Today’s all about being Constructive.
And that is good because I believe there is a hunger out there for positive solutions.
We must be able to believe there can be a better future.
That as a country, we can, for example, fix this crazy housing crisis, restore affordable home ownership, and make rental housing warm and dry so kids aren’t being hospitalised with respiratory disease because of cold damp homes.
And we must in this land of plenty be able to end homelessness.
Previous generations fixed these problems. Surely we can too.
Sorting out housing, and our built environment, has become one of the great challenges of our time.
Your industry is right at the heart of this challenge.
And I think you are in for a sustained period of change, opportunity and growth.
At one level it’s simple. There is a housing crisis. So we’re going to build more houses.
We are going to restore the Kiwi dream of affordable housing.
Something we all grew up taking for granted but has now become an impossible dream for so many people.
This afternoon I want to set out four big Labour Party policies that are designed to create the conditions so you and your industry can build more, and build better.
And in the process together we can grow a more competitive, innovative and profitable industry.
1. Scale, volume, certainty
For a range of reasons we are not building enough homes. Our biggest city has in the last few years accumulated a shortfall of 42,000 homes and that is getting worse by about 4000 a year. Hardly any affordable homes are being built – only about 5% - because in an over-heated under-supplied market developers naturally choose to build larger more expensive homes that deliver better margins.
To cut through these problems, Labour in government will build 100,000 affordable homes for first home buyers.
When I say we will build them, I mean you will build them. Have you seen the average politician swinging a hammer? It’s not a good look.
These homes will be built by the country’s finest private sector architects and builders. The Government will finance them – passing on to first home buyers the Government’s ability to borrow cheaply.
The work will be tendered to firms that can scale up, and produce instead of dozens of new homes per year, hundreds. Or instead of a few hundred a year, a couple of thousand.
This is a ten year commitment. By not only tendering this kind of volume, but also the certainty of multi-year contracts, it will allow firms to scale up, and to invest in the plant and technology that will allow more offsite manufacturing.
Scale, and investment in technology and design, will provide the platform for the quantum leap in innovation and productivity that will deliver great 21st century homes at affordable prices.
The idea is to crank up the industry’s output to at or beyond the typical top of the cycle, and maintain it there for a decade. Its goodbye to the boom and bust cycle.
In the process we are going to house a new generation of young Kiwi families.
And we will eliminate the shortage of housing that is one of the drivers of skyrocketing house prices.
Can we do it? Of course we can.
How do I know? Because we have done it before. I live in a suburb in West Auckland built entirely in the 1950s and 60s by group home builders making modest affordable homes for first home buyers – as a result of deliberate government policy.
And it’s a fantastic place to live.
Where is the money going to come from?
We will set up a $2 billion revolving loan fund. Once a new home has been built and sold, the proceeds will be recycled back into the fund to finance a new build. Over ten years, the money gets spent over 20 times, and the whole project is fiscally neutral.
Where is the land going to come from?
We don’t have a land shortage. We have a highly restrictive planning regime that chokes off the supply of new land – so we are going to free that up.
Where are the people going to come from to build all these homes?
They are going to come from here. Our modelling predicts Kiwibuild will generate 5000 new jobs in the construction industry. We will invest massively in young New Zealanders. More on that later.
2. Building communities, not just houses
If we are serious about building at this scale, and we are, then we need to make government – both central and local – a lot better at supporting the private sector to do what it does best: building great places for people to live and work and play.
Our cities, in many places, are crying out for renovation. When I say renovation I don’t mean just sticking in a new kitchen.
Whole suburbs need investment. Poor quality housing stock needs to be upgraded. Land can used more efficiently. Transport infrastructure modernised.
Development on this scale can be complex. Regulatory and planning issues. Infrastructure investment. Fragmentation of title.
There is too much risk and uncertainty for private capital to do it on its own.
But here’s where smart government can play an enabling role.
Labour will set up an Affordable Housing Authority whose job it will be to cut through the red tape, and lead the development of large scale master planned urban development projects that will deliver high quality new communities and thousands of new homes – many of them affordable.
