Another housing fix goes into the mix

Tuesday, 22 June 2021

Housing Minister Megan Woods says a new infrastructure fund is a step towards unlocking more large-scale pojects.

EDITORIAL: In the context of marathons-not-sprints, slowing down the rampant housing market is in ultra-distance territory.

As Housing Minister Megan Woods acknowledges, the supply crisis has been “decades in the making”. The unmaking is not going to happen overnight.

So no-one is getting too carried away with her announcement on Tuesday of a $1 billion fund to help get land ready for large-scale housing projects.

The ghost of KiwiBuild still sends shudders down the spines of Labour politicians, a lesson in not committing to overly ambitious targets to increase housing supply in New Zealand.

The Government has launched a $1 billion infrastructure fund to get large-scale housing projects moving.

* Megan Woods on housing: ‘The market hasn’t delivered’

* Developers question impact of $3.8b infrastructure fund

* KiwiBuild house cost could rise as Government reconsiders price cap

Part of the reason for that broken scheme was the shortage of the infrastructure, such as roads and water pipes, needed before housing subdivisions could be developed at anywhere near the pace KiwiBuild envisaged.

Woods’ announcement is a bid to fix that. While infrastructure never sounds that exciting, the lack of it is one of the key blockages to building on brownfield intensification sites where services such as sewerage and water need upgrading, as well as greenfield developments.

The $1 billion contestable infrastructure fund will be open to developers, iwi groups and councils for a minimum of 200-house developments in the big cities, and smaller projects in regional centres.

Indebted councils in particular have been unwilling or unable to keep up with demand for new infrastructure for housing, so the fund should help set some wheels in motion.

Whether they will move far or fast enough is the multibillion-dollar question. When the Government announced its $3.8b Housing Acceleration Fund in March – from which the infrastructure fund is drawn – developers welcomed the direction but questioned whether it would be enough, given the scale of the housing shortage.

How quickly will it have an impact? The fund will be open for bids at the end of the month, and Woods expects the Government will make decisions on successful projects by the end of the year, with work starting next year, so any big effect is a way off.

In the meantime, median house prices nationally were up more than 30 per cent year-on-year in May.

There are the stirrings of a headwind with a stronger-than-expected economic revival feeding into interest rate rises, and other levers such as loan-to-value ratios, extending the bright-line rule, and interest deduction changes for rentals, taking effect.

But for many first-home buyers, the opportunity has already gone, and their hopes rest largely on that seemingly mythical beast – affordable housing.

That would require a much bigger and much quicker injection of new homes into the market than has been the case until now.

Woods has spoken of tackling the housing crisis by rebuilding the capacity for a government to be a participant in the market. Along with a $2b injection for Kainga Ora to buy land for housing, the infrastructure fund is another part of that shift. The Government is essentially taking over some of the upfront costs that have until now been left to councils and developers.

As with anything in the housing sector, it is no quick fix or, as politicians of all stripes are fond of saying, “no silver bullet”.

More will have to be done, but it is at least a shot in the right direction.