KiwiBuild not ‘crashing and burning’

There has been a lot of coverage of the failure of KiwiBuild to come close to meeting it’s first milestone target of 1000 houses by the end of June.

Yesterday Phil Twyford conceded that they might manage a paltry 300 –300 KiwiBuilds by July – and many of those have simply been purchased ‘off the plan’ and would have been built by developers anyway.

KiwiBuild is not crashing and burning, because there is bugger all to crash and burn. It’s problem is that it hasn’t even ignited yet.

In opposition Twyford and Labour had claimed there was a housing crisis. The failure of KiwiBuild may be a growing crisis for the Government.

KiwiBuild struggling to deliver on housing crisis

KiwiBuild is one of Labour’s most important initiatives. It is supposed to address the ‘housing crisis’, to boost the number of houses needed around the country to accommodate a growing population. And it was initially presented as a way of portraying the Labour-led government as progressive and as compassionate as Michael Joseph Savage’s Labour that kicked off state housing  in the 1930s.

But KiwiBuild has proven to be a problem for Labour.  It is struggling to deliver on Labour’s promises, and the resignation of it’s first head – Head of KiwiBuild wasn’t working, now resigns – won’t help house building progress nor credibility.

The promise (Labour housing policy):

Build 100,000 affordable homes across the country

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 $500,000 to $600,000, with apartments and townhouses under $500,000. Outside Auckland, houses will range from $300,000 to $500,000.

It was always going to crank up the building programme.

The plan (Labour FAQ: KiwiBuild):

KiwiBuild is aiming to build:

  • 1,000 homes in the year to June 2019,
  • 5,000 the year after, 10,000 in the year to June 2020,
  • 12,000 every year after that.

The execution to date – Stuff’s Kiwibuild Tracker:

  • Homes built 33
  • Homes under construction 77

There is a lot required in the next five months to make the June target.

Gareth Kiernan (chief forecaster at economic consultancy Infometrics) at Stuff: Resignation another step to KiwiBuild failure:

Stephen Barclay’s departure as head of the KiwiBuild unit makes it even less likely that the scheme will be able to progress at the rate hoped for by the government.

Even allowing for a slow start, things are falling woefully behind.

Bearing these KiwiBuild targets in mind, having dynamic leadership for the programme seems imperative. Yet the KiwiBuild unit has effectively been without a leader of any sort since early November.

​KiwiBuild is an ill-conceived policy mess that doesn’t understand what is making housing unaffordable, why that unaffordability is a problem and needs government intervention, or even exactly who the policy is trying to assist.

We’re left with small $650,000 houses in Auckland’s outlying suburbs being offered to graduate doctors, or building homes in New Plymouth and Wānaka that are still too expensive to provide a realistic alternative for people wanting to get into the housing market.

Attempting to provide affordable housing while failing to address high land costs and ignoring critical capacity constraints in the construction industry is a recipe for failure.

So will Phil Twyford keep trying to do more of the same? Will Jacinda Ardern stick with Twyford as Minister of Housing? Probably, demoting Twyford would be seen as an open admission of failure, and more importantly, there is hardly a wealth of talent waiting to step up to one of the toughest jobs in Labour’s Cabinet.

KiwiBuild has to find a new head, and Twyford is going to have to show abilities not yet apparent, as well as finding new ways to accelerate the rate of house building.

Whether housing overall is a large problem or a crisis is just political semantics.

Whether KiwiBuild under performance is a large problem or a looming crisis looks like reality.

 

 

Head of KiwiBuild wasn’t working, now resigns

Last May Minister of Housing Phil Twyford praised the appointment of Stephen Barclay as Head of KiwiBuil:

It was revealed in December that Barclay, wasn’t working, but details weren’t given. Twyford refused to clarify – see Q+A: Phil Twyford “not my job to know” why KiwiBuild CEO not working:

Corin Dann: Do you know why he’s left the job..?

Phil Twyford: No, and I haven’t been advised on that, and it would be really inappropriate for me to comment…

Corin Dann: You don’t know why the CEO of KiwiBuild has not  been in the job since November.

