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Twyford creates new housing & urban development ministry

Housing & Urban Development Minister Phil Twyford.

When the new Government allocated portfolios last October, Labour’s Phil Twyford won housing & urban development and the separate transport role.

On Friday, he announced that housing & urban development would get its own ministry, to be established on 1 August, operating from 1 October.

Initially, the Government will move functions from existing agencies, and will look at using funding from their existing operational budgets:

  • From the Ministry of Business, Innovation & Employment: the housing & urban policy functions, the KiwiBuild unit and the Community Housing Regulatory Authority
  • From the Ministry of Social Development: policy for emergency, transitional & public housing, and
  • From Treasury: monitoring of Housing NZ & the Tamaki Redevelopment Co Ltd.

The changes won’t affect where people go to for help with housing. The Ministry of Social Development will continue to assess people’s need for housing support and manage the public housing register.

The aim is for the new ministry to help deliver on the Government’s priorities of making housing more affordable & cities more liveable. Mr Twyford said: “Addressing the national housing crisis is one of the biggest challenges our government faces. The new ministry will provide the focus & capability in the public service to deliver our reform agenda.

“Too many New Zealanders are hurting because of their housing situation. Many are locked out of the Kiwi dream of home ownership. Others are homeless or suffering the health effects of poor quality housing.

“The new ministry will be the Government’s lead advisor on housing & urban development. It will provide across-the-board advice on housing issues, including responding to homelessness, ensuring affordable, warm, safe & dry rental housing in the private & public market, and the appropriate support for first-homebuyers.”

Mr Twyford said the new ministry would provide the Government with strong leadership & fresh thinking. It would also end the fragmented current approach caused by involving a number of agencies.

Then he rattled off 7 aims of the new government:

  • Ramping up efforts to house the homeless
  • Building affordable homes through KiwiBuild
  • Modernising & building more public housing
  • Reforming the tenancy laws to make life better for renters
  • Setting minimum standards to make rentals warm & dry
  • Adjusting the tax settings to discourage speculation, and
  • Setting up an urban development authority to lead largescale urban development projects.

In sum, he said: “The Ministry of Housing & Urban Development will help us deliver our bold & ambitious plan to build much-needed affordable housing, and create modern & liveable cities ready for the future.”

Earlier stories:
25 March 2018: Unitec land transfer kicks off KiwiBuild
23 May 2016: Is it really a faraway boundary that’s raising inner-city house prices?
8 November 2015: Twyford talks ideas which unitary plan & council funding review likely to resolve

Attribution: Ministerial release.

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Robertson introduces the new rules of play on economy

Finance Minister Grant Robertson laid out, in his first Budget, the new set of platitudes that will set the framework this government will work under.

He’d already done that in his December mini-budget, and the Labour Party had made clear in its election campaign that it wanted a change in emphases. The annual numbers game puts it in place.

The Opposition appeared to be still thinking under the old set, which amounted to exceedingly unbalanced largesse on one hand, extending to denial on the other.

In this brief summary on the Budget, I’ve ignored most of the numbers, emphasised the platitudes – you might call them the rules the new government will stand by – and pointed to 2 important economic factors for the property sector, migration & housing. At the foot, you can link to Treasury & Budget pages for more of the numbers detail.

Mr Robertson:

“We must make our economy more sustainable for future generations. This means caring for our environment as a core value, not as an after-thought. It means transitioning in a just & deliberate manner towards a low carbon economy.

“To transform the economy we have to be more productive. We have to work smarter, build our skills & resilience, explore new innovations and adapt to change. We cannot continue to rely on merely increasing our population, exporting raw commodities and an overheated housing market to drive economic growth.

“Our economy must be more inclusive, too. This means a society where everyone has an equal chance to fulfil their potential, to contribute, and to live meaningful, connected, healthy & fulfilling lives….”

Next, the how

“Our plan will grow & share our prosperity, so that our whole society is lifted up, and everyone has access to good quality healthcare, education, housing & other social services.

“That is why, in this Budget, the Government is prioritising those investments that will rebuild the critical social & physical infrastructure in New Zealand, and address the long-term challenges we face.

“At the same time, we are committed to living within our means, and having a buffer to deal with the risks & shocks that can come upon a small country sitting on the faultlines of the Pacific….

“We must manage the country’s finances responsibly for the sake of future generations. This Budget delivers an operating surplus for 2017/18 of $3.1 billion, rising in 2018/19 to $3.7 billion, with surpluses reaching an estimated $7.3 billion by 2022.

“These surpluses allow us to reduce debt. The Budget responsibility rules commit us to reducing the level of net core Crown debt to 20% of GDP within 5 years of taking office….

