses/decade for Auckland may add 2000/year

The headline is what matters in an election campaign, and the headline is that National is promising that, as the government, it will build 34,000 new houses on Crown land in Auckland over the next 10 years.

New Zealand has a record of not electing governments beyond 3 terms and National is ending its third term as the majority in a coalition, which jeopardises the chances of it being in a position to carry out the promise.

Social Housing Minister Amy Adams.

Amy Adams, Social Housing Minister and Minister Responsible for Housing NZ, revealed the figure in a speech at the Property Institute in Auckland yesterday. And then she proceeded to whittle it down.

The 34,000 is made up of 13,500 new social houses & 20,600 affordable & market homes.

Under the Crown Building Project, the Government will take down 8300 old, rundown houses.

Ms Adams said Housing NZ alone had over 50 housing developments under way in Auckland. The forward programme includes other housing projects already announced & underway:

  • Northcote, where 300 state houses will be replaced by 1200 new homes
  • Hobsonville Point, where the Government-owned Hobsonville Land Co Ltd (now HLC (2017) Ltd) is about to deliver the 1000th house in a programme to deliver 4500 homes
  • Tamaki, where the government-council regeneration project has a programme to develop 7500 new homes over the next 15 years, replacing the houses on 2800 Housing NZ properties
  • Other existing projects include 2700 new homes already announced under the Crown land programme, 580 houses under the Ministry of Social Development’s social housing reform programmes, and new homes for emergency & transitional housing.

By Ms Adams’ calculation, the Government would add 24,000 new – not previously announced – houses over a decade, though on the figures above the actual total might be less, perhaps down at 20,000, or an average 2000/year.

Comparing promises

Andrew Little.

That compares with Labour leader Andrew Little’s proposal last year for 100,000 new affordable houses nationally over 10 years, half of them in Auckland, which would include partnerships with private developers.

So, on top of existing projects, Labour has promised 5000 and National 2400 extra houses/year for Auckland.

Labour also promoted a dole for apprenticeships policy which would subsidise employers to take on around 4000 young people for on-the-job training in fields including building & construction.

Phase one of National’s Auckland housing programme, which covers the next 4 years, would cost $2.23 billion and be funded through Housing NZ’s balance sheet and $1.1 billion of new borrowing that the Government has approved as part of the business case.

Phase 2 in the latter years would be funded through the market housing development part of the programme & rental returns.

Ms Adams said ministers had also agreed that Housing NZ would retain dividends & proceeds from state house transfers, to help fund the building programme.

A glance at reality

The promises come after a period of extremely high immigration – a net inflow of 228,000 nationally over the last 4 years, 108,000 of those in Auckland, requiring 40,000 homes at an average 2.7 persons/household.

Building consents in Auckland over those 4 years started low, 6500 for the March 2014 year as the country was still gradually easing out of the global financial crisis, and totalled 34,200 for the 4 years.

Assuming 100% construction of consented homes (which is not normal, but I don’t have the exact figure), Auckland fell short of housing the net migrant inflow by almost 6000 homes over those 4 years. That housing requirement ignores, completely, the net flow of people within the country.

The National proposal might fill the gap if immigration eases, but on the slim information from the minister it would encourage pricing to stay high. On my calculation in February, consents for new homes nationally (excluding land) have risen 34% in value over the last 5 years – after a slow shift from the bottom of the market, between 6-7.7%/year for the last 4 years.

The land price equation in Auckland can be partly met by intensification throughout suburbia, land prices falling because of the freer availability of sites under the new unitary plan, and section sizes being reduced.

That doesn’t require tampering with rural:urban boundaries, which Labour has said it will eliminate. Those boundaries have a role in protecting non-urban land and in directing development into more efficient parcels.

Auckland also needs more infrastructure for housing development, but it needs to be in well devised communities with a supply of jobs nearby, not on the basis of rural carpetlaying. The local job requirement is fundamental but has been ignored as Auckland has spilled out along motorway corridors.

To catch up, New Zealand needs more builders with a longer future in the trade than the typical construction cycle allows. To do that, either the Government or some other industry supporter needs to ensure trade skills are being taught to enough people before a boom gets underway, and it makes sense to reduce booms, and therefore busts, with some smoothing of economic cycles (but not the total smoothing the US tragically & farcically tried in its attempt to avoid what became the global financial crisis).

As a cyclical high recedes, the building force needs attractive alternatives other than leaving for Australia. Some of that can come through infrastructure projects, which ideally should be separated in time from highs in house & commercial construction, thus reducing cost pressures as well.

Full Adams speech, 16 May 2017: Launch of Crown Building Project

Earlier stories:
16 May 2017: Little calls for end to negative gearing, and Property Institute calls it “cynical ploy”
6 March 2017: Auckland above 10,000 home consents/year again
10 February 2017: Smith exultant about figures that are plainly inflated
19 January 2017: Building consent highs still don’t match migrant demand
11 July 2016: Little sets out 8 planks to remedy housing issues
19 November 2012: Shearer proposes Government scheme to build 100,000 “entry-level” houses over 10 years

Attribution: Ministerial speechnotes & release, Statistics NZ tables, Labour releases, own articles.

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Little calls for end to negative gearing, and Property Institute calls it “cynical ploy”

Labour Party leader Andrew Little renewed the party’s call to eliminate negative gearing on residential property investments yesterday, and was promptly accused by Property Institute chief executive Ashley Church of making “a cynical electoral ploy [that] risks making the country’s housing crisis significantly worse”.

The party campaigned to end negative gearing in 2011. This time, Mr Little proposed reducing negative gearing by 20%/year over 5 years and spending the estimated $150 million saved on $2000 grants to 600,000 homeowners to insulate their homes.

Mr Little’s call was to “crack down on speculators”, which included banning foreign speculators from buying existing homes: “This will remove from the market foreign speculators who are pushing prices out of reach of first-homebuyers.”

He said Labour would tax property speculators who flick houses within 5 years, and end their ability to use tax losses on their rental properties to offset their tax on other income, “which gives them an unfair advantage over people looking to buy their first home”.

