Ardern’s ‘Kiwibuild’ affordable housing policy already an epic fail

By Leith van Onselen

As part of its election platform, the New Zealand Labour Party promised to “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.

In May, the Labour-led Government appeared to backslide on its ‘KiwiBuild’ program, changing how the program would work and significantly increasing the price threshold:

A week out from the Budget, the Government’s flagship housing policy Kiwibuild seems to be heading for the broken promise zone.

Housing Minister Phil Twyford has already delayed the start date, and Newshub can reveal he’s also changed another key part of the policy…

KiwiBuild was always an ambitious policy, and now that he’s in Government, Mr Twyford is tweaking it. The promise was to build 100,000 affordable homes, but the word ‘build’ has gone by the wayside.

In official documentation, it’s been replaced with: “KiwiBuild aims to facilitate the delivery of 100,000 affordable dwellings.”

Papakura MP Judith Collins was scathing.

“There’s no evidence that they’re going to build anything much now, so we’ve now gone from building 100,000 homes over 10 years to facilitating”…

Labour’s KiwiBuild policy before the election was that standalone houses in Auckland would be priced between $500,000 and $600,000, and apartments would be priced $500,000 or lower.

But the tender documents show that’s now changed. All new homes built under the policy will now be costed by room.

One bedroom will go for $500,000, two bedrooms $600,000 and three bedrooms $650,000 – that’s $50,000 more than Labour promised in the election.

In a nutshell, the revised policy would see the NZ taxpayer underwriting private developers, meaning they would effectively protect developer margins, and developers would receive all of the reward without bearing the risk.

The KiwiBuild policy is also unlikely to add much to overall dwelling supply, since it would merely ‘underwrite’ many dwellings that would have been built anyway.

Further, only in Bizarro World would $500,000 for a one bedroom home be considered ‘affordable’, rather than being ridiculously expensive.

With this background in mind, it’s interesting to note that the Auckland Council’s chief economist has estimated that the revised $650,000 threshold for an “affordable” three bedroom Kiwibuild home would actually be unaffordable to more than half of Auckland’s households. From the NZ Herald:

A study from the Auckland Council’s chief economist looked into home affordability in country’s biggest the city.

As well as finding that middle-income earners had been the hardest hit by declines in housing affordability, it suggested a three-bedroom home at the top end of price range of the KiwiBuild scheme is likely to be out of reach for half of Auckland’s households…

The council said that its study discovered a household would need to be making $105,200 a year – in the top half of income earners – and already have a 20 per cent deposit in the bank to afford a KiwiBuild home at the $650,000 cap.

If a household only has 10 per cent deposit, the council says a family would need to earn $118,300 a year to afford a $650,000 KiwiBuild home.

“To deliver houses that even households in the top half of earners could afford, Kiwibuild would need to deliver a lot of houses below the $650,000 cap,” council senior economist Harshal Chitale says.

According to the council’s analysis in 2017, the poorest third of Auckland households
“had practically no likelihood of being able to purchase a freehold home (whether a stand-alone house, townhouse or apartment) – even with a 20 per cent deposit”.

A household squarely in the middle of the pack could only afford a home in the bottom 11 per cent of the market ($537,000 and below), provided they had a 10 per cent deposit.

If they had a 20 per cent deposit, they could afford a property in the bottom 18 per cent of the market…

“We also examined how affordability by income percentile has changed over the five years since 2012. Practically every household income group saw the range of houses they could afford fall sharply,” Chitale says.

“But the biggest declines were for households in the 50th to 75th percentiles. These middle-class income groups have been increasingly locked out of home ownership,” he said.

Kiwibuild is affordable only to high income earners it would seem. So basically, no change from the status quo.

Good job, Jacinda.

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    • Yes. The mob’s credulity keeps getting tested, but it seems to be freaking bulletproof. No lie is big enough to shatter it.

      • On the progress side though – it takes less and less time to fail! So if you can cram more and more failures per unit of time – something might twig at some point.

  1. Jumping jack flash

    It was always going to end this way.
    You can’t build affordable homes next to the unaffordable ones that have all the debt attached to them!

    There’s only two scenarios.
    The affordable ones will increase in price to match the prices of the unaffordable ones and become unaffordable – which is precisely what happened here.
    Or the unaffordable ones will decrease in price. And that’s not an option because there’s all the debt attached to them…

    The affordable ones need to be built far away, possibly next to one of those poisonous, volcanic lakes that smell like rotting meat, or something, so they don’t actually increase in price and become unaffordable, ever.

    She should have gone on a junket to the UK to look at their failed affordable housing policy first, because what happened with this one is pretty much the same as what happened to theirs.

    • ScoMo went to London and saw it , and is trying to bring it back here.
      Because it benefits people who can afford unaffordable homes. Not to worry about the other people, they should rent and help the investors in unaffordable homes.

  2. What ever happened to NZ labor’s policy of abolishing Auckland’s rural/urban boundary? And their policy of funding infrastructure through MUD style bonds?

    Perhaps the same as what’s happened with kiwi build – gone very quiet about it hoping no one will notice.