“We are also delivering on our Budget responsibility rules by keeping government expenditure below 30% of GDP. Core Crown expenses are expected to track at about 28% of GDP each year through to 2022….

The funding switch

“Altogether, this means that over the next 4 years we have about $24 billion more than the previous government had planned to invest in infrastructure & social services, so we can repair the deficits that are undermining our economy & communities. This will lay the foundations for our economic & social transformation.”

Housing

“This government is determined to take action on the housing crisis & the scourge of homelessness which has emerged in this country.

“In December’s mini-Budget we allocated $2.1 billion for our ambitious KiwiBuild programme to deliver 100,000 long-overdue affordable houses built across the country, including 50,000 in Auckland over the next 10 years.

“Budget 2018 commits more than $1 billion in new funding to go towards housing, including $369 million in new capital funding.

The different priorities of this government are never clearer than in housing. One of our first actions was to stop the state house sell-off.

“Today, I am announcing that this government is taking serious action to increase the supply of public housing by investing $234.4 million in operating funding for Housing NZ & community housing providers. This will provide more than 6000 homes over the next 4 years.

“We are working with councils to deliver more houses. For instance, the Tamaki Regeneration Co, which is jointly owned by the Government & Auckland Council, will be given another $300 million to provide about 700 state houses, as well as another 1400 houses in Tamaki for the open market.

“These will be new, warm & dry houses. Too many of our homes are cold & damp, leading to preventable diseases. A new programme to make Kiwi homes healthier will provide $143 million to go towards grants for those on lower incomes to insulate & heat their homes. Investing in warmer homes simply makes sense….”

The homeless

“In this Budget, our government will support more than 1400 of New Zealand’s most vulnerable homeless people & families through the Housing First programme over the next 4 years.

“Housing First supports people who have been homeless for a long time or who face multiple & complex issues. We recognise it is much easier for people to address issues like mental health, or drug addiction, once they are housed.

“This programme aims to end homelessness for people, not just manage it.

All these plans announced today, as well as the Families Package, will help to lift children out of poverty.”

Sustainable economic development

“We are focused on playing our part to support generating prosperity & sustainable economic development.

“To that end, we are prioritising infrastructure….

“This Budget formally establishes the $1 billion/year Provincial Growth Fund to support growth in the regions, as outlined in the coalition agreement between Labour & NZ First.

“This fund represents the single biggest investment in the regions of New Zealand in our lifetimes. It aims to enhance economic development opportunities, create sustainable jobs, contribute to community wellbeing, lift the productivity potential of regions and help meet New Zealand’s climate change targets.

“This year the Provincial Growth Fund will be made up of $684.2 million of operating expenditure & $315.8 million of capital expenditure. This includes significant investment in the One Billion Trees programme and support for regional rail projects.

“The Budget also sets aside funding for the establishment of the NZ Forestry Service. Our investment in forestry will help us to deal with climate change, lift our economy and provide employment….

“It is possible & necessary for New Zealand to transition to our goal of a net zero emissions economy by 2050. This will require some major changes, but we can do this if we work together.

The new economy

“This Government also sees the opportunity that this transition provides. Budget 2018 sets aside $100 million of new capital funding for the Green Investment Fund to kickstart investment in assets & technology to reduce carbon emissions.

“This fund, which is the result of the confidence & supply agreement between Labour & the Green Party, will help a just transition to a more sustainable economy that will ultimately create jobs in new, clean industries….

The regional equation

“Work is underway on developing lists of regional skills & labour shortages. We want an immigration system that really works for New Zealand. We want to match migrant skills to the regions & industries where they are needed most. We want to ensure that any genuine skill shortages are filled, with immigration levels that are sustainable….”

Understand the differentiation: Wellbeing to replace GDP focus

“Next year we will be the first nation in the world to deliver a Wellbeing Budget reporting our annual progress against a range of measures that highlight the health & wellbeing of our people, our environment & our communities. We will use the living standards framework developed by the NZ Treasury to help develop our Budget, and to measure our success.”

  • That’s the end of my excerpts from Mr Robertson’s speech to Parliament yesterday. Below, some points on the key issues of migration & housing.

Migration:

One key figure in Treasury’s economic & fiscal update is the migration projection, which previously showed a steep decline from a net inflow of 70,000/year now to 15,000/year in 3 years. The projected decline in yesterday’s update would reduce the net inflow to 25,000/year at June 2021.

Housing:

Look at this statement to see how distorted economic measurements can be. Along with graphs showing its forecasts, Treasury provided a pithy statement of position for the Budget release. For housing, debt & gross domestic product (GDP), it said: “The growth in the housing market has seen household debt increase. In 2017, household debt reached 168% of household disposable income. If incomes don’t rise or interest rates rise sharply, then paying off mortgages could be difficult for some. If this happens, then people may spend less, or buy or build fewer houses, reducing GDP.”

