Funding crisis stalls $140m state home development
The $140 million McLennan development at Papakura including 145 state homes has been called to a halt due to a lack of funding.
McConnell Property took over the 24-ha site from Housing New Zealand with the promise of dedicating one third of the homes to state housing.
The developers have a funding partnership with Dutch ABN Amro, backed by the Royal Bank of Scotland, but McLennan requires presale private investors and not one section has sold.
Of the 450 homes each worth $420,000, 145 homes were to be dedicated to Housing New Zealand.
Of that, 13% of the development was to be allocated to state housing, and another 15% towards affordable housing under the Gateway scheme.
Housing New Zealand is now seeking further funding from private investors.
Construction was due to be completed next year, but has not moved past planning as McConnell have been unable to find a single buyer for Stage One.
“It has been a struggle to get funding,” McConnell general manager Martin Udale says, explaining that with no sales, presale targets have not been met. “More than that, it is not the right time in the market to launch a new project.”
Housing New Zealand general manager of assets Kevin Mara says, “We have our own funding and may also look at what might happen with the Gateway scheme, but other private investors will play a major part in this.”
“To get new projects off the ground, there are presale requirements. To start a new project with a total 450 dwellings requires a fair level of presale,” Mr Udale says. “The market is not in the right place.”
Mr Mara says that the premise Housing NZ agreed to was that private sales would help McConnell to fund the development. “Because the market is so bad, they could not achieve sales. We could not get our houses out of the subdivision, and could not proceed.”
The Housing NZ portion of homes within the development would be of the same style and quality as other privately purchased homes, and “pepper-potted” throughout the community.
Schools, early childhood services, sports fields and open spaces are also planned to be built into McLennan.
“The project was going to have a ‘sustainable’ angle, but I hate that word. It almost sounds ‘green’,” Mr Udale says. “It is something you have to be conscious of, developments done well should be sustainable.”
Mr Udale says, “With this sustainable community, government and Housing New Zealand are keen to demonstrate the ability to create new mixed tenure places.”
Mr Mara says that Housing NZ is looking at how to take “controlling interest is not the right word, but, how Housing NZ will position ourselves” to get the development in to action.
“This is not going to be a government funded development. We will continue talking to the current developers,” says Mr Mara. “McConnell has performed exceptionally well so far, and we don’t want to force them in to position of financial hardship.”
Mr Udale says that he hopes to see construction started by June, with Stage One completed by November of this year.
Mr Mara says that the project “is not going to be resolved in the near future”.
“The focus now is on how to share risk returns and rewards, to find a structure of arrangement that is a win-win situation, to use old hackneyed phrases,” Mr Udale says.
“I think everybody is putting their best foot forward on the project. We will between us resolve a way forward on the project over the next two or three months, then proceed,” says Mr Udale.