    • Yep. Abolishing rural growth boundaries is the ultimate solution. Especially in the future when robots do 51% of the jobs. At that stage, it would make no sense to live in Sydney and Auckland.

      Floating housing could be a solution – ships are cheaper than ever.

      • St JacquesMEMBER

        This is exactly why they have to turn Sardine City, Big Little City and Hellbourne into overcrowded third world sewers quick-smart if they’re going to maximise their capital gains.

  3. She is the latest Juliar!

    It seems like Alexis Tsipras is the same.

    Shows what a miracle Theresa May is. The salaries of cleaners in Manchester are going up due to kicking out 3rd world passport holders.

  4. kiwikarynMEMBER

    I am betting the Law of Unintended Consequences is going to kick in, and that there will be LESS homes built with Kiwibuild. If the Govt is picking and choosing which developers it will underwrite, what happens to those who are not chosen? How will they be able to compete on the market with similar homes that will have to be sold at much higher prices to cover the higher bank funding costs. Who will buy them, when most people will just wait for the next Kiwibuild development to be built so they can buy cheaper? Will banks even lend money to these developers considering that their risk has now increased substantially due to Govt favouring the competition? I predict most non-subsidised developers will just give up rather than take the risk on – meaning less homes will be built rather than more.

  5. Where is Flawse when needed!
    “The answer lies back in time!”
    Had this whole rotting mess been held static in 2012, at then-current prices ( which is what appears to be the plan today – 75% higher than was in vogue back then), then maybe, maybe, the issue would be halfway to resolution.
    That we are where we are has condemned us to one of two worst alternatives:
    (1) Nothing happens and things get worse or
    (2) The whole sector goes bust and collapses below 2012 prices to eventually bubble back to that level.
    Which one will it be?
    It doesn’t matter now. Both will be horrific for those caught inside that solution.

    But to get back to basics. Is it Jacinda’s fault? Nope. It’s (Sir) John Key’s, ( affectionately called by some, Sir Chong Qui, when he recently sold his suburban home for $20mio, a ‘surprisingly high’ price to a businessman from – China!) who knew and campaigned on a kind of solution (2) in 2007, and then did a Tsipras as is mentioned above.
    And who’s fault is it over there? Glenn Steven’s.

    • Janet is right – blaming the current PM Jacinta for a deliberate policy by PM Keys to turn Auckland into the next Singapore is unfair. The current situation actually precedes Keys a tiny bit, but Keys made the current situation protocol.

      However, past criticism of PM Jacinta’s non-promises were pointed out prior to her even being elected, and some of those posts were deleted! If you want a forum of discussion, try to be factual, and non-abusive (even though certain commentators don’t give myself that reciprocal kind of respect) – a lack of contrasting opinion detracts from the overall interest IMHO.

  6. 100,000 homes in 10 years, so 10,000 per annum. Half in Auckland, so 5000 per annum there. This means they would have needed 14 completions per day every day, 7 days per week for 10 years, just to fulfil the Auckland part of the deal. Doesn’t seem at all feasible to me, so no wonder they’ve started blowing smoke up everyone’s arses.

    Politicians everywhere are just a bunch of miserable lying vicious rat bastards. Just look at Jacinda’s teeth, and you’ll see that it’s true….rats….everywhere.

    • Posted at todays LINKS thread … … with extensive further postings …

      Average asking price for Auckland homes down more than $82,000 (-8.3%) from its February peak – prices also down in BoP, Wellington and Canterbury |

      The housing market is cooling with average asking prices and the number of new listings on taking a tumble in June.

      The average asking price of all properties from throughout the country that were newly listed on the property website last month was $645,133, compared to $658,170 in May and $661,129 in April.

      The national average asking price is now down 4.2% compared to its February peak of $673,659.

      Average asking prices in June were down compared to May in most parts of the country, with just four regions, Waikato, Taranaki, Central Otago/Lakes and Otago posting gains and asking prices declining everywhere else.

      In Auckland the average asking price declined for the fourth consecutive month to $912,071 and has now lost more than $82,000 (-8.3%) since it peaked at $994,873 in February.

      It is now the lowest it has been since July last year. … read more via hyperlink above …

      Auckland’s middle class plummeting down property ladder |

      Auckland’s middle class have seen a huge drop in their ability to own the home of their choice.

      Auckland Council has released a report Who can buy Auckland’s houses analyses housing affordability at 10 and 20 per cent deposit rates for different income levels.

      David Norman, Chief Economist at Auckland Council says middle class groups in Auckland “actually had it pretty good” in housing terms after the global financial crisis of 2008. … read more via hyperlink above …

      More than half of Auckland households unable to buy ‘affordable’ (Kiwibuild) $650k home, council says – NZ Herald

  7. You’re not supposed to judge people on policy merit, you’re supposed to judge them on their strata. You know, go nuts about Trump being a sexist, but cover up Whoopee Goldberg saying “well it wasn’t ‘rape’ rape”. Jacinda is a female prime minister and therefore your criticism of her is misogynistic.

    • St JacquesMEMBER

      Mate, your wasting your talents here. Get into politics as an adviser or something.