The Affordable Housing Authority will set up local development companies – like the Hobsonville Land Company – that can be joint venture vehicles to partner with the Council or other investors.
Its job will be to do the master planning, have access to fast tracked planning and consenting, invest in the network infrastructure (roads, public transport, power, water, sewerage).
And then parcel up development opportunities for developers.
This is the model that has worked so well at Hobsonville. We are going to roll that out on a grand scale.
3. Making urban land markets more competitive
There is something else we need to do to fix the system.
At the heart of the housing problem, is a highly restrictive planning regime that chokes off the supply of new land, and by creating an artificial scarcity of land, drives up urban land costs.
The price differential between urban land where you can develop, and rural land that you can’t yet develop, is the trigger for the land banking and speculation that delivers massive windfall gains to the speculators at the expense of hard-pressed home buyers and Generation Rent.
As long as you’ve got that Urban Growth Boundary and the restrictive zoning that goes with it – the speculators will always game the system.
When urban land is so expensive, developers won’t build affordable homes on expensive sections. It doesn’t make any sense. That’s why only about 5% of new builds are in the affordable range, compared to 35% a generation ago.
We need a new planning system based on the idea that we must make room for a growing population.
Auckland needs to make room for another million people in the next 30-40 years.
If you stop people building – whether it is building up or out – only one thing happens. The cost of housing goes up.
We need a smarter way of managing urban growth.
We will abolish the Urban Growth Boundary.
And replace it with more intensive spatial planning, protection of areas of special value, and acquisition of land for transport and other network infrastructure.
But then within the growth corridors you allow people to build, as long as the development can carry all the costs of infrastructure and utilities needed to serve it.
If we get rid of the boundary, it will bring urban land costs down.
But as we all know, lack of infrastructure is the main block to new development.
Which is why we propose an overhaul of the expensive and inefficient way new infrastructure is financed.
At the moment infrastructure costs within a development, and a share of the connecting services via development contributions, are paid by the developer and then passed on to the new home buyer.
The costs are front loaded onto the price tag of a new home, driving up prices which are then capitalised into the value of all properties across the market.
The infrastructure is paid off through the home owner’s mortgage.
Our policy is to bond-finance infrastructure, taking advantage of cheap 50-year rates, paid off through a targeted rate on the property in the new development.
It will be less inflationary across the market, and fairer because it spreads the cost over the lifetime of the asset, while ensuring that the costs are carried by that development and not subsidised by the ratepayer or taxpayer.
The three ideas I have outlined so far will create huge opportunities for your industry to grow and develop:
1. Kiwibuild will allow firms to scale up and get the benefits of supply-chain efficiencies and new technology and design, with the confidence that comes from volume and the certainty of multi-year contracts.
2. Our Affordable Housing Authority will de-risk for the private sector the opportunities for master-planned large scale urban development projects.
3. Reforming the planning system to make room for growth rather than try to stifle it, will allow you to build more and build better, while squeezing the speculators and the land bankers.
Finally, we will commit to working in close partnership with your industry on productivity, workforce development, and regulatory reform.
Sadly this work seems to have fallen off the current Government’s to-do list.
There is work to be done on product certification. Recent issues with imported steel suggest it is not clear the current regime is fit for purpose.
We have a high cost building supplies market, with New Zealand consumers paying 20-30% more than their Australian counterparts for basic building materials.
There is some way to go in building capability and skills to protect quality standards. We can see that from the problems with shoddy building in the over-heated Auckland market.
That can’t be unrelated to the fact that the industry is short of up to 60,000 skilled people for building and construction in Auckland alone.
Which is why one of the most important tasks is to build the workforce.
Our dole for apprenticeships policy will subsidise employers to take on 4000 young people for on the job training including in the construction industry.
Our policy of three years free post-school education and training will see tens of thousands more people getting skilled up including in your industry.
We’ll work with you, through the BCITO to continuously assess the number of apprentices that need to be in the system, and in what trades, taking into account the peaks and troughs, and immigration top ups.
We’ll back that up with the commitment to resource the training of young Kiwis so they can take advantage of the career and commercial opportunities your industry has to offer in this extraordinary era of growth.