Phil Twyford: Mmm. I know that he’s not at work, um but it’s literally not my job to know, and there are other people who deal with that, and they are, and I’m focussing on trying to get houses built.

Corin Dann: Has he actually resigned?

Phil Twyford: Corin, I can’t comment on this…It’s a matter relating to an individual public servant, and I simply cannot comment on it.

Barclay has now resigned from the job.

RNZ:  KiwiBuild head Stephen Barclay officially resigns

The head of KiwiBuild, Stephen Barclay has officially resigned from the role.

In a statement issued on his behalf, it was announced that he would step down from today.

Housing Minister Phil Twyford’s office said he would not be commenting on Mr Barclay’s resignation as it was an employment matter.

RNZ understands Mr Barclay’s absence arose from an employment dispute following the KiwiBuild unit’s transfer to the Ministry of Housing and Urban Development.

In a statement, the Ministry of Housing’s chief executive Andrew Crisp said he recieved Mr Barclay’s letter of resignation just after 12pm today.

“I am considering how this affects the employment process currently underway,” Mr Crisp said.

KiwiBuild and Twyford have been under fire for some time, and this has given the Opposition more ammunition.

However, the resignation “does not bode well” for KiwiBuild, which “has already shown itself to be a much more difficult beast than Phil Twyford, or the government seem to anticipate,” National Party housing spokesperson Judith Collins said in a statement.

Mr Barclay was appointed to the position in May, but had been absent since November. There should be more transparency about what had happened, she said.

“It’s taken three months for Mr Barclay to exit from a role he held for only four months,” Ms Collins’ statement read.

KiwiBuild had been “fraught with issues”, including houses not selling, and the policy was not working. Mr Twyford should be upfront about why its head could not last a year in the role, she said.

Twyford has kept distancing himself from this.

But he won’t be able to keep distancing himself from the under performance of KiwiBuild if he can’t get the massive housing project cranked up this year.

Q+A: Phil Twyford “not my job to know” why KiwiBuild CEO not working

Phil Twyford was interviewed on Q+A last night. Oddly Twyford said he couldn’t comment on reports that the KiwiBuild chief executive Stephen Barclay left the job last month – see KiwiBuild problems building up more than houses – saying “I can’t comment on anything to do with an individual public servant, that would be completely inappropriate” but did concede that Barclay is not working at KiwiBuild: ” I know that he’s not at work, um but it’s literally not my job to know”

Corin Dann: I wonder if you can clarify and clear up this business with the CEO of KiwiBuild, Stephen Barclay – reports over the weekend that he has left the job. Has he left the job?

Phil Twyford: I can’t comment on anything to do with an individual public servant, that would be completely inappropriate.

Corin Dann: Where the minister of a two billion dollar investment here for the public, I would have thought that’s in the public interest for you to comment on that isn’t it?

Phil Twyford: So I don’t hire the public servants, I don’t manage them, I just get their advice.

Corin Dann: Do you know why he’s left the job..?

Phil Twyford: No, and I haven’t been advised on that, and it would be really inappropriate for me to comment…

Corin Dann: You don’t know why the CEO of KiwiBuild has not  been in the job since November.

Phil Twyford: Mmm. I know that he’s not at work, um but it’s literally not my job to know, and there are other people who deal with that, and they are, and I’m focussing on trying to get houses built.

Corin Dann: Has he actually resigned?

Phil Twyford: Corin, I can’t comment on this…It’s a matter relating to an individual public servant, and I simply cannot comment on it.

Corin Dann: Do you have confidence in him?

Phil Twyford: Corin, I can’t comment on this. It’s a matter that relates to an individual public servant.

And it went on, with Twyford repeating his ‘individual public servant’ and ‘inappropriate to comment’ lines. This seems remarkable that Twyford won’t say if the CEO of KiwiBuild has resigned or is working or not.

Twyford must know something about it, but is resolutely refusing to comment on it.

