Many people are ripping into KiwiBuild at the moment. A lot of these criticisms have a strong whiff of partisan heckling – this is politics after all – some of them are fair and others are just looking for trouble.
One complaint, largely coming from the left, is that the houses are not affordable in any meaningful sense (ie, they are too expensive) and a second is that the market should just be left to supply housing and government shouldn’t subsidise this (ie, they are too cheap). But almost all of them, so far, are missing the real and important medium and long-term value of the KiwiBuild programme.
I’ll discuss this below, but firstly to address three legitimate claims about KiwiBuild:
1. KiwiBuild is not really about building affordable houses in the short-term. Labour’s framing of KiwiBuild is about building lots of affordable housing, and this makes a clear, easy-to-understand sell. This probably was the plan when KiwiBuild was first announced years ago under the leadership of David Shearer, but the programme has morphed a bit since then.
National made big changes to housing between the original development and now. The sale price is not especially affordable in any meaningful sense of the word in relation to incomes, but in the medium and long-term the programme will have a cumulative effect of making housing across the country more affordable.
Also, the alternative models led by the former government in Auckland (in which special housing areas made housing more expensive) and in Christchurch (which gave a development monopoly to a company which led to very slow development) did not work. But I guess criticism about the affordability of the houses is fair in this regard. The problem is that changing this in either direction would seriously endanger the viability of the whole programme.
2. Kiwibuild isn’t state housing. Saying the government should build more state housing is fair, but this isn’t a criticism of KiwiBuild. They are separate programmes. The $2 billion being spent on creating 100,000 houses would only buy 3,500 state houses. Indeed, the current government is expanding the existing state housing stock, has organised large scale emergency housing for the homeless, and has reversed both National's appalling dividend and the large-scale sell-off of the housing to private and non-profit agencies.
Kiwibuild isn’t meant to be state housing, but is being integrated with state housing on lots of sites, as I’ll explain below. A parallel programme to build thousands of new state houses exists, but it is expensive, and the real value of KiwiBuild, as explained below, would not be addressed by transferring the money to state housing construction. KiwiBuild is not subsidised housing like state housing and is more similar to the original state housing, which was government-built housing for workers, not housing for the country's most vulnerable.
Further, this is not the first government to get involved in land-use sub-divisions for the benefit of ballot winning young couples and families. 33,000 family farms were created by the state and allocated by ballot in the 19th and 20th century.
3. KiwiBuild is probably not going to add a huge extra supply to the total housing stock. The 100,000 houses can easily be misunderstood as being a total addition to what would have been built if it didn’t exist. Several people have argued, probably fairly, that it is instead largely replacing housing that would have otherwise happened anyway. Alternatively, the Reserve Bank recently announced that many of the buildings will add to the supply. New Zealand is building lots of houses, and regardless of the government would have built at close to our capacity anyway. Kiwibuild doesn’t change this much in terms of numbers. There is some debate about this. But in the long run this is less important than it might seem.
The real issue, in the medium and long term, is the location and size of the houses. The legacy of KiwiBuild will be to address these two major problems. There are three reasons KiwiBuild houses will have an important and valuable medium and long-term benefit for New Zealand.
To explain this, some historical context is needed. There is a big gap between 1989 and 2008 in which national government stopped being involved in land use. Interestingly, this corresponds with the explosion of suburbia, infrastructure deficits, and the huge increases in house prices.
The last National government intervened into this with the huge motorways/RONS that pumped billions into roading and subsequent associated rural/outer suburban development. The new government is continuing an interventionist approach (which all infrastructure is, ultimately), but shifting the main modes to different forms of public transport.
KiwiBuild needs to be understood as a partner to this broader shift away from greenfield development and associated high cost (for both economic and environmental objectives) development and towards intensive development (infill and along growth corridors) Alongside the big state housing programme, and the 100,000 KiwiBuild houses is a new $4 billion rapid transit fund. This all means smaller houses and more efficient use of land.
1. KiwiBuild will add a big supply of smalller, better designed houses to the New Zealand stock. A lot of the land for the KiwiBuild programmes is either surplus land close to cities, or land that has been generated by the demolition of old state houses. In both cases newer, denser and higher-quality state housing is being produced alongside the KiwiBuild houses and new private sector housing. Some, such as Vanessa Cole, have argued this is a privatisation of public land, but I think this misunderstands the value of creating lots of smaller, better located and better designed housing.
The state housing supply is being increased by this government, and unlike developments in Australia (which often have as little as 5% of ‘affordable’ or public housing) the New Zealand developments are being based on a ⅓, ⅓, ⅓ model, which means the state gets to positively influence the kinds of development, while also creating downward pressure and opportunities on the open market.
The main legacy of KiwiBuild is to create a ‘new’ type of housing stock of small, good quality houses. Early buyers might own these for 5 or 10 years, but these houses will provide access into the market for 50 or 100 years. The focus on the first buyer misses their bigger value over the long run. New Zealand has around 1,500,000 households, so KiwiBuild will add another 6-7%. If KiwiBuild lasts ten years and hits its targets it will add a significant new kind of housing type to the country's stock, possibly more if private developers follow suit.
2. Kiwibuild is a key part of redesigning big parts of New Zealand cities to be better integrated into transport, and commercial development and other public institutions. The inner-city developments in Mangere, Mt. Albert and other locations in Queenstown, Porirua and Wellington are being integrated with new public transport lines, access to public amenity including schools and working alongside council long-term plans.
This is the first government in New Zealand history (or at least in 100 years) to show any real awareness of how to influence the long-term growth of our cities, and while it's early days and it’s far from perfect, this is again a vastly different set of priorities to the building of large motorways and the associated construction of large and expensive houses on the outskirts of cities.
KiwiBuild gives the government the ability to use smaller and more compact houses to drive these larger urban moves that will make our cities more walkable, more affordable, more environmentally robust. If you disagree with these things, or the efficacy of this approach, then great, let's debate that, but the cost price at sale is a red herring.
3. KiwiBuild is creating new delivery infrastructures for housing, and thus enabling new systems, for more sustainable, warm, safe, dry, and affordable housing that the broader market will be able to access. (ie, prefab housing made in factories out of New Zealand wood).
In June this year KiwiBuild put out public info on the building of large off-site factories to construct the houses. This is exactly the kind of large scale investment that is only possible with a surety of supply. Many attempts to get these kinds of processes going in New Zealand have failed in recent years because the market, by itself its too small and unpredictable. Creating a steady supply stream also raises exciting possibilities for larger-scale vertical integration with growing and harvesting of trees, milling in New Zealand, and transformation into high quality housing, possibly by the same or nested companies or iwi.
It is perhaps the possibility of sustained, long-term economic and urban transformation of industry and our cities that most scares the opposition at the moment. The experiments of the last 30 years have failed and major policy shift is needed. It’s long overdue.
With thanks to Brendon Harre for stats and critique of this.