Expanding his point, Mr Little said: “Homebuyers are being locked out of the market by speculators. Losses from rental property investments will be ring-fenced. Speculators will no longer be able to use tax losses on their rental properties to offset their tax on other income, a practice called negative gearing. This move has been recommended by the IMF & the Reserve Bank.

“The biggest users of this loophole are largescale speculators who own multiple rentals and use losses on new acquisitions to continually reduce their tax. The speculators’ tax loophole helps them outbid homebuyers for properties because the taxpayer effectively subsidises part of their cost of servicing mortgages.

“Ending this loophole will not affect most people who have bought a single rental as a long-term investment because most of them are not using it. Those [small investors] that do use this loophole generally only do so for a few years after purchase.”

Church calls it envy politics

Mr Church said the suite of housing proposals Labour announced last year was smart, but on this one he accused the party of “resorting to a form of envy politics designed to set one section of New Zealand society off against another. The policy is a direct attack on mums & dads who are trying to provide for themselves in retirement and be less of a burden on the state.

“Mr Little’s use of the word ‘speculators’ to describe property investors is mischievous. Speculators are people who buy & sell property very quickly in the hope of making a quick buck – whereas investors are people who buy for the long haul – providing housing to thousands of New Zealanders in the process.”

Mr Church said the policy, if implemented, would have a dramatic & rapid effect on the supply of private rental accommodation, creating a problem which would ultimately fall back on the Government: “Your typical property investors are average mums & dads – not wealthy cigar-smoking fat cats – and their ability to purchase an investment property is usually leveraged against the equity in their home & their ability to claim losses in the early years, like any other business does. This move would certainly stop them investing – but in the process it would quickly lead to a shortage in rental housing which would fall back on the Government – so it would end up costing the taxpayer a lot more in the long run”.

Mr Church noted that negative gearing is only a factor in the early years of a property investment: “Over time, rents rise and properties become ‘positively geared’ – at which point the additional income becomes taxable. Is Labour suggesting that they will forgo this tax income – or that they’ll make property investors pay tax on profits while removing the ability to claim losses?”

Need is “to harness family investment”, not to discourage it

He said his biggest concern was that Labour was proposing a policy to reduce private investment in property at a time when private investment in new houses “is probably more important than at any other time in the nation’s history – the Government, and parties who want to be in government, should be proposing policies that increase private investment in the construction of new dwellings as quickly as possible – exactly the opposite of what Labour is proposing.

Instead, Mr Church said there was “a need for smart & innovative solutions that harness the power of mum & dad investment to get those houses built quickly. That might include giving preferential tax treatment to investors who build, or buy, new homes – not punishing them for doing so”.

And he questioned Mr Little’s level playing field: “That’s absolute nonsense. Homebuyers & families aren’t being closed out of the market by investors – they’re being closed out by loan:value restrictions that require them to have a 20% deposit at a time when house prices are at historically high levels. The best way to fix that is to remove those restrictions on first-homebuyers – not blame those who are providing rental accommodation to those who choose not to own.”

Labour plan includes big build, training programme & elimination of Auckland urban boundaries

Labour does have a development plan, announced last year, to get 100,000 houses built quickly under its KiwiBuild programme, which would include partnerships with private developers.

Mr Little said Labour would establish an affordable housing authority to work with the private sector to cut through red tape and get new homes built fast. “It will partner with private developers, councils & iwi to undertake major greenfields & revitalisation projects, building affordable homes with KiwiBuild & the private market [but the company names Kiwibuild Ltd & Ltd have already been registered by private company owners]. These homes will be part of great communities built around parks, shopping centres & transport links.

“Labour’s KiwiBuild programme will build 100,000 high quality, affordable homes over 10 years, with 50% of them in Auckland. Standalone houses in Auckland will cost $5-600,000, with apartments & townhouses under $500,000. Outside Auckland, houses will range from $3-500,000.

“Increased house-building will require a larger workforce. Labour’s dole for apprenticeships policy will subsidise employers to take on around 4000 young people for on-the-job training in fields including building & construction. Labour’s policy of 3 years’ free post-school education will see tens of thousands more people study in all fields, including building & construction. KiwiBuild is projected to create 5000 new jobs at its peak.

“Labour will remove the Auckland urban growth boundary and free up density controls. This will give Auckland more options to grow, as well as stopping landbankers profiteering & holding up development. New developments, both in Auckland & the rest of New Zealand, will be funded through innovative infrastructure bonds.”

Link: Labour policy, Levelling the playing field for first-homebuyers

Attribution: Party & institute releases.

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On joining the 1%

I suppose I ought to have become excessively rich too. “Ought to”, rather than “could have” or “should have”.

“Ought to” because, although this country has always had its share of people born with a silver spoon in their mouth, it’s also been possible to attain great heights from a lowly start. And, to a great degree, it’s been up to you – but the rules have been changing.

I began writing this as I heard Labour Party leader Andrew Little talk of slashing immigration by the thousands, perhaps 10s of thousands, and of building houses for the out-crowd, and after reading a few items online about the Deep State, the 1% and more rewriting of economics.

Slashing the migrant inflow is easily done, and we won’t have to lift a hand, I’ve been telling people. All we need is for the Australian economy to perk up, and 10s of thousands will be gone again. Including the “pass-throughs”, the people who found it easier to get a New Zealand passport than an Australian one, but really wanted to go to the bigger economy.

Soon the pass-throughs won’t be able to get into Australia so easily though, and we’ll lose their short-term input as well.

Having more people here doesn’t hurt us. Failing to provide for their arrival – or for our “collateral damage”, the people left without home or job or hope – does.

And speculation? It moves on when the opportunities dry up. One way is to increase supply and another, as Mr Little is proposing, is to remove tax inequality.

On building homes, prices & markets

This morning I read various pieces on economics & politics to see where Donald Trump might take us next or what alternatives might gather support, and I made my periodic sortie on to Twitter, visiting long enough to leave a comment on a councillor’s (and National Party conference attender’s) page saying we hadn’t reached record house-building yet, but that consents were high and construction was increasing.