He did comment on the appointment of Barclay – “Great to have someone of Stephen’s calibre leading the Kiwibuild team.”

 

KiwiBuild problems building up more than houses

NZ Herald: KiwiBuild chief gone after just five months: Barclay leaves top role

KiwiBuild chief executive Stephen Barclay has left the organisation after only five months in the job.

Barclay was appointed in May to steer the Government’s flagship scheme to build 100,000 homes in a decade.

Barclay, who has business, civil service and sporting experience, could not be reached for comment.

However, according to a person close to the matter, Barclay left his position at the start of November.

Leaving after just five months is not a good sign.

Leaving a month ago and only being made known publicly now is a sign that the government knows it doesn’t look good for KiwiBuild.

This is just part of ongoing not looking good. Reported  Wednesday (TVNZ): Five Auckland KiwiBuild apartments fail to sell on ballot, offered up on a first come, first served basis to those who qualify

Another five KiwiBuild properties have failed to sell off the ballot and are now being offered to anyone willing to buy them that qualifies for the programme, on a first come first serve, basis.

The properties are in Auckland’s 340 Onehunga Mall development and consist of two studios and three one bedroom apartments priced from $380k to $500k.

A total of 25 apartments were originally available, and 20 have now sold.

However, after the winner and runners-up fell through on five apartments they are now back on the market.

A spokesperson for KiwiBuild apologised to the people in the original ballot who weren’t contacted first when the apartments came back on the market.

“It’s a learning process,” he told 1 NEWS.

The spokesperson further clarified KiwiBuild’s position, saying there are no expectations that KiwiBuild homes would sell off the ballot.

Yesterday (Stuff):  KiwiBuild problems ‘more than just teething issues’

The extent of the issues that KiwiBuild has encountered have been a surprise, one economist says.

After three KiwiBuild homes were left unsold through the ballot for the Wanaka development, it was revealed that five apartments were passed up by the selected buyers for the 340 Onehunga Mall Development. They were then handed to a real estate agency to sell privately on a first-come, first-served basis (although still to qualified KiwiBuild buyers).

The scheme has also been criticised for building properties in New Plymouth that are selling for more than the median price in the suburband for including a graduate doctor among its first buyers in South Auckland.

Cameron Bagrie, of Bagrie Economists, said the problems seemed to be more than just “of the teething variety”.

“It’s a big project, there are going to be issues. I guess what’s been a bit of a surprise is the extent of the issues.”

Stephen Barclay leaving last month adds a bit of a shock to the extent of the issues – but are they a surprise? It was always going to be difficult for Labour and Phil Twyford to deliver on their highly optimistic plans, especially in the first few years.

It was fairly obvious they weren’t going to be able to just wave a wand and suddenly have heaps of land available, and heaps of builders available.

Newsroom:  Behind the contentious KiwiBuild numbers

The promise is well-known: 100,000 over 10 years, but the reality could be quite different. So far, just 33 have been completed, with 77 more on the way and a pipeline for many thousands more slated to begin construction in the large urban development projects announced in Auckland and Wellington.

Both the optimistic and pessimistic forecasts have their risks.

De-risking residential construction could come with massive gains in productivity, increasing existing capacity, or there could be a financial shock in the next four years. A shock would cause overstretched construction firms to collapse, leading to a huge slowdown in construction; with the forecast being slashed by 50 percent between the election and Budget, it’s difficult to tell.

Twyford’s next moments of truth will come at the Half-Year Economic and Fiscal Update next week, and then the next Budget, when Treasury releases its latest forecasts.

Any project of this size is going to have high risks.

Capital gains bonus for KiwiBuild buyers

Scoring a Kiwibuild house was already regarded as like winning a lottery, but the prize could be better still with another change by the Government.

Newshub: Housing Minister’s backdown on penalties for KiwiBuild property flippers

Newshub can reveal KiwiBuild has just become a much better investment.

The Housing Minister has quietly softened up the penalties applied to buyers who flip their home.

Documents obtained by Newshub show owners will no longer have to give up all capital gain they make on the house if they sell it within three years.

