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.