One of the misleading statements on housing statistics recently has been that record dollars spent equates to record construction numbers – ignoring the influences of land & construction inflation (Statistics NZ doesn’t count land in the estimated costs of housing, but it matters to everyone who wants to work to a land:building ratio).

Another misleading theory is that foreigners represent only a tiny percentage of home buyers, so their influence can be dismissed. It can take just one successful bid at auction for the right house on the right street to influence a market, up or down, and a bidder not seeming to care about the price can wield undue influence. There’s been plenty of that in Auckland, but it’s mostly stopped.

You’ll have seen that construction hasn’t started on many of Auckland’s special housing areas with the alacrity the ex-minister kept presuming – there were still catches – and that most of that housing was targeted too high for low-earners to buy in. The US’s tactic to take ownership down to that basement market evolved into an extraordinary rash of worthless subprime mortgages and an international collapse called the global financial crisis, but there are more sensible ways of achieving a wider spread of ownership.

An era of inequality as policy

Since that crisis began, it’s been evident that many of the excessively rich have become filthily excessively rich, and you don’t get invited to go out fishing with them in their tinny because it happens to be longer than a very long wharf, with exclusive entry.

You’ll have read plenty about the 1% grabbing all the money, that it’s not trickling down to the rest of us. And in the US, how the Deep State controls all the levers, but you’re never quite sure who this Deep State is or how to belong to it.

From most articles about this mystical beast, ordinary mortals aren’t invited. Right family, right school, right university, right employer, all of those and you’re in.

You can break in, though sometimes you might have to pick the lock.

It would come as no surprise, given my job, that I’ve conversed with a high proportion of New Zealand’s 1% over the years – some there by inheritance, many on their way up – and they come in a range of political hues, partly, I think, because so many have climbed from a low rung and haven’t followed orthodox courses to the upper echelons.

Those upper echelons exist in both the corporate & public sectors, and paths within the 2 have become closely related, starting when the corporate sector crashed & burned in 1987. In the preceding 3 years, as the neoliberal mindset began to dominate, corporate salaries began to be topped up with various extras such as options, warrants & bonus shares.

Come October 1987, many of the leading companies ceased to exist and bonus shares & options were of no value, but the notion that executives deserved far more pay clung on. It had far less to do with performance than with who held the voting power at company meetings. It was an international affair, enabled by majority shareholdings being under the control of institutions which didn’t disagree with the notion.

The public sector, meanwhile, chased higher executive earnings to maintain staff quality.

The inequality which continues to grow can be rearranged through taxes & earnings ratios (for example, relating the cleaner’s pay to the chief executive’s, much as minimum pay could be worked out on a ratio instead of a fixed figure).

Here, the Deep State constitutes political insiders who include senior public sector executives and corporate, bank & finance sector leaders.

Many of our 1% made their money in the 1980s and kept it, some by the skin of their teeth, and through judicious investment since then have become multi-millionaires.

I reflected today, instead of swearing the oath of poverty by choosing a career as a journalist, I might have turned off at one of the many corners that crop up on your way forward in New Zealand. Into one or another aspect of the sharemarket, or an inside instead of outside position in property, for example. But I didn’t, and so ensured I wouldn’t become a 1%er.

Nor did I aspire to become a member of the Deep State (or anyone inside it to even think of hiring me).

So, having failed right from the first paragraph of this article, I bring you some other writers’ insights on how insiders succeed in growing their position at the outsider’s expense, how the art of propaganda has advanced well beyond the understanding of many of us, and – this one is a dark delight – how people in an inconsequential town in Macedonia played a fake-news role in the US election, and what most unlikely reason drove them to it.

Counterpunch, 15 March 2017: How bankers became the top exploiters of the economy
Quartz, 13 May 2017: 21st-century propaganda: A guide to interpreting and confronting the dark arts of persuasion
Wired, 15 February 2017: Inside the Macedonian fake-news complex

Attribution: Comment.

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English announces super at 67

Prime Minister Bill English said today the Government would progressively lift the age of eligibility for NZ superannuation from 65 to 67, starting in 20 years.

The proposal assumes National will win the election, scheduled for 23 September. Mr English said (assuming he’s still in power), the change would go into legislation next year.

As justification for a measure his predecessor, John Key, wouldn’t take, Mr English said: “New Zealanders are healthier and living longer, so adjusting the long-term settings of NZ super while there is time for people to adapt is the right thing to do….

“Gradually increasing the retirement age from 2037 will more fairly spread the costs & benefits of NZ super between generations, ensure the scheme remains affordable into the future and give people time to adjust. It will also bring New Zealand into line with other countries like Australia, the UK, Denmark, Germany & the US, which are all moving to a retirement age of 67.”

Mr English said universality & indexation wouldn’t change. He said he was announcing the change now so political parties could debate superannuation transparently in the lead-up to the election.

Little says Labour will hold it at 65

Labour Party leader Andrew Little said before the announcement that Mr English was fuelling uncertainty: “On Saturday he talked about a ‘reset’ for super, but wouldn’t be drawn on what that meant. By Monday he was ruling out changes to entitlements. What will tomorrow bring? A rise in the age of entitlement from 65? This drip feed of options is irresponsible.

“It’s just more poor leadership from Bill English, just like his approach to the housing crisis. His dithering is creating unnecessary anxiety over something he needs to be absolutely clear about because it affects the lives of so many. It’s one thing to be uncertain about what’s going to happen. It’s another thing to say let’s have a debate about it without actually putting the case for change….

“Labour’s policy is very clear. There will be no change. A Labour government I lead will keep the age of entitlement at 65 and we will re-start contributions to the NZ Superannuation Fund.”

Attribution: English release.

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The English programme is for steady growth

Bill English, completing his second month as Prime Minister, opened Parliament yesterday with a statement that was long on boring. The word ‘continue’ cropped up throughout his speech.

And that’s neither odd nor bad. A prime minister who’s just finished 8 years as deputy and also as finance minister is hardly going to tell you he’s been doing a bad job and is going to change everything.

