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More ambition needed to lift productivity, home-building, Twyford says

Thursday 16th August 2018

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New Zealand needs to be more ambitious if it is to improve the performance of its major centres and the contribution they make to the national economy, Housing and Development Minister Phil Twyford said today.

Well-functioning cities are important to delivering thriving and resilient urban communities, he told delegates at an infrastructure conference in Auckland today. And getting them wrong becomes a drag on the economy that sucks resources away from productive investment.

Auckland’s economic performance is “way below” what it should be given its population base and the businesses based there, he said. Gridlock alone is costing $1.3 billion of lost productivity every year, while housing costs are stopping families getting ahead and reducing resources available for investment elsewhere, he said.

“Our residential housing stock is now worth more than $1 trillion. It occupies a bigger share of our national economy than is the case in the UK, the US and Australia,” he said at the start of the two-day Building Nations symposium.

“A vast amount of our country’s national wealth is being sucked into buying and selling houses to each other instead of developing businesses that create jobs and exports and prosperity,” Twyford said.

“We need to lift our sights. We have to be more ambitious about growth. We have to harness new sources of investment and be willing to do things differently.”

Investment is a key theme of the conference given the scale of funding required across the country. A string of major roading projects – started by the previous government – are still underway. Auckland Council has agreed to a 10-year, $28 billion transport plan with the government, while councils in some other regions are struggling to cater for growing tourism, and a looming bill to replace or upgrade ageing water systems.

Earlier this week Chapman Tripp called for greater private sector or pension fund involvement in infrastructure projects to take pressure off the government and councils.

The government is already working on ways to accelerate home construction and is looking at funding and planning law changes to get the new road and rail links and other infrastructure in place for larger-scale, lower cost housing development.

Twyford, also minister of transport, noted the important role the proposed national Urban Development Authority will play in freeing up more land and streamlining development of large-scale, complex housing developments.

He said the government also recognised the debt constraints that cause many councils to deliver infrastructure on a “just in time” basis, limiting the flow of new homes to market.

He cited the role that Crown Infrastructure Partners – the renamed manager of the Crown’s ultra-fast broadband roll-out – can play in funding initial infrastructure at bulk scale so that developers can deliver more homes quicker and also benefit from the lower costs of doing so.

In return for CIP funding, Twyford said developers agree to register a security over their land which is handed down to individual home owners. This security requires the developer, and eventually the home owner, to pay a small annual infrastructure payment to CIP over the life of the assets.

“Because of the quality security of these Infrastructure Payments, CIP is able to raise highly competitive long-term financing from the private sector and this flows on to an overall efficient funding pipeline,” Twyford said in notes for his speech.

“We see the CIP as the start of our journey into alternative financing.”

(BusinessDesk)

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