When Labour announced the policy in 2016, its plan to stop buyers reaping windfall gains was they must not on-sell their home for five years – or else they had to hand all the money they made to the Government.

That’s now changed to if buyers sell within three years, they must give up 30 percent of their profit.

“We really tried to strike the right balance here,” Mr Twyford says.

“We don’t want people cashing in on a potential windfall gain – but on the other hand, these houses are not subsided. People are paying for them with their own hard-earned cash.”

Is this a sign that it was harder to attract buyers to KiwiBuild ballots?

ODT editorial: Cracks appear in KiwiBuild

Kiwibuild, one of Labour’s primary policies, is showing signs of serious cracks.

The key for KiwiBuild and Labour will be winning the public relations battle, on which KiwiBuild narratives gain traction in the coming years.

Labour will suffer if the dominant view is that it is a lottery for yo pros (young professionals) who might be able to buy houses even in expensive places such as Auckland and Queenstown Lakes anyway.

Labour will be on the back foot if KiwiBuild is seen as a windfall for the likes of the graduate doctor and her online marketing manager partner who were the poster couple for the first such houses in Auckland.

And if KiwiBuild is seen as simply rebranding houses that would be built anyway, even apparently good progress towards the 100,000 target over 10 years will be seen as just spin.

It will be detrimental, too, if the view KiwiBuild is a useful hand-up for developers through guaranteed sales becomes the norm.

One wonders, too, if a scheme could have been devised so that potential lottery-like capital gains were ameliorated. Could KiwiBuild have been thought through better so that those buying at a discount would also have to sell at a reduction, the difference going to the next first-home buyer. Or the initial discount on market price would be returned to the government when the houses were sold. Although this has been achieved overseas, policies such as KiwiBuild can become mired in complexity.

Labour must be hoping the issues with the shaky start to KiwiBuild can be patched over, that it really can deliver lots of new homes and ease the housing crisis.

Crucially, it must hope its narratives gain purchase and the public can be convinced the scheme is positive with wide public benefits.

KiwiBuild was a ten year plan, but if it looks like a shambles in eighteen months time it may make the  2020 election campaign challenging for Labour.

 

Ardern: “housing for every price point, every income, every need”

In an interview on Newshub Nation Jacinda Ardern has defended Kiwibuild providing what many would see as expensive housing to people with very good incomes, and said that the Government should provide housing for just about everyone – “So for us it’s about providing housing for every price point, every income level and every need.”

That’s a remarkable statement.

Here is the whole part of the interview transcript that discussed KiwiBuild and housing.


You mention KiwiBuild — there’s been more controversy this week around the income thresholds for KiwiBuild. Have you over-promised on how affordable KiwiBuild homes actually are?

I think when you look at the context of where we’re building in the Auckland market, when you’ve got houses sitting around the million-dollar mark, and first home buyers saying that’s simply not a threshold that we can meet. What we’ve done with KiwiBuild, of course, is not about subsidising housing, but about providing more supply in the housing market where builders and developers just were not producing houses.

From memory, roughly five per cent of houses being built in that market were what you would call something adequate for a first home buyer. We’re trying to turn that around. We’re intervening in the market by building what people are looking for. When you think about that fact that, say, two teachers with five years’ experience, you know they just come under the threshold for KiwiBuild and even then those couples are struggling to find a home.

So that’s what KiwiBuild is all about. It’s rightly been popular, and I think we’ll look back on what we’re doing in the housing market and think this is something that will be a real turning point.

MBIE figures released to us early this year suggested that a first home buyer would need to earn at least $114,000 to buy a $600,000 home. The median household income is only $88,000. We’re looking at seven times the median income in order to afford a $650,000 home. That’s not considered affordable. The New Zealand initiative would say that you would need to bring that down to three times the median income to meet international affordability ratings.