Nevertheless, I read through it in case something had moved out of line. One thing I’d hoped might have moved a little closer to action was the Resource Management Act reform programme. It was down the end of the speech and is still a work in progress. That’s perhaps for the best, because it needs work to remove some of the unnecessary turmoil some changes were going to make.

Mr English said economic growth was expected to average about 3%/year over the next 5 years, “supporting more jobs, reducing unemployment and allowing incomes to rise faster than inflation.

“Unemployment is forecast to drop to 4.3% by 2020-21. Over the same period another 140,000 jobs are expected to be created and the average wage is forecast to increase by a further $7000 to $66,000.

“The Government’s overall fiscal strategy remains unchanged – getting on top of spending and paying off debt in the good times so that the Government can support New Zealand communities through future challenges.

“The operating allowance remains at $1.5 billion for each of the next 4 Budgets. The capital allowance has been increased to $3 billion in Budget 2017 and to $2 billion in future budgets to provide for a number of high quality infrastructure & investment projects.

“Treasury’s latest forecasts of the operating balance before gains & losses (OBEGAL) is for a $473 million surplus this year, rising to $8.5 billion in 2020-21.

“Net debt is expected to fall to 18.8% of gdp by 2020-21, with contributions to the NZ Superannuation Fund forecast to restart the same year.”

Among projects for the year (there are others, in case you think the most important one has been omitted – check the link below):

“The Government will continue work on improving the quality of our rivers & lakes, and progress work on a fair & equitable allocation system for water & discharges.

“The Government will encourage petroleum & mineral exploration while adhering to strong environmental & safety provisions. Investment in data acquisition projects such as aeromagnetic surveys will continue, ensuring aeromagnetic data on around 30% of New Zealand’s land surface will be available by mid-2018.

“The Government will continue to promote competition in the electricity market to help keep downward pressure on power prices. It will also continue to promote renewable energy, with a target of reaching 90% renewable energy by 2025, up from 81% in 2015. Work will be progressed on setting renewable energy targets beyond electricity.

“Investment in modern infrastructure is a priority for the Government. Capital spending over the next 5 years is forecast to total $32.1 billion, compared to $18.4 billion over the last 5 years, with major investments in transport, schools, hospitals, defence & housing.

“The Government will continue construction of the remaining 5 roads of national significance, and accelerate a package of regionally important state highway projects under the accelerated regional roading

“Housing will remain a key focus for the Government this year, and work will continue to increase the supply of land for housing.

“Legislation to reform the Resource Management Act will be progressed, to reduce costs & delays for homeowners & businesses, and the Government will also proceed with reform of the Building Act.

“The Productivity Commission will deliver its final report on the urban planning system. This will consider options for the long-term replacement of planning legislation.

“The Government will work with Auckland Council to ensure the successful implementation of the city’s unitary plan. Additional special housing areas will be established, and more underutilised Crown land will be made available to support an increase in residential building.

“The Government is reforming the social housing sector to grow supply and get better outcomes for people & families most in need of housing assistance.

“The Government will build & fund additional social & emergency housing places, having last year provided permanent funding to the emergency housing sector for the first time.

“The social housing reform programme will progress, with the transfer of up to 2500 Housing NZ properties in Christchurch to community housing providers. The reforms aim to drive more diverse ownership of social housing, engaging providers who can support tenants with additional social services, and redevelop social housing to better match tenants’ needs.

“The Government will progress the advanced survey & title services project, which will significantly improve the quality & range of survey & title services provided by Land Information NZ.

Legislation to amend the Local Government Act will be progressed, allowing local authorities to create more shared services across regions, particularly for core infrastructure such as transport, water & sewerage.

“The Government will continue to review New Zealand’s immigration settings to ensure they support economic growth and provide employers with access to the international labour market to fill labour needs that cannot be met domestically. A new global impact visa will be piloted to attract up to 400 young technology entrepreneurs.

“The Government will implement initiatives to contribute to its goal of raising Government investment in research & development to 0.8% of gdp, including the rollout of the $250 million/year strategic science investment fund.

“2 new regional research institutes will be established in Marlborough & Alexandra, and a second round of regional research institute funding applications will be completed, supporting 1-3 additional institutes.

“The Government will continue to resolve historical Treaty of Waitangi claims, and intends for all willing & able iwi to have settled or have an agreement in principle by the end of 2017.”

Prime Minister’s statement, 7 February 2017

Attribution: Speechnotes.

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English explains his thinking

Prime Minister Bill English used a Rotary Club address in Auckland yesterday for his first election campaign offer, a big lift in police numbers & resources.

The package would amount to $503 million and includes adding 1125 more staff to the police force over 4 years, 880 of them sworn officers; an increase in cash & assets seized from gangs & organised crime, up from $230 million to $400 million over 4 years; and $115 million for rehabilitation & reintegration programmes.

The National proposal, the first promise heading into the 23 September general election, comes 4 months after Labour leader Andrew Little berated the Government for holding police income down to 14% since it was elected in 2008, compared to a 25% rise in costs over that period arising from immigration & inflation. Labour proposed lifting police numbers by 1000 in 3 years.

More interesting to me from Mr English’s address yesterday, though, were some of the pictures he painted from his upbringing on a Southland farm, his time as a young farmer fighting the debt which threatened to overwhelm him and, he said, learning economic reality. Below, I’ve run those parts of his speech:

A successful recipe

Some people believe New Zealand’s location protects us from the most immediate pressures. But in time, the effects of decisions made in Washington, Berlin, Moscow & London will wash up on our shores.

When our values & direction are tested, we should remember that history shows we’ve developed a successful recipe for New Zealand over many years, and we can hold true to our values. That allows us to face international challenges with confidence. Confidence in our resilience, confidence in our ability to adapt and confidence in our place in the world.

We have forged a distinctive place in the global community as a fair-minded people with a successful economy open to trade, investment & migration. That economic success has been hard won by New Zealanders. It should not be taken for granted.

As some of you know, I was brought up in Southland, a place where hard work & farm skills were respected more than profit, and where no one could do it all on their own. I got my politics around our large dining table growing up, and from my mother who ran a farm, raised 12 children and was a serial community activist.

