Billions boost in borrowing to address public housing pressure

Housing has been a growing problem for years, and despite promises by the incoming Government in 2017 the problems have grown, especially for those trying to buy their first homes as house prices keep climbing, and also for the many who have to rent.

The Government has quietly enabled a major increase in borrowing “for the newly formed Kāinga Ora social housing agency by $4.05 billion to $7.1 billion so it can build and refit almost 4,800 more state houses on top of the 6,400 already planned”.

But this is  bit of a bottom of cliff solution as people who face a cliff of property and rental prices seek state help for their housing.

Newhub: Tenants going to extremes to find housing as rental prices surge

Tenants around the country are going to extreme lengths to secure a roof over their heads as rental prices hit record highs.

Last year, the average cost of a rental property in Christchurch went up 1.7 percent to $379, while Dunedin went up 8.4 percent to $464.

Rental properties in Auckland rose 2.2 percent to $563 a week. Hamilton went up 6.1 percent to a December record of $420. Wellington went up 10 percent, topping the country with rents of $604 per week.

It mostly comes down to supply – high house prices mean people stay in rentals longer to save deposits, putting pressure on the market.

In turn, rent prices are going through the roof.

“Essentially, we need more houses,” Olsen said.

Trade Me’s latest figures from December show the number of enquiries on its rental listings has risen 17 percent on the year before.

Demand in Auckland and Wellington has increased by 20 percent and 8 percent respectively. In Christchurch, it was up 22 percent, and in Dunedin, 24 percent.

“With demand already really high, we expect to see record rents and some pretty startling demand figures over the next few months,” Trade Me head of communications Logan Mudge said.

Some landlords warned the Government they would need to pass on the costs of its rental reforms – which include limiting rent rises to once a year and introducing new healthy homes standards.

It’s obvious that increasing costs would be past on to renters.

Stuff: Warning 2020 may be a tough year in rental market

Trade Me Property spokesman Aaron Clancy said demand for rental properties was increasing enormously. “Unfortunately for tenants, this is a trend we expect to continue in 2020,” he said.

“As house prices continue to climb around the country, tenants are staying in rentals longer to gather a deposit, and that’s putting pressure on the market. In areas like Wellington city and Auckland city we reckon we will see record-breaking median weekly rents in the coming months as we head towards what we call March madness – when students return to the area for the university year and look for a new place to rent.”

It’s not surprising that more people are trying to get state houses.

Stuff: Public housing waitlist hits new record of 14,496

Close to 14,500 households were on the waitlist for public housing as of November last year, a record high.

The figures show 14,496 eligible households were on the waitlist for state-assisted housing at the end of November, up from 14,355 the month before and almost three times the 5844 households waiting when the Government was elected two years ago.

The vast majority of the households waiting are “Priority A”  – or the most in need. The median time to get eligible people into a house was 116 days, up from 100 the month prior.

Over November the Government managed to house 567 households, but this gain was wiped out by a growth of 1649 new eligible applicants.

The Government have argued that the waitlist has ballooned thanks to a hidden demand unleashed when they it was elected, as people would then see it as more likely they would get help.

Public housing minister Kris Faafoi said the increase was thanks to this new stance.

Partly perhaps, but it must also be due to rising rents and an ongoing shortage of houses.

Faafoi noted the Government had built 3300 public housing places and had another 2500 planned to be finished by the end of the this year.

There are currently 67,253 total subsidised state tenancies, up from 63,300 in 2017.

And it looks like an increase is planned.

Newsroom: Kāinga Ora’s borrowing limit lifted by $4b

The Government has quietly lifted the borrowing limit for the newly formed Kāinga Ora social housing agency by $4.05 billion to $7.1 billion so it can build and refit almost 4,800 more state houses on top of the 6,400 already planned.

The extra borrowing could allow the Government to lift its state house building plan from 6,400 by 2022 to 11,200. The plans come as Labour’s support partner, the Greens, called for more borrowing to fund state housing.

Just quietly, the new Treasury Secretary’s Senior Solicitor Katherine Reinhold announced in the Government Gazette on Monday in a snappily headlined item (Notice of Approval Given Pursuant to Section 160(3) of the Crown Entities Act 2004 that Finance Minister Grant Robertson and Housing Minister Megan Woods decided on December 19 to increase Kāinga Ora’s borrowing limit under its own name to $7.1 billion from January 1 this year.

Kāinga Ora then announced in its investor section (but not its home page) to bond market investors yesterday that its lending limits had been increased and it planned to borrow $2.5 billion through issues of its Wellbeing Bonds in calendar 2020, including a new longer-dated bond “in the next few months.”

So this should help address housing shortages, as long as land can be found and there is enough construction capacity, but it will take time.

Lack of available land remains a major problem, as is the time and cost needed to subdivide new building sections, so this looks a bit like tinkering at the wrong end of the problem.

 

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17 Comments

  1. Blazer

     /  20th January 2020

    plenty of land…levy the land bankers sitting on it.

    Ramp up rates on the 40,000 empty homes in Auckland.

    Low interest rates look like they are here to stay.
    They penalise savers and reward borrowers…full steam ahead for the FIRE economy.

    Reply
    • One of the biggest problems regarding land shortages in Dunedin is a small group of people using RMA/Environment Court processes associated with the new district plan to put a hold on development of over a thousand properties. They appealed the 2GP and a year later their legal claims are still vague apart from wanting to interfere in the rights of property owners to use their properties.