The bottom line is GDP; acting rationally can reduce it.

It’s almost with surprise that the Treasury note reports that household debt has increased, even though interest rates have been at all-time lows. Why? Because buyers of houses buy to the limit of their outgoings and, as the debt component is lower, they can buy a more expensive house.

Those facts are factors of politics & misgovernance. The misgovernance has come in allowing – promoting – record immigration without creating a receiving economy that encourages dispersal of new arrivals. Hence, avoidable Auckland traffic congestion and pressure that forced house prices to spiral upward.

The new government has stated policies to grow regional development and reduce immigration – which another Treasury note says will plummet in a natural cyclical change anyway.

The Treasury note on housing also comments that there’s a shortage of skilled labour to build houses. Migration to Australia topped 53,000/year in 2012 (net outflow to Australia then was about 40,000/year) but has since slid to zero.

Assuming cyclical norms, the outflow will resume and rise steeply. In that case, a clamp on immigration will cause economic disruption. The better course is to provide a welcoming environment that’s spread around the country instead of being singularly focused on Auckland, encouraging immigrants to look at more options for a new life, and encouraging prospective emigrants to reconsider.

Links:
Treasury, 17 May 2018: Budget economic & fiscal update 2018 (BEFU)
Budget at a glance 2018
Fiscal strategy report

Attribution: Budget speech & documents.

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Inaccurate name-calling – the stuff of rising partisanship

Whacking communism as the enemy of US-style capitalism may be in order, if those 2 political concepts are what you’re talking about.

What prompted me to write about it was the different names applied to capitalism & communism. Am I right in thinking the suggested alternatives are more appropriate?

More often than not, the speaker who wields the terms capitalism & communism is talking about neither. For capitalism, the meaning is more likely to be an autocratically controlled form of trade, and the fear of communism more likely to be about dictatorship than about a mode of sharing.

As the partisan voices rise, frighteningly, in the US, understanding of others’ views will shrink. We’ve been fortunate in New Zealand in having less volatile, fractious partisanship, but it’s an important factor to watch because it will increasingly influence international relations. That, in turn, affects life in New Zealand.

On my trawl through various foreign media at the weekend, I was curious to read a piece about former New York mayor Rudy Giuliani’s odd performance now that he’s President Donald Trump’s lawyer, followed by a truism from Michael Bloomberg, Mr Giuliani’s successor as mayor of New York, which I think partisans are inclined to ignore.

The quotes

This quote is from a comment in the thread on a Gizmodo story about Mr Giuliani, as Mr Trump’s lawyer, letting his mouth run ahead of him: “What Americans call ‘capitalism’ is no more capitalism than whatever was in Soviet Russia was actually ‘communism’. The names applied to modern activities do not match the traditional definitions of social intent. In other words, people have been calling it capitalism knowing that it is not truly capitalism. Just as the Soviets called their methodology ‘Communism’ even though it was just as far from the truth. I do understand that demanding the labels remain is a key part of convincing people their arguments are sound concerning these sociological ideals, but what we call Capitalism would be better called Objectivist-Caste Economics. Whereas Soviet Communism would be better called Dictatorial Segmented Centralism. Neither involve a true social contract. Neither involve any sense of social well-being beyond what is necessary to maintain power structures. They are both methods of putting the few in charge of the many.”

Also at the weekend, Mr Bloomberg said in an address to a university audience in Texas: “The greatest threat to American democracy isn’t communism, jihadism, or any other external force or foreign power. It’s our own willingness to tolerate dishonesty in service of party, and in pursuit of power.”

Links:
Gizmodo, 12 May 2018, commenter PV on this story: Extremely good lawyer Rudy Giuliani claims Trump killed AT&T-Time Warner merger, then denies it
Associated Press through the Guardian, 12 May 2018: Michael Bloomberg calls ‘epidemic of dishonesty’ bigger threat than terrorism

Attribution: Gizmodo, Guardian.

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Populist politics, the backlash of unfettered globalisation

Opinion, by Denis McMahon, chair of the Tauranga-based syndicator & funds manager PMG Ltd

Denis McMahon.

2 weeks into the 2019 financial year, there are some very important trends emerging & playing out in the world which I believe will be affecting our lives, and investments, for some years to come.

The US got off to a good start in January, with most forecasters predicting a good year but not a stellar one. There has been a good deal of exuberance in the US stock market and many commentators are expecting earnings to grow, despite recent volatility.