By the early 1980s, I was a new, keen & highly indebted young farmer. Interest rates were around 17%, but farm costs were held down by wage & price freezes.

That wasn’t sustainable and just papered over the economic problems that had built up over a number of years.

The economy had to be restructured. My community was hit hard as farm subsidies were wiped.

I made lots of financial & farm management mistakes. But with the help of family and a lot of hard work, we stayed on our feet.

Many New Zealand families had similar experiences in other industries, as jobs were lost and they struggled to rethink where they fitted in a country that had suddenly changed.

We thought the world owed us a living. It didn’t.

Small steps

I learned then that business & families in a small trading country like ours needs to continuously adapt in small steps – and that government should back Kiwis to do just that, focusing on resilience & aspiration rather than fear & isolation.

Hiding from economic reality eventually requires drastic & damaging change.

This has been the guiding philosophy behind the National-led Government’s approach over the past 8 years. And it has delivered the strong economy we have now.

As a new MP in 1990, I saw the deep-seated resilience of our rural families & communities as they rebuilt their skills & their confidence. I saw the same qualities in the big city when I married into a Samoan Italian family.

I must admit the scruffy unemployed farm worker who turned up on the arm of their eldest daughter wasn’t quite what Mary’s parents had in mind as a son-in-law – busy as they were with several jobs and raising a large family. From them I saw the grit & determination it takes to feed & educate a large family, own a home and win respect when starting afresh in a new country.

Mary and I have raised 6 children of our own. Along with the hundreds of families we’ve met through school, church, relatives & dozens of sports teams, we’ve shared the experience of working multiple jobs, getting everyone everywhere on time, finding time to spend with the children & each other – and for enough sleep – as well as answering the hardest question of all every day: what’s for dinner and who is cooking it?

The people who shaped my life are resilient & capable.

I’m proud that on the other side of the globe from the European capitals I visited a few weeks ago, New Zealanders have built a cohesive & globally competitive country that can provide valuable lessons to the rest of the world.

In recent years, New Zealand has dealt with the biggest financial crisis since the Great Depression, we’ve dealt with devastating earthquakes and we’ve made significant progress on deep-seated social & Treaty issues.

A sound footing

We now have a dynamic & diversified export sector, sound government finances, low unemployment and thousands of new jobs. People are voting with their feet. New Zealanders are staying home, more tourists want to visit us, and more people want to live here. The outlook remains positive and the economy continues to grow, with over 130,000 jobs created in the last year. Average wages are expected to keep rising and reach $66,000 a year by 2021. That means more opportunities for our kids to get jobs and more money in people’s pockets.

The global economy is looking a bit better than last year, with improving prospects in Europe & the US. However, the political instability I mentioned earlier means there is no room for complacency.

In this environment, I believe the biggest threat to New Zealand is disruption of the international system of open trade. Under my leadership, New Zealand will continue to advocate for free trade and aim to execute high quality trade agreements. When we open doors for our exporters, they walk through and create opportunities & jobs for New Zealanders.

Immediate challenges

Our immediate challenges at home are what I call the positive challenges of growth. The Government is building the roads, schools & houses needed to support our growing communities. We’re providing the public services & infrastructure needed by a successful, growing & modern economy – and there’s much more to do.

The whole point of building a strong economy is to improve the lives of all New Zealanders. If we can stay on course and build on the progress we’ve already made, we have the best opportunity in decades to make positive sustainable choices for our country – choices that deliver better incomes for our families, safer communities, and provide better government services for everyone.

As prime minister, I want people to be rewarded for their hard work & enterprise.

Businesses, farms and entrepreneurs across New Zealand are the engines of growth in our country – as are the people who work hard every day in those enterprises.

So we’ll continue to back people who take risks to create new jobs & new businesses.

We’ll back hard-working people who get up early in the morning to milk the cows or to catch the bus to work, so they can raise their families. And we’ll back people who bravely leave behind welfare dependency to move into work or who work hard to manage their health issues or disability so they can live independently. I believe in the capacity of all New Zealanders to improve their lives in some way, large or small. And I believe in the generosity of this country to help them do it.

Here’s what I mean.

Last year, I visited Kaiti School in Gisborne, where many of the children come from low-income families. I saw inspired teachers sign up parents, mostly young mums, to the local iwi savings scheme. I met a 5-year-old who presented me with a business plan for selling toffee apples at the school fair. He told me about his products, his customers & his marketing.

If we accept the normal assumptions, then that young Maori boy hasn’t got much chance. But what I saw in his eyes, and in the teachers supporting him, will change his life.

Finding the bright side

Through my extensive family & many years as a local MP, I have seen hundreds of examples of suffering & loss of hope turned around by quiet heroism in our communities, families, schools & public services. It never happens without the hope of one person for another.

I’ve also seen lives blighted by poor public services, bad decisions, neglect & bureaucratic inertia. A well-intentioned public service on its own is no guarantee of success – we have to help people to fan the small flames of hope. This government is committed to doing that.

We’ve developed a better understanding of the needs of people who rely on us most. Public servants can now see the lifelong benefits of intervening early to help those in need, and the lifelong costs when that doesn’t happen. We know, for example, that a teen parent on welfare will spend an average of 17 years on a benefit, at a cost of just under $300,000.

There is a group of around 1000 5-year-olds each year who, in later life, are far more likely to commit crime, be on a benefit or go to jail, and they’re far less likely to succeed at school. Left alone, each of these children will cost taxpayers on average around $270,000 over the next 30 years, with some costing over $1 million. We will spend time and money now to change the course of their lives.

For too long, governments have serviced misery, rather than investing upfront to help people change their lives for the better. Some New Zealanders need ongoing support to help them lead a decent life – and they should have as much choice as possible in how that happens. But there are many more who will benefit from smart, lighter-handed assistance and will then move on.

A basic: Money isn’t always the answer

It seems pretty basic to me that if you are spending billions of dollars on social programmes like health, education, welfare, housing and law & order then it should work. You should actually be achieving something, otherwise you’re wasting taxpayers’ money and messing with people’s lives. So we now publish results every 6 months showing what has been accomplished.