Two points that I would make there. That’s the upper end of KiwiBuild, of course there are price differentials across the country, and we expect they’ll be much more affordable in different parts of the country. That’s the first point. The second point is that that demonstrates — the fact that even at 650 that’s a very big difference from the million-dollar houses that we’re seeing sold more frequently in the Auckland housing market — pointing to the unaffordability that we have right now. So we know we have an issue.

That’s the top end of what KiwiBuild is offering. There are lower price points as well for slightly smaller homes that are good starter homes and, again, they’re cheaper across the country. But it points to the problem that we have in New Zealand that that is the price point that people are having to look at in order to get into the market. We are looking at other options. We’re looking at shared equity schemes.

We are increasing the number of public and state houses available. We’ve got an agenda to build 6400 state and public houses within New Zealand as well.

So for us it’s about providing housing for every price point, every income level and every need.

Alan Johnson from the Salvation Army says KiwiBuild is one example of how Labour has become the party of middle-class welfare. What do you say to that?

I totally disagree. People still have to pay for these homes themselves. They have to muster a deposit themselves.

I think that many would argue with that. KiwiBuild has been criticised widely for months, like “Disappointment is setting in as more people realise that the scheme is really only going to benefit the rich.” – see Political Roundup: Kiwibuild is now ‘socialism for the rich’ (NZH).

The high income couple who Labour used to promote the first KiwiBuild house hand (Ardern described it as “a momentous occasion) over said it was like winning lottery – see Purchasing new KiwiBuild home ‘like winning Lotto’ (1 News).

This is just one of the things that we’re doing across housing. I’ve already mentioned state housing. We’ve brought on an extra 1200 public housing spaces. We’ve invested in housing first, which is to try and work with those who are homeless in New Zealand. We know that a home affects everything. It affects your ability to build community, to keep your kids in the same school, and so we’re looking at everyone’s income needs and everyone’s housing options to make sure that we’re providing for everyone.

But what I would say to Alan as well, is that it’s part of our psyche — the idea of home ownership and the fact that people who consider themselves to be in the middle haven’t been able to afford a home, we should want to turn that around too. I don’t apologise for that — as long as we’re also meeting the needs of other New Zealanders who might not be able to muster those deposits and that’s why we’re looking at shared equity as well.

There are almost 9000 people waiting for a state house; you mentioned state housing. 800 homeless in Auckland alone. Can you see how people would think maybe that $2 billion going to KiwiBuild could be better used elsewhere?

And again, we need to be really careful around the way that we talk about KiwiBuild. That’s, of course, a rotating fund that’s set up to ensure that we have the initial funding for the project. Of course, people are purchasing these homes, and that money goes back into the pot to rebuild additional houses. This is not a subsidy.

This is actually just the state using its large buying power and determining that there’s a gap in the market and partnering with developers to build what’s missing. It is not a subsidy scheme for buyers; it’s just plugging the gap and ensuring that we’re providing where the market has failed.

More than 296,000 people, Prime Minister, are getting an accommodation supplement because they can’t afford their housing costs. That’s 6500 more people than this time last year. Do you need to do more?

Look, absolutely. Absolutely we do. And that’s why it can’t be just about KiwiBuild. It can’t be just about state housing. It can’t be just about emergency housing places.

But one of the great issues, of course, with things like accommodation supplement – what we ultimately need to be doing is making sure that we’ve got that public housing in the first place. So that’s why we stopped the state housing sell-off under the last government. We are increasing supply. We just announced a huge amount of work that we’ll be doing in Porirua to renew and refresh 2900 state homes there. It is a huge agenda that we have.

And I hark back here to something Michael Joseph Savage first said when we first started building state houses under that Labour government. He said, ‘We don’t claim perfection, but we do claim a considerable advancement on where we have been in the past.’ And I’d say the same for us. It’s not perfect. We’ve had 12 months, but already, we’re ramping up a building programme that I think will really pay dividends and make a real difference for people who need shelter.

It was always going to take quite a bit of time to make a significant difference on housing. The National Government tried (with disappointing results) to resolve growing housing shortages and homelessness. The Labour-led Government promised a lot but struggled to show results over their first year in office.