The World Bank is predicting global growth of 3.1% – again, not spectacular, but something we need to get used to in a global environment of low inflation.

There are housing bubbles in Canada, Australia, China and, as most argue, in New Zealand (specifically in the main centres), although China appears to be stalling at present. Property bubbles are always a cause for concern as they always involve leverage and, as 2007-09 showed only too clearly, once people are unable to service the debt, the dominoes start to tumble.

But for me, the biggest threat to stability & progress around the world is the spectacular rise in populist politics. A lot of this is a backlash against decades of globalisation, as evidenced by the rise in protectionist policies. Ironically, this is happening at a time when the US is stepping back from its traditional role of global leader & guarantor of what is being called the Pax Americana.

Since the end of World War 2, the world has had the US enforcing the spirit of free trade, but I suspect those days are gone. The benefits of globalisation have not been evenly distributed and we are now seeing the backlash.

Globalisation has, since the 1970s, seen the transfer of millions of jobs from the US to emerging countries and that has changed the relative value of capital & labour the world over. One of my favourite historians, Niall Ferguson, has said that around 40 million Americans lost their jobs in the global financial crisis and the backlash is starting to be felt.

The same story is playing out in Europe, where populism is on the rise as a backlash against the EU, who have completely ignored the massive concern shown by many member states over both the EU’s mismanagement of the financial crisis and its apparent failure to stop over a million people entering its member states in an uncontrolled fashion.

As examples:

  • Austria has elected a 31-year-old anti-immigration candidate as chancellor
  • Italy’s populist & digitally progressive Five Star Movement won the most votes, nearly 33% in the 4 March election
  • German Chancellor Angela Merkel won the election but it took 5 months of negotiations & compromises for her to be able to form a government because of the strong showing by the populist Alternative for Germany party
  • Our own elections in September, showed an increasing number of people wanted change to the existing National establishment. Although National received the most votes, Labour’s new young, female leader saw support for Labour rise rapidly in the few short weeks leading up to the election.

Ferguson believes it is the beginning of the end for the EU and I suspect he’s right. So, when you start to see the rise in populism coupled with a rise in protectionism, you can well expect disruption in the markets.

Meanwhile, back in “Shortland Street”, business has typically not reacted well to the election of a

Labour-NZ First government, with polls showing a sharp drop in business confidence. To be fair, this is nothing new, as 2000 was a particularly bad year for business following on from the election of the Clark-led government in 1999.

What was different then was that they then had 7 years of arguably the best economic times in decades to mitigate the perceived negativity. They will certainly not have that this time around. With so much uncertainty and a low inflationary environment, it’s hard to see any current justification for a hike in interest rates. However, with Labour clearly signalling their desire for higher wages, this will feed through into the economy and generate some inflationary pressure, possibly resulting in interest rate rises.

We’re certainly seeing some very interesting trends, which all point towards increased market volatility and, in my view, reinforcing the need for a defensive portfolio approach & diversification in your investment strategy.

I’ll watch with much fascination to see what unfolds here & overseas in FY19.

Background:

Mr McMahon has been working in, managing & investing in property for 33 years, starting in Auckland, where he managed a property portfolio (including 2 retirement villages) for a local council body, which led to a position as manager of property & legal services for the Tauranga City Council in 1990. This work included rationalising the newly amalgamated authority’s property portfolio over a 2-year timeframe.

He set up Property Managers Ltd in 1994, introducing investors to property syndication. In 2014 with Phil Tushingham, he co-founded Pacific Property Fund Ltd, PMG’s first managed property fund.

In 2013, Mr McMahon became chair of PMG, following the appointment of Scott McKenzie as chief executive.

The portfolios PMG manages include Pacific Property Fund Ltd, which invests in geographically & category-diverse properties; 2 funds which invest in category-specific properties, PMG Direct Office Fund & PMG Direct Fund; and a private equity fund, PMG Capital Ltd.

Disclaimer: The Bob Dey Property Report & Bob Dey Publishing Ltd do not have a policy on opinions & their slant, other than that they ought to relate to property. Bob Dey believes nobody is right 100% of the time, including himself. Opinion pieces such as Denis McMahon’s are presented to you unedited, apart from fitting the website’s style.

Attribution: Denis McMahon.

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Ardern announces pregnancy

Prime Minister Jacinda Ardern announced this morning that she & partner Clarke Gayford are expecting a baby.

“We’re both really happy – we wanted a family but weren’t sure it would happen for us, in fact, we had been told we would need help. That has made this news unexpected but exciting.”