Spending more public money is not, in itself, an achievement. Real achievement is reducing welfare dependency. Real achievement is getting better results for our kids at school. And real achievement is preventing rheumatic fever, and reducing emergency department waiting times. Real achievement is changing lives. This approach, which we call social investment, is showing promising results.

There are now over 50,000 fewer children living in benefit-dependent households than there were in 2011. And the number of sole parents on a benefit is the lowest since 1988.

My government is willing to take the risk of trying new ways to help those most in need. Some new services might not work. Others might be opposed by existing providers. In election year, some will say the answer is always more money. If that were true, we would have no social problems, as we’ve been increasing funding for decades. The recent rise in the prison population confirms we need to do better.

We’ve made some progress in breaking the cycle of welfare dependency, child abuse, low education levels & escalating criminal offending, a cycle that is often intergenerational. It is a long job.

The people who fall through the cracks

But there remains a small number of people who have a disproportionate impact on the safety of our communities. Too many people in prison and on community sentences are regulars in the government system. So today I want to address that issue.

This Government’s Policing Excellence and Prevention First programmes have focused on reducing crime and preventing reoffending. These programmes contributed to a 20% reduction in crime between 2009-14. They improved public confidence in police, and they drove productivity gains that freed up the equivalent of more than 350 extra frontline officers. More recently, we’ve set challenging targets to reduce violent crime, youth crime & reoffending.

We’ve made it harder for violent offenders to get bail and we’ve sharpened our focus on preventing family violence. And we’re using social investment to better understand the people who most need our intervention and identify what really helps them to lead better lives.

We have driven government agencies to address the drivers of dysfunction, rather than just responding to the symptoms. Because preventing crime often requires intervention from education or housing agencies rather than just the police, for example.

Here is a surprising fact: The most common age of an apprehended burglar last year was 16. That’s right – just 16 years old. We need to push harder to keep every young person on a track that avoids first offending and prevents them moving on to even more serious crime. But the police frontline need more time to dedicate additional resources to crime prevention & working with other agencies, while also meeting higher demand for dealing with serious crime now.

Although recorded crime has fallen since 2009, overall demand for police services has recently increased. That’s down to the complexity & time-consuming nature of cases such as family violence, child abuse & sexual assault, as reporting of these crimes increases. In addition, recorded crime has begun to rise again over the last 2 years – particularly burglaries, robberies & assaults.

As I’ve said, this government is prepared to invest up front in programmes that will tackle these complex issues and make a positive difference to communities.

Warning: examine the promises closely

Delivering better public services for a growing country is all about investing where it’s needed, while working smarter and being more accountable for results.

In weighing up promises by political parties this year, I challenge you to look beyond the dollar-figure soundbites. I want you to ask whether the policy sets out exactly how it will improve people’s lives – or whether it is just taking the easy option of throwing money at a problem.

Attribution: Bill English speechnotes.

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Housing minister no more

Nick Smith has lost the housing portfolio in today’s Cabinet reshuffle by new prime minister Bill English, and nobody’s picked it up, although 2 ministers have social housing & Housing NZ in their titles.

Dr Smith has retained the building & construction (previously building & housing) and environment portfolios.

Ministers with ‘housing’ in their title are:

  • Amy Adams, responsible for social housing, responsible for Housing NZ Corp, also Associate Minister of Finance, Minister of Justice, Minister for Courts, Minister Responsible for Social Investment, and
  • Alfred Ngaro, Associate Minister for Social Housing.

Steven Joyce picks up finance & infrastructure, Gerry Brownlee remains Leader of the House and retains Supporting Greater Christchurch Regeneration, Defence and the Earthquake Commission portfolios. He will also be appointed Minister of Civil Defence.

Simon Bridges continues as Minister of Transport and will pick up the economic development & communications portfolios and associate finance.

Anne Tolley becomes Local Government Minister, replacing Peseta Sam Lotu-Iinga, who is retiring from Parliament.

Full ministerial list

Attribution: Prime ministerial release.

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Greens unveil expanded housing purchase plan & finance models

Green Party co-leader Metiria Turei refreshed the party’s home for life policy at the weekend with a progressive ownership plan and new financing models for community housing groups.

She told the Habitat for Humanity conference in Rotorua on Saturday: “For much of Aotearoa New Zealand’s history, governments used their low cost of borrowing to finance affordable homes for New Zealanders. It is time for government to pick up its tools again.”

The home-for-life policy is a rent-to-buy type of scheme, but Mrs Turei said the constantly rising average house price – now over $1 million in Auckland – made housing unaffordable for most people.

As a part of a government-build programme, the Green Party would make 10,000 new homes available over 10 years to people who can’t afford a deposit or a normal commercial mortgage, through progressive ownership rent-to-buy arrangements.

“Progressive home owners will pay a weekly payment of no more than 30% of their income. Part of each payment will be rent to cover the Crown’s costs. The rest will purchase equity shares in the home. Over time, with each regular payment, ownership of the home will transfer from the Government to the people who live in it.

“Our plan will save people more than $100/week compared to a commercial mortgage. This programme will work alongside any Government plan to build more affordable homes. It will provide access to affordable, stable housing and get people out of expensive rentals and into their own homes.”

Mrs Turei said community housing providers would be able to buy an additional 5000 newly built, energy-efficient homes from the Government through the progressive ownership programme: “Community housing providers may choose to use these as emergency housing, rent them out as social housing, or sell them to tenants over time using their own rent-to-buy programmes.

“Community housing providers will provide a deposit or use private sector finance to pay for part of the initial cost of building new, highly energy-efficient homes. The Government will fund the remaining stake through Housing NZ. Community housing providers will make regular payments to buy out the Government’s stake.”

She said the Greens proposed that the Government issue low-interest loans to community housing providers, funded by supplying long-term partially guaranteed housing bonds to investors who want to see their money put to use to solve the housing crisis.

Green Party, home for life policy

Attribution: Party release.

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Little sets out 8 planks to remedy housing issues

Labour Party leader Andrew Little announced yesterday that Labour would, if elected next year, carry out 8 actions aimed at fixing the housing crisis.

