Labour would buy private land for housing, Twyford says

AUT construction management professor sees impracticalities in Labour and National's home-building policies.

Labour's housing spokesperson Phil Twyford says Labour's KiwiBuild policy would see townhouses, flats and apartments on sale for under $500,000 — cheaper than National's expanded Crown Building programme announced mid-week, which will aim to provide "affordable" homes at a $650,000 pricepoint.

He also revealed a Labour Government would be willing to buy private land if it had to.

"We are going to work with the council, we are going to work with Ngāti Whātua, we are going to work with other investors, and if necessary we are going to buy private land to develop," he told The Nation.

"We've committed $2 billion to kick-start KiwiBuild and we're going to establish an affordable housing authority to act as an urban development agency.

"We'll put capital into get it started, but it's going to manage the Crown's entire urban land holdings. It will use that balance sheet to buy land and develop land with other partners."

On Tuesday Social Housing Minister Amy Adams announced a plan for the government to build 34,000 new homes in Auckland as part of the Crown Building Project.

But Mr Twyford says only about 2000 homes in the proposal will likely be deemed affordable, by the Government's current definition of $650,000.

"Is 650,000 affordable? That's the government's definition of affordability and the reason they use it is because that's the threshold for people who get a Home Start subsidy. By definition, if they need a government subsidy to buy a $650,000 house, I don't think it is affordable.

"We're going to build large urban development projects - many of them around the railway network in Auckland. Places like Henderson, Manukau, Mt Wellington, Onehunga, Panmure, Avondale.

"Auckland Council's already done much of the work on this. Their development agency Panuku has already identified all of those sites as being appropriate for development."

Prime Minister Bill English says the government's priority is those most in need of housing.

"Then we've got the opportunity to flex just how many are market houses, how many are built at lower prices and therefore more readily available at lower incomes," he says.

"As we work our way through this, we'll see how the market goes, where the prices are, because as you can see in Auckland, the house prices are flattening, some cases falling. In another two or three years when we have met our social housing needs, which are pretty important first, we'll see what the situation is then."

Meanwhile, back in the real world
Earlier this week, AUT construction management professor John Tookey told NBR that making more land available for housing would not help. Developers only ever drip-feed new homes onto the market to artificially constrain supply.

“Imagine Toyota got an additional million tonnes of sheet steel dumped outside one of its factories at zero cost,” he says.

It would not see more cars constructed. Toyota would want to protect its margin. And regardless, there is more to making a car than supplying steel, just as there is much more to creating a new subdivision than freeing up land.

He said one way to get ahead of the market was for the government more state houses.

National duly delivered with its Crown Building Programme to build.

But in a follow-up interview after Nation's policy was unveiled, Mr Tookey called the plan to build 34,000 new homes "tokenism."

He said 2400 new homes a year in Auckland on top of current activity would represent a 25% increase in output for construction industry was already closed to maxed out, with large and small builders were unwilling to invest in new capacity least they get caught out by a down-cycle (and Prof Tookey says it is inevitable the Auckland housing bubble will deflate; the only question is whether it will be a slow hiss or something more violent).

The AUT man says new building has broadly kept up with immigration. He sees a constraint on homes available for first-time buyers caused by Boomers hoovering up properties to rent. His favoured solution is a mix of carrot and stick tax initiatives to draw Boomers out of the rental market, then keep them on the sidelines — including allowing property investors to avoid a capital gains tax if they shifted profits from a rental property sale to a KiwiSaver account.

Prof Tookey says off-site building of pre-fabricated, repeatable designs would be one way to meet government's targets. However, he saw the industry as too inert, conservative and risk-averse to add this capacity.

He added that efforts to recruit offshore would be problematic. Builders working on a 6% to 7% margin would be loath to go through the expensive process of recruiting overseas. The jobs would not necessarily be that well paid, and the likes of Fletcher Building would be asking potential immigrants to move to one of the most expensive housing markets in the world, relative to income. 

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