Ms Ardern said she’d put a programme in place to take a 6-week timeout for the birth, putting Deputy Prime Minister Winston Peters in charge of the country: “I have used the last few weeks to get on with making a plan. Yesterday I met with Deputy Prime Minister Winston Peters, to share the news and to ask him to take on the role of acting prime minister for a period of 6 weeks after our baby is born. Just like when I am overseas, Mr Peters will take on all the functions of prime minister, working with my office and staying in touch with me. I fully intend to be contactable & available throughout the 6-week period when I’m needed.

“Mr Peters and I have a great relationship and I know that, with the help of the rest of the team, we will make this work.

“After 6 weeks, I’ll be back on deck. Clarke & I are privileged to be in the position where Clarke can stay home to be our primary caregiver. Knowing that so many parents juggle the care of their new babies, we consider ourselves to be very lucky.

“I am so looking forward to having an extra role this year, but I am also excited about all of the plans we have as a government to make New Zealand an even better place. That includes work on health, housing, education & child wellbeing (just like the priorities in our 100-day plan). I am looking forward to leading that work, and having a slightly expanded family join me on that journey.

“But for now, bring on 2018!”

Ms Ardern, 37, became prime minister on 26 October, heading a government of Labour & NZ First MPs with support from the Greens.

Attribution: PM’s release.

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Collins raises scare about “road tax” diversion, but government fund already $½ billion in red

Former Cabinet Minister Judith Collins, now the National Opposition’s transport spokesperson, raised a scare this week that the new government would divert National Land Transport Fund money from major road projects to rail.

2 things she neglected to mention:

1, while the fund’s income comes largely (but not entirely) from road users, it has always referred to its “land transport” programme rather than to “roads”.

2, it will be a long time before the fund has any money to spend on anything. Its annual reports for the last 2 years disclose that the fund’s liabilities exceeded its assets by $497 million at June 2016, rising to a $528 million deficit at June 2017.

It had budgeted for a $40 million surplus at June 2017.

The fund’s 3 biggest spends in the last financial year were on the accelerated Auckland transport programme ($236 million), public-private partnerships (for highway development, $557 million) & Tauranga’s eastern link toll road ($107 million).

The fund’s income is derived from “all revenue from fuel excise duty, road user charges, motor vehicle registration & licensing fees, revenues from Crown appropriations, management of Crown land interest, and tolling”.

The fund uses this income to manage the funding of the road policing programme, the national land transport programme & activities such as transport planning.

The fund’s last annual report says: “The National Land Transport Fund has a negative general funds balance due to the programmes that were accelerated and current funding was sourced from the Crown. The funding received has been recognised as long-term payables, which are not due until 2-27 years from balance date.

“The fund has the option to slow down expenditure on the national land transport programme, or utilise the short-term borrowing facility of $250 million if required to meet obligations as they fall due in the short term.”

Congestion issues

Auckland – a region where traffic grinds to a halt daily – has a serious, and growing, campaign to get more people to commute by rail, reducing road traffic, but it still has to work out how to handle freight much more efficiently.

The biggest proposal for improving freight movement, the East-West Link through Penrose & Onehunga, won consent from a board of inquiry in November, confirmed by its report & final decision on 21 December. But, by then, the incoming government had canned the project.

Collins on Labour’s “pet” obsession

Ms Collins said in a release on Monday the new government’s transport minister, Phil Twyford, “has confirmed the government is considering diverting taxes paid by motorists who want better roads to rail instead, while insisting to media this won’t happen.

“This is an important principle, adhered to by successive governments, ensuring the specific taxes paid by motorists are invested in newer, safer & better roads – helping keep New Zealanders connected & safe. Road users pay taxes which are directly returned to them.

“But this now appears under threat, because of the Labour Party’s obsession with light rail in Auckland. Mr Twyford has written to stakeholders saying a number of changes to the government policy statement (GPS) on land transport are being considered. Among the proposals is ‘exploring how rail investment is incorporated within the GPS & the National Land Transport Fund’.

“This is in spite of his office telling media last week that funding for road upgrades would not be redirected to rail.

“In his rush to erroneously claim that a number of roading projects aren’t under threat because of the Government’s obsession with Auckland rail, Mr Twyford has been saying different things to different people.

“This desperate grab for more taxes is the result of this free-spending government realising how much it’s going to cost to build its pet rail line from Auckland’s cbd to the airport – so it’s looking to divert funding from regional roads as a result.

“The National Land Transport Fund is paid for by road users to be invested in improving New Zealand’s roading network and it should remain that way. The Government needs to check its priorities and ensure the taxes paid by road users are invested back in the roads they are using.

“Last week, National launched a series of petitions aimed at saving those regional roads that the Government is looking to slash funding for. Given this duplicity from the Government, I want to again encourage everyone to sign the petitions to save our roads,” Ms Collins said.