They are:

  1. Build 100,000 affordable homes around the country
  2. Ban foreign speculators from buying existing homes
  3. Introduce an affordable housing authority, partnering with the private sector, to fast-track development in our cities
  4. Tax property speculators who flip houses within 5 years
  5. Help 5100 more Kiwis into emergency housing every year
  6. Make Housing NZ build more state houses & maintain them properly, rather than paying dividends & selling stock
  7. Require all rental homes to be warm, dry & safe to live in, and
  8. Abolish the urban growth boundary and allow Auckland to grow up & out.

Mr Little said: “The Kiwi dream of home ownership is slipping away and we’re facing the biggest housing crisis New Zealand has ever seen. This is a game-changing policy package to fix the housing crisis.

“Labour will establish an affordable housing authority to work with the private sector to cut through red tape and get new homes built fast. It will partner with private developers, councils & iwi to undertake major greenfields & revitalisation projects, building affordable homes with KiwiBuild & the private market. These homes will be part of great communities built around parks, shopping centres & transport links.”

The party would put all surplus urban Crown land under the control of the affordable housing authority for use in its development projects.

“Only a quarter of adults under 40 own their own home, compared to half in 1991. Too few houses are being built, which is helping to drive up prices beyond the reach of middle New Zealand, and too few of the houses that are built are affordably priced for new home buyers.

“In Auckland, despite more than 13,000 new houses being needed to keep up with population growth, just 9400 new houses were consented in the past year. The trend for new consents is falling when a dramatic increase is needed.

“The Government’s estimate that only 5% of new builds are priced in the lowest quartile means fewer than 500 affordable houses will be built in Auckland this year.

“There is no single body tasked with driving the construction of affordable homes. Most developments are smallscale & slowed down by long consenting periods. To ensure profitability, private developers focus on building large, expensive houses.

“At the same time, regional centres are crying out for redevelopment of rundown town centres & suburbs but there is no support from the Government to get this done.”

100,000 affordable homes

Mr Little said Labour’s KiwiBuild programme would build 100,000 high quality, affordable homes over 10 years, 50% of them in Auckland. Standalone houses in Auckland would cost $5-600,000, apartments & townhouses under $500,000. Outside Auckland, houses would range from $3-500,000.

Growing the building workforce

Increased house-building will require a larger workforce, but the Labour policy is aimed more widely than that: “Labour’s dole for apprenticeships policy will subsidise employers to take on around 4000 young people for on-the-job training in fields including building & construction. Labour’s policy of 3 years’ free post-school education will see tens of thousands more people study in all fields, including building & construction. KiwiBuild is projected to create 5000 new jobs at its peak.”

Remove barriers that are stopping Auckland growing up & out

“Up & out” has become a common cry, often without thought on what the “out” would achieve. The constraining urban boundaries were put in place to prevent sprawl into rural areas and to enable infrastructure to service new development most efficiently, and therefore more cheaply. Auckland’s old councils were at odds on urban growth – the outer councils were attracting more housing development but had trouble meeting the infrastructure programmes & costs, while the old Auckland City Council favoured intensification as a regional policy.

Mr Little said: “Labour will remove the Auckland urban growth boundary and free up density controls. This will give Auckland more options to grow, as well as stopping landbankers profiteering & holding up development. New developments, both in Auckland & the rest of New Zealand, will be funded through innovative infrastructure bonds.”

Crackdown on speculators

He said Labour would ban non-resident foreign buyers from buying existing New Zealand homes: “This will remove from the market foreign speculators who are pushing prices out of reach of first-homebuyers.”

Labour would extend the bright line test, requiring income tax to be paid on any gains from the sale of residential property, from the current 2 years to 5 years: “This will target speculators who buy houses with the aim of making a quick capital gain. Current exemptions from the bright line test will continue.”

Mr Little said Labour would consult on way to close the negative gearing loophole: “Negative gearing can be used by speculators to make taxpayers subsidise losses on their properties. This is effectively a subsidy for speculation.”

Focus Housing NZ on helping people, not making a profit

Labour will make Housing New Zealand into a public service rather than an SOE, and will substantially increase the number of state houses. Unlike the current government, Labour will not milk state housing for a dividend, and will end its programme of state house sales.

Establishing an affordable housing authority
Focus Housing NZ on helping people, not making a profit

Attribution: Party policy announcement.

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PM talks $1 billion infrastructure fund, English talks payback frame, Smith talks grabbing more power

Prime Minister John Key announced a new $1 billion housing infrastructure fund today “to accelerate the supply of new housing where it’s needed most”.

The one-off contestable fund will be open to applications from councils in the highest growth areas – currently Christchurch, Queenstown, Tauranga, Hamilton & Auckland.

Mr Key & his ministers said in background to the fund: “Why a one-off fund? Longer-term, councils need to find new ways of funding infrastructure through existing funding tools or potentially coming up with new ones.”

The fund announcement comes 3 days after Auckland Council approved a $770 million increase in its annual budget to $8.77 billion, which right-wing critics of the council say is already too big.

The budget includes $705 million of capex for growth, numerous water & wastewater projects aimed at expansion in existing areas and for greenfield growth, and provision for the council development manager, Panuku Development Auckland, to work on transformation of about 18 centres & suburbs, including regeneration & new development.

English at odds with prudent policy

Finance Minister Bill English said the new fund “will help bring forward the new roads & water infrastructure needed for new housing where financing is a constraint. The Government will invest up front to ensure the infrastructure is in place. But councils will have to repay the investment or buy back the assets once houses have been built & development contributions paid.”

That’s to say, the Government is offering councils a programme forcing them to incur extra debt beyond long-term plan provision, on a timetable they can’t control, when, in Auckland’s case, the council is struggling to maintain its debt at a prudent level.

It’s a determined continuation of the Government’s intention, in Auckland, to dismantle the urban boundary and enable more greenfield development – 3 weeks before the panel which has spent 18 months hearing & working through submissions on Auckland’s first unitary plan delivers its considered recommendations to the council, including recommendations on that urban boundary.

Property Institute chief executive Ashley Church was quick to applaud the Government for its fund: “The move will go a long way toward overcoming Auckland Council’s major objections to opening up residential land on the fringes of the city.