And things aren’t going smoothly. To try to fast track KiwiBuild houses the Government has bought houses ‘off the plan’ – from developers who were already building houses.

The elephant in the room largely remains unaddressed, the Resource Management Act. Things like the constraints it puts on making land available for new housing, and the use of the RMA by NIMBYs to oppose high density housing in their neighbourhoods.

The shortage of land and the shortage of housing are major factors in pushing the prices of housing up to levels that are unaffordable for many on lower incomes who can’t save deposits and can’t afford large mortgages, even at the current low interest rates.

A typical KiwiBuild house has a price of about $650,000. That requires a deposit of at least $65,000, a substantial amount for those on low incomes. And a mortgage of $585,000 at say 4.5% (current KiwiBank rate, low deposit buyers often pay higher mortgage rates) would cost about $26,000 a year, or about $500 per week. That’s hefty enough, but if mortgage rates go up (they were more than double current rates 10-12 years ago) many people would be unable to afford to pay their mortgages.

It is proving difficult enough to build 10,000 houses a year (Labour had a target of 100,000 houses in ten years).

But suggesting that the Government should provide “housing for every price point, every income, every need” sounds like Ardern is in lala land.

KiwiBuild ballot in Wanaka extended due to lack of interest

A KiwiBuild ballot in Wanaka has been extended due to the low number of peoele entering the ballot, with some houses having no entries.

ODT: Northlake ballot extended

The South Island’s much-heralded first foray into KiwiBuild home ownership has been a bit of a fizzer — at least so far.

So few prospective homebuyers have entered the ballot for 10 KiwiBuild house and land packages in the Northlake suburb of Wanaka that the developer has asked to extend the ballot period by 10 days.

The ballot was due to close on Thursday.

KiwiBuild senior media adviser Mark Hanson said yesterday 20 ballot entries had been received.

‘‘Some houses have received no entries and the developer has asked us to extend the ballot to Sunday, November 18, to allow for people who they are working with more time to work through their pre-qualification process.’’

Inquiries yesterday did not produce any clear reason for the different levels of interest between Auckland and Wanaka but it is understood many Aucklanders entered the ballot in the final days.

The Northlake KiwiBuild homes were the first announced outside Auckland.

Four two-bedroom and six three-bedroom detached houses costing between $565,000 and $650,000 are in the ballot.

Two bedroom houses and sections for from $565,000 will be tough to afford for many ordinary Kiwis.

Mr Twyford had no comment to make yesterday on the level of interest in Wanaka KiwiBuild homes.

At the time he announced the Wanaka programme, Mr Twyford said the Queenstown-Lakes district had been “absolutely hammered by the housing crisis”.

“So here in Wanaka and Queenstown we’ll be announcing more KiwiBuild homes because we want to give young first-home buyers a crack at affordable home ownership and currently they’re locked out.”

He said there were plans for further KiwiBuild announcements in the Queenstown Lakes district in the coming weeks and months.

Wanaka is a part of the Queenstown Lakes district. KiwiBuild may need to review their intention to do more in the area.

It is not a surprise to see ups and downs in a project like KiwiBuild. It was a grand plan from Labour with a lack of preparation, as if they didn’t think they had a chance of getting into Government.

https://www.facebook.com/NorthlakeWanaka/

Politics and Kiwibuild

The Government used the first couple take possession of a KiwiBuild house in a publicity promotion for their policy.

Then an uproar erupted over criticising KiwiBuild, using the couple as an example.

Judith Collins got involved, which attracted a lot of criticism. and so it goes on.

Twyford defends KiwiBuild

Minister of Housing Phil Twyford has conceded that Kiwibuild is not for poorer people, but for ‘middle New Zealand’. He is correct that they can’t afford new house mortgages – but that was clear years ago when he was promoting it as a fix for homelessness.

Twyford said that Judith Collins criticising the first Kiwibuild house owners as having travelled the world is mean spirited.

Collins yesterday:

And:

It didn’t help that the purchaser described winning the Kiwibuild draw as like winning Lotto.