Twyford signalled his intention

Mr Twyford wrote in a column for Contractor magazine last week: “To achieve our vision for transport, change is necessary. I am interested in how we can best use existing funding tools – like the National Land Transport Fund & the Government Policy Statement (GPS) – to support a more multi-modal approach.

“The traditional way in which we finance & fund infrastructure needs to change if we are going to address the multiple challenges of urban growth, replacing ageing assets, meeting higher environmental standards & improving resilience. We believe we need to be smarter about how we use the Government’s balance sheet.”

Mr Twyford wrote that the challenges of population & freight growth in the “golden triangle” of Auckland-Bay of Plenty-Waikato “will not be solved solely by investment in the roading network. All modes can be complementary to each other.

“For example, the Government is committed to implementing a rapid transit system for Auckland, which will include light rail from the cbd to the airport and to west Auckland. Such an investment will not only make it easier for people to get around town, but it will also free up our roading network to improve freight efficiency.”

The National petitions

National MPs began launching their petitions a fortnight ago.

Whangarei & Northland MPs Shane Reti & Matt King’s petition calls for the Auckland-Whangarei 4-lane “road of national significance” to proceed as the previous government planned it.

In Auckland’s eastern suburbs, MPs Jami-Lee Ross (Botany), Simeon Brown (Pakuranga) & Denise Lee (Maungakiekie) launched their petition to support the East-West Link.

They commented: “After a decade of planning & $50 million of investigative spending, you would expect that there was a clear direction on the project. This project has been through a fine-toothed procedural process like no other. It is supported by council, iwi, and has been approved by the Environmental Protection Agency’s board of inquiry.

“The current gridlock is a major barrier to commerce. This is making it difficult for people getting access to their basic daily goods. It is quite literally the bread & butter of transport projects.”

Links:
Contractor, 15 January 2018: Infrastructure & transport
National Party petitions: Save our regional highway projects

Attribution: National Party releases, Contractor.

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National talks new urban planning laws, business & environmental alliance says “Go further”

The National Party has been working steadily towards its latest election policy for most of its 9 years in government: new urban planning laws that would make it easier to build, and faster than the Resource Management Act.

It would incorporate parts of the Local Government Act & the Land Transport Management Act. The Resource Management Act would stay in place for non-urban areas.

Steven Joyce lining up some mud at Manukau in 2009.

But Resource Reform NZ, an alliance of 3 normally National-leaning organisations – the Employers & Manufacturers Association, Infrastructure NZ & the Property Council – plus the Environmental Defence Society, said yesterday the National proposal didn’t go far enough.

They want “an integrated governance, planning, funding & delivery system to guide resource management & national economic development”.

The catchcry: fit for purpose

The ministers releasing the party policy and the Resource Reform alliance used the same term as their base: fit for purpose.

The ministers (now spokespersons for the duration of the election campaign), Steven Joyce on infrastructure & Nick Smith on environment (but apparently not on building & construction) said in their campaign proposal yesterday: “A re-elected National-led government will introduce new fit-for-purpose urban planning laws separate from the Resource Management Act to encourage more responsive planning, faster development & better protection for the environment in our growing cities.

“New Zealand is growing strongly and we want to make it easier to build the housing & infrastructure for that growth while still ensuring our urban environments are some of the most liveable in the world.

“To do that we need to give our cities the ability to adapt & develop faster, while respecting & improving the urban environment – and the current planning system is not allowing that.

“The RMA’s one-size-fits-all approach has restrained the development of our cities, dragged on their economic performance and restricted the supply of much-needed housing & infrastructure.

“So National will establish a fit-for-purpose planning system that allows our cities to evolve in a way that improves the quality of the local environment, and makes them great places to live & work.”

Idea is to separate planning & environmental regulation

Nick Smith, also lining up some mud, in 2015.

Dr Smith said the new planning legislation would have clear & separate objectives for regulating urban & natural environments: “Over the past 9 years we’ve simplified the RMA and made it easier to build, but the RMA is only one part of the planning system, and we have reached the end of what can be done by making incremental changes to the act.

“We agree with a number of stakeholders that it is time to develop fit-for-purpose planning legislation dedicated to urban environments that includes the relevant parts of the Local Government Act & the Land Transport Management Act in one piece of legislation.

“So we will set up separate planning & environmental regulations specifically designed to encourage growth, while tackling the environmental challenges found in cities, such as air pollution & stormwater surges.

“This new legislation will work in parallel with our plan to put in place urban development authorities to redevelop specific brownfields areas in our cities to allow for more housing – the work for which is already underway.”

