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OECD joins KiwiBuild critics as 'reset' looms

Tuesday 25th June 2019

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The government should reallocate KiwiBuild funding to social and rental housing rather than take on higher levels of financial risk than housing policies of other countries to assist KiwiBuild buyers who are "sufficiently well off to buy a home", the Organisation for Economic Cooperation and Development says in a review of the New Zealand economy.

"What we're basically saying here is that maybe there is scope for providing a little bit more rental housing, given the fact that many of the people that I think the government is trying to help with this programme can maybe not afford to buy homes as a rule," said OECD deputy secretary-general Ulrik Vestergaard Knudsen, who attended a media briefing on the 2019 report, along with Finance Minister Grant Robertson and senior Treasury officials.

The OECD comments come ahead of a long-awaited 'reset' of the flagship KiwiBuild programme, which had promised 100,000 affordable homes over 10 years, but has so far completed only 141 such homes in the government's first 18 months in power. That lack of progress has cast doubt over whether the policy's architect, Housing and Urban Development Minister Phil Twyford, will retain that portfolio in Thursday's Cabinet reshuffle.

Prime Minister Jacinda Ardern defended both Twyford and the government's wider housing programme in Parliament this afternoon, but ducked a question from Opposition leader Simon Bridges about whether the name 'KiwiBuild' would survive the policy reset.

"I see that as the least of the issues, what something is called," she replied. "The most material thing is whether we will continue to build houses and the answer is 'yes'."

Vestergaard Knudsen said low-income renters in New Zealand faced "very high housing costs" and recommended that "KiwiBuild should be refocused on enabling the supply of land".

"This would direct government efforts to key bottlenecks and risks to developers where they are better placed to manage them. To assist low-income renters, the supply of social housing should be expanded, including by reallocating funding from KiwiBuild."

The OECD official who led the report process, David Carey, said "supplying affordable rental accommodation is a more usual approach for affordable housing for low-income people because a lot of low-income people can't afford to buy a house for $600,000" - the target price for KiwiBuild home in Auckland.

Robertson declined to comment on the recommendations, but acknowledged they were "useful ideas about how that could work." He noted that "the premise of KiwiBuild is about first home buyers, so it actually isn't necessarily aimed at the very low income people".

"We never said that that's what KiwiBuild was for, but what we need to do is to ensure that KiwiBuild is fulfilling its potential along with the rest of the government's housing programme to provide the full suite of houses being built. We need a balanced set of interventions that help a range of people and that's certainly something I'm prepared to listen to."

Ardern noted yesterday that rocketing house price inflation in Auckland had cooled and that 24 percent of all people buying houses at the moment were first-timers.

The OECD report criticised the income thresholds for KiwiBuild applicants, saying it was "so high that it only excludes 8 percent of potential first-home buyers".

"Other OECD countries, including Austria, Canada, France and Germany promote delivery of affordable housing without incurring the same fiscal risks or hands-on allocation role, primarily through subsidising construction of affordable (often rental) housing. Refocusing KiwiBuild on enabling the supply of land through aggregating fragmented land holdings and de-risking development sites, with subsidies to developers for affordable housing if necessary, would allow private and not-for-profit developers to take the lead in delivery and allocation of affordable housing and better allocate risks to those best placed to manage them."

Twyford told a select committee hearing last week that the government was considering 'build-to-rent' options in the KiwiBuild reset.


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