      Reply
    • Pink David

       /  20th January 2020

      “Ramp up rates on the 40,000 empty homes in Auckland.”

      On average, someone leaving a house ’empty’ is paying $30,000 per year to leave it empty. How much difference do you think doubling rates will make?

      Reply
  2. artcroft

     /  20th January 2020

    Encourage home owners to become landlords by allowing them to select who the want as tenants, set their own bonds, charge what they want, give landlords some protection from the tenancy tribunal, and you will see more properties put on the rental market.

    Reply
    • Blazer

       /  20th January 2020

      Surely you know that what you propose is unworkable.
      Without around 2.5 billion of taxpayer funds going to landlords now ,rents would plunge,and landlords wailing would waken the…dead.

      Reply
    • Corky

       /  20th January 2020

      Arty, have you got snake bit fever? Doing that gives owners control over their lives and property. No, it’s much better to watch people suffer the indignity of not having a roof over their heads. Its great to see landlords selling up. And what would all those NON PRODUCTIVE bureaucrats do if they didn’t have a job putting obstacles in the way of productive people wanting to address the housing shortage issue?

      Reply
      • Blazer

         /  20th January 2020

        so landlords are selling up….what to other landlords.!

        Even the term landlords is ..telling.

        Reply
        • Corky

           /  20th January 2020

          No, they are selling to the open market.

          ”Even the term landlords is ..telling.”

          Only in your fervent socialist mind, Blazer

          Definition:

          ”The owner of real estate, such as a house, apartment building, or land, that is leased or rented to another person or entity, called the tenant. PROPERTY. landlord & tenant.”

          All I see is an owner made a legal pauper by this government.. not a LORD of his own lands and property.

          Reply
          • Duker

             /  20th January 2020

            Very few landlords build a new property to rent , most buy an existing house of an owner and with the tax advantages rent it out for tax free capital gains and possibly some income.
            Every landlord who sells up makes the market more affordable by reducing competition for the housing stock on sale. Thats what drives up prices , more buyers and espcially those who can deduct interest costs from their tax on their normal work, called negative gearing. Homeowners cant do that

            Reply
            • Pink David

               /  20th January 2020

              “Very few landlords build a new property to rent , most buy an existing house of an owner and with the tax advantages rent it out for tax free capital gains and possibly some income.”

              The majority of landlords are renting at a loss to transact that into a tax free capital gain. Rents are subsidised by the way that tax system works.

  3. RNZ: High house prices ‘a threat to the middle class’

    The 16th annual Demographia International Housing Affordability Survey released today, which examines 309 housing markets in eight countries, rated all eight markets in New Zealand as “severely unaffordable”.

    Tauranga-Western Bay of Plenty was the least affordable, costing 9.3 times the local median wage, edging out Auckland at 8.6, followed by Napier-Hastings, Hamilton, Dunedin, Wellington, Palmerston North and Christchurch.

    According to the Demographia report, it cost seven times the median wage to buy a house in the third quarter of last year, up from six and a half times the median wage the year before.

    Co-author Hugh Pavletich said there was no doubt housing affordability was getting worse.

    “This survey is a huge wake-up call basically for all involved at central and local government.

    “The whole situation has moved from a crisis to a disaster.”

    Pavletich said high house prices were “a threat to the middle class”

    https://www.rnz.co.nz/news/national/407673/high-house-prices-a-threat-to-the-middle-class

    Reply
    • Blazer

       /  20th January 2020

      ‘This survey is a huge wake-up call basically for all involved at central and local government.’

      do tell….must need an electric shock to the nether regions to jolt them out of a Rip Van Winkelesque …slumber.

      Reply
  4. Stuff: Rising regions make NZ’s housing market less affordable

    Oliver Hartwich of the New Zealand Initiative said extremely high house prices were a sign of success, but of failure by authorities.

    “Demographia’s annual reports have become a sad routine. Every January, we hear how New Zealand is among the least affordable countries when it comes to housing.

    “And though the problem has now been researched enough, we are still waiting for decisive political action to fix or dysfunctional land and housing market.

    “To make housing affordable, we need to liberalise our planning regime, incentivise councils for housing development and, if privately, fund new infrastructure. If we don’t implement these reforms, Demographia’s future reports will continue to document our housing crisis.”

    https://www.stuff.co.nz/business/118831756/rising-regions-make-nzs-housing-market-less-affordable

    Reply
  5. Alan Wilkinson

     /  20th January 2020

    Idiot Lefties only know how to throw taxpayer’s money instead of fixing the problems. Everything they do make the problems worse.

    Reply
    • Blazer

       /  20th January 2020

      you can outline how supposedly ‘non idiot lefties’…have confronted the problem.

      Will not hold my…breath.

      Reply
      • Alan Wilkinson

         /  20th January 2020

        For a start they didn’t wage a war on landlords to push rents through the roof.

        Reply
    • Duker

       /  20th January 2020

      Throw taxpayers money ?
      back in 2010 instead of putting effort into housing the National party gave Chorus $900 mill for 45% of non voting equity- effectively lending them the money at low interest.
      This is why we were so slow to come out of the GFC, vanity projects of Steven Joyce like Chorus and various 4 lane duplications of state highways were built – but not a by- pass for the Manawatu gorge that was sliding into the river.

      Reply

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