Dr Smith said National would “keep a close eye” on changes applicable to non-urban & rural areas through the existing Resource Management Act.

“National will start its urban planning reform process by consulting with key stakeholders, local government, iwi, experts & the public to develop fit-for-purpose legislation that works for cities.

“The successful Auckland unitary plan & the independent hearings panel review process shows we can put sensible rules in place that work for everyone. We want to use the same collaborative formula to create an urban planning system that enables growth, gives businesses the confidence to invest and adapts to the changing needs of cities.”

Reformists seek consensus for change, don’t detail their reforms

Resource Reform NZ reform of the resource management system needed to go much further. It recommended that this would be best addressed through cross-party consensus on the issue by a politically independent process, such as a commission.

Infrastructure NZ chief executive Stephen Selwood said: “We know New Zealand’s prosperity is being held back by the current framework the wider planning system operates within. It is no longer fit for purpose, and is why we find ways to work around the current system when we want to deliver the infrastructure that the county so desperately needs.”

Property Council chief executive Connal Townsend said: “The current unco-ordinated planning system is driving increasing housing unaffordability, the high cost of commercial development and reliance on outdated funding mechanisms such as rates & council debt. That means we’re simply not building enough, quickly enough with the quality & innovation needed to develop the cities & standard of living we all expect in the future.”

Environmental Defence Society executive director Gary Taylor said: “The environment is suffering too. The Resource Management Act is our pre-eminent environmental law. Yet the cumulative effects of permitted land use activities over the lifetime of the act have led to a slow but significant deterioration of the quality of our streams, rivers & lakes.”

And the fourth advocate for greater change, Employers & Manufacturers Association chief executive Kim Campbell, said: “For business, these issues are also stifling the ability to grow & expand. Which, in turn, also impacts employees & the families. Looking into the future, we face even bigger challenges in how we manage & respond to demographic changes, advances in technology, rising consumer expectations & climate change.”

Attribution: National & Resource Reform releases.

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Ardern follows well researched overseas thinking on rentals, some responses over-edgy, and 5-year-old Ahuri research is helpful clarification

Jacinda Ardern in her policy broadcast yesterday.

Labour leader Jacinda Ardern announced a set of new terms for residential tenancies yesterday, and was immediately – and predictably – told this would badly affect landlords and would have the opposite effect on New Zealand’s housing crisis to that she intended.

The Labour policy is along the lines of what is the norm in Germany, where tenants enjoy long-term occupancy, and also follows the thinking of AHURI – the Australian Housing & Urban Research Institute – in a paper written 5 years ago, How can secure occupancy in rental housing be improved in Australia?

Below: First the Labour policy, then some adverse comments, followed by the AHURI view.

A quick note: I’d thought of paying more attention than I usually do to election policy announcements, then thought better of it. For starters, I have more than enough to write about already. Second, a high proportion of wishlist & splurge electioneering has been vote-buying which can mostly be dismissed – or, if it does eventuate, watched extra-critically. This one, though, is a policy which will affect a large investor sector. If it follows the AHURI line of thinking it ought to be beneficial all round.

A family constantly on the move

To deliver her policy, Ms Ardern said down with a family who’d moved 4 times in 3 years, whose children had to move schools, and whose attempts to save to buy their own home had been set back.

“About 50% of Kiwis now rent their home, but too often their living situation is precarious,” Ms Ardern said.

Her promise: “A Labour Government will strengthen renters’ rights so everyone can have more stability. Not only will Labour increase the notice period for ending a tenancy, we’ll also end letting fees, limit rent increases to one/year, make all homes warm, dry & safe to live in, and much more.

“And for landlords who need to move on tenants who are breaching their agreement, we’ll make sure the tenancy tribunal is properly resourced, and that issues like anti-social behaviour are much clearer in the law.

“It’s about making renting fairer & more stable for both tenants & landlords – and is part of our comprehensive plan to fix the housing crisis.”

Policy: Making life better for renters

“For most people, renting used to be a short stage of their life before they bought a house and started a family. Now, it is becoming the norm. 3 out of 4 people under 40 years old rent, compared to one in 2 in 1991. Among older New Zealanders, the home ownership rate has fallen from over 90% in 1991 to 75% today. All up, half of New Zealanders now live in rental properties.”

Ms Ardern said renters’ rights were still designed around the assumption renting is a short-term arrangement for people without children and that renters will move frequently, rather than set down roots in their community.

