Government officials informed Housing Minister Phil Twyford that KiwiBuild plan will carry risk.
The new Minister was briefed by officials from several ministries regarding Labour’s housing policies as he came into office.
At present, Labour’s biggest plan is KiwiBuild: to deliver 100,000 new affordable homes in the next ten years, with 50% in Auckland and 50% in other areas.
Officials made note that in order to achieve this target, they would require a higher level of construction activity than the 1970s, during which just under 40,000 new homes were built annually. However, this achievement will positively serve the public and transform the construction sector.
In order to hit target for KiwiBuild, in addition to estimated private construction, the sector would require 44,600 homes to be built in 2022.
During the briefing, none of the officials negated the possibility of achieving KiwiBuild, although many did point out the restraints of a limited labour market.
“Regional labour market stickiness and high housing costs may also reduce the flow of labour to high-demand locations, especially Auckland,” the officials noted.
Other hindrances include the public developments towering private development, stagnant housing programmes, and the difficulty of making housing affordable.
Twyford promised that homes in Auckland will rest at $600,000, whereas those outside of Auckland will be priced no more than $500,000.
Despite so, the enormity of the trial- including the risks – also points to a promising transformation once the challenge is overcome, the officials stated.
Whatever method is used to tackle the present constraints will need to be large-scale enough to boost productivity and certainty.
“Large-scale contracts could support a market for manufactured housing (MH) solutions from domestic and international suppliers. MH could reduce time to build each dwelling (by 60 per cent) and total construction costs per dwelling (by 15 per cent),” it is written.
“Greater certainty in the sector will support already rising residential building apprenticeship sign-ups.”
During the discussion, officials did not favour the “dole for apprenticeships” scheme due to employee concerns. On the other hand, they supported the “KiwiBuild Visa” to bring foreign builders.
KiwiBuild is projected to cost $2 billion, with another $100m going to the Affordable Housing Authority to watch over its development.
While National’s Housing Spokesman Michael Woodhouse hopes to build more houses, he is uncertain that it will actually be achievable.
“He’s got no evidence and can take no comfort from the development community at the moment that they will be responsive to the invitation,” Woodhouse stated.
“In order to get any of KiwiBuild done he will to take some capacity out of the private market.”
“We wanted to set up and environment for the developers to get on with it and then get out of their way. He obviously takes a more interventionist view.”
Twyford explains that the public is well aware of the program’s limitations and that the Government has plans to tackle them.
“There are constraints around work force, around land prices, and a lack of firms operating at that scale. These are all givens,” Twyford said.
Actually having a clear plan would help with developer certainty and direction within the industry, greatly “derisking” the investment, Twyford explained.
“This is about using the levers of the state to encourage private investment. The result will be the building of more homes.”
Twyford stated that KiwiBuild would regularly inform the public of the amount of homes built. The goal is to construct 16,000 within the program’s first three years.