“It follows a recent directive from Housing Minister Nick Smith, which required councils to open up enough land to cater for the growth in our fastest growing centres. The 2 measures have stripped Auckland Council of most of its excuses for inaction.”

Fairgray spelt out growth reasons which government could control

Mr Church’s view – and the Government’s intent – are at odds with research by the economist who led much of the council’s research on growth capacity & urban boundaries for the unitary plan hearings, Doug Fairgray.

Dr Fairgray said in a column run on this website on 24 June: “So what is driving this latest upsurge [in house prices]? Simply, the conditions which underpinned the price boom through the pre-GFC period have returned, but with greater effect. The principal drivers again include the ease of securing finance to purchase dwellings, stimulated by the strong competition among banks & financial institutions to increase their loan books, together with historically low interest rates making loans more affordable, and in particular the record levels of population growth in Auckland driven by record in-migration.”

The Government was able to address all those factors. It could also have addressed the heightened investor demand for houses throughout the 5 years since the market hit the global financial crisis bottom in mid-2011.

And, if Dr Fairgray is right in saying land supply is not the central problem, the Government’s move to hasten greenfield residential development will exacerbate long-term costs for commuters and council costs for the provision of community infrastructure.

Smith stretches Government talk to power grab on planning & consents

Building & Housing Minister Nick Smith said: “The fund will be available only for substantial new infrastructure investments that support more new housing, not to replace existing infrastructure.

“To access the fund, local councils must outline how many new houses will be built, where they will be built and when they will be available. Ideally, they will have agreements with developers on these issues.

“Funding may also have other conditions attached, such as faster processing of resource consents. All of this will require close collaboration between central & local government.”

Mr English said: “Infrastructure, and its financing in particular, is one of the 3 key constraints to building more houses – alongside land supply & consenting requirements.

“Councils have strict debt limits, which means some lack the headroom to invest in infrastructure now, and then wait for future development contributions to recover the costs. The fund will help provide more infrastructure sooner by aligning the cost to councils with the timing of revenue from development contributions.”

Depending on the number & timing of applications, it will require the Government to temporarily borrow up to $1 billion, which will increase net debt until it is repaid.

Dr Smith repeated Mr Key’s recent statement that the Government was also considering establishing urban development authorities to help further speed up the supply of new housing: “Urban development authorities have streamlined powers to override barriers to largescale development, including potentially taking responsibility for planning & consenting & other powers.

“These changes are just the latest steps in the Government’s ongoing, comprehensive programme to increase the supply & affordability of housing.

“They will complement the work of the housing accords & special housing areas, our social housing build, our emergency housing programme, the expanded HomeStart scheme for first-homebuyers, the development of surplus Crown land, the national policy statement [on urban development], Resource Management Act reform and the extra tax measures we took last year.

“We are making good progress in facilitating increased investment in housing with a record $11.4 billion of residential building work underway this year. This initiative to support councils with infrastructure provision is the next logical step in this programme.”

The council budget & infrastructure projects

Auckland Council’s budget for the year that started on Friday includes a rise in debt from $8 billion to $8.77 billion, but with interest costs held below 12% of revenue (11.3% for the last year, 11.5% for the next year).

Capex for 2016-17, up from $1.8 billion for the year just finished to a budgeted $1.95 billion, includes $1.375 billion for new assets, ranging from multi-year projects such as the city rail link & Ameti (the Auckland-Manukau eastern transport initiative) to a spread of local projects.

For just under $2 billion of capex & other outgoings, including $705 million for growth, the council budget includes $835 million to come from borrowings, $644 million from an operating cash surplus, $163 million in development contributions, $87 million from asset sales & $240 million from subsidies.

Key projects include $81 million on expanding the water collection system, $71 million on expanding wastewater treatment, and a number of other expansions & replacements of infrastructure.

The new Hunua 4 watermain will run 32km from the Redoubt North reservoir at Manukau Heights to the reservoir on Khyber Pass Rd, Grafton, costing $23 million this year.

Design will continue on the central interceptor for wastewater to support growth, replace aging assets and reduce overflows into the Waitemata Harbour.

The Waikato water treatment plant expansion will be completed and preliminary work, including getting consents, will be done for the North Harbour 2 watermain.

The budget includes $4.5 million on the start of the northern interceptor wastewater pipe, which will support northern & western growth and free up capacity at the Mangere wastewater treatment plant, supporting central & southern growth.

Upgrades to the regional water network include 2 new reservoirs at Pukekohe East, the first to start in 2017 and take 2 years to complete, and the second to follow depending on population growth.

The council’s development management arm, Panuku Development Auckland, had 2 transformation projects approved last December for Manukau Central & Onehunga, 8 other transformation projects to work on and another 8 to support, including development at Pukekohe, intensification at Avondale & New Lynn and redevelopment at Otahuhu.

Institute wants initiatives to encourage builders

The Property Institute’s Ashley Church said neither the Government nor the council should build the volume of houses required to address the shortage. He said the next step for the Government should be announcement of a series of initiatives designed to encourage the private sector to start building.

“Such measures could include a return of the ability to claim depreciation on dwellings constructed from now, removal of all loan:value restrictions on the construction of new dwellings, and an exemption from the ‘bright line’ test where the seller had built a home, rather than purchased an existing home.

“Moves such as these would very quickly create private & investor activity in new home construction and would lead to a focus on the construction end of the market – which has got to be preferable to the current situation where 42% of all purchases in Auckland are made by investors selling existing homes to each other.”

Mr Church acknowledged that the high cost of land, particularly in Auckland, meant these measures wouldn’t lead to a reduction in housing prices – but said they would “very definitely” contribute to slowing the growth in those prices.

Housing Infrastructure Fund – Q & A.pdf

Earlier stories:
1 July 2016: New house consents hit 9-year high but other sectors quiet
24 June 2016: Fairgray works through the question: Who’s really the house price villain?
6 December 2015: How Panuku proposes to lead transformation of Auckland

Attribution: Ministerial & Property Institute releases, council annual plan.

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