The policy:

  • Increase 42-day notice periods for landlords to 90 days to give tenants more time to find somewhere else to live
  • Abolish “no-cause” terminations of tenancies
  • Retain the ability of landlords to get rid of tenants who are in breach of the tenancy agreement with 90 days’ notice, or more quickly by order of the Tenancy Tribunal
  • Limit rent increases to once/year (the law currently limits it to once every 6 months) and require the formula for rental increases to be specified in the rental agreement
  • Give tenants & landlords the ability to agree tenants on a fixed-term lease of 12 months or more can make minor alterations, like putting up shelves, if they pay double bond and on the basis the property is returned to the state it was in at the start of the tenancy
  • Ban letting fees
  • Require all rentals to be warm, dry & healthy for families to live in by passing the Healthy Homes Bill, introduced as a members’ bill by Ms Ardern’s predecessor as Labour leader, Andrew Little, and in the committee stage when the parliamentary term ended in August, and
  • Give landlords access to grants of up to $2000 for upgrading insulation & heating.

Notice periods

Ms Ardern said notice periods would be used where a landlord required the home to live in or had sold the property, the tenant had breached the agreement such as anti-social behaviour, failure to pay rent or causing damage to the property; or the landlord didn’t want to continue a fixed-term tenancy past its expiry: “This will mean landlords are still able to give notice to evict bad tenants. Landlords will still be able to go to the Tenancy Tribunal to ask for evictions or other remedies in the event of breaches of tenancy agreements.

“Most landlords operate with integrity and seek to provide decent accommodation at a fair price. These reforms will not affect them. What they will do is stop exploitative behaviour by a minority that is blemishing the reputation of landlords as a whole.”

Property Institute: It will worsen housing crisis

Ashley Church.

Property Institute chief executive Ashley Church said: “Labour’s new housing rental policies will scare existing landlords out of the rental market and will make the current housing crisis even worse – particularly in Auckland.

“The timing of these proposals couldn’t be worse. Auckland is currently in the grip of a serious housing shortage which affects both buyers & renters – and anything which deters investors from providing housing can only succeed in compounding that problem.

“If you’re an existing landlord, the deck is already stacked against you. The market has flattened, loan:value ratio (LVR) restrictions mean your equity position is worse, and bank credit rationing means that it’s now much harder for you to borrow money to do renovations & improve your position.

“Now Labour is telling you that, if elected, they’ll take away your right to terminate a tenancy and they’ll regulate the circumstances under which you can increase rents to make them comply with some as-yet-undefined Big Brother formula.”

Mr Church said these moves would come on top of a capital gains tax, pending a report from a yet-to-be-formed tax working group: “It doesn’t take a rocket scientist to recognise that Labour are already committed to a capital gains tax and that their tax working party will be made up of others who share that worldview. So, if you’re a property investor, the very clear message is ‘We’re going to get you’.

“That might make for good politics – but it risks doing long-term damage to the property market by scaring off mum & dad investors who are currently putting a roof over people’s heads.”

Mr Church said private investment was the key to solving the housing crisis and providing incentives to get people building new homes was the way to overcome the supply issue: “But no one is going to do that if they’re worried that they’re going to be regulated & taxed to death. Existing landlords will abandon the market and people who might otherwise have invested will stay away. Which means the State – which is just you & I as taxpayers – will be left holding the bag.”

First National chief also makes lopsided call

Bob Brereton.

First National Real Estate chief executive Bob Brereton said Labour’s proposals to change tenants’ rights “will severely, and negatively, impact on a landlord’s ability to protect their investment and will result in increased rents for tenants.

“The pledge to outlaw letting fees is a good example of a poorly thought-out policy with an unintended consequence: Letting fees are charged by professional property management companies to cover the costs associated with securing the right tenant. They then act as advocates for both the landlord & tenant to ensure comfort, safety & protection of the investment. If you remove letting fees, many management companies will be forced to increase management fees to compensate. This will simply force up rents.”

He was also concerned about the proposal to remove the right to end a tenancy, with 90 days’ notice, without cause: “This is simply ludicrous. There are many reasons why landlords might want vacant possession of a property, and infringing on these is a direct challenge to private property rights.

“A similar proposal to increase the provision to end a tenancy after 42 days, in certain circumstances, to 90 days will have a significant impact on property values. The 42-day provision is used, particularly, when a landlord sells a property and the buyer requires vacant possession or where the landlord needs to move back into it urgently, so this provision could impact on a landlord’s ability to sell.”

Brereton says regulating rent rises a no-no

Mr Brereton said one of the biggest challenge of Labour’s policy was the proposal to regulate market rentals by passing legislation to cap the amount by which rent can be increased. His example:

“A landlord buys a house, putting up say $200,000 of their own cash or equity, to provide a home for someone without one. They borrow $450,000 for the purchase at 5% interest and, paying only interest, it costs them $22,500 in interest, another $2000 for rates and $1500 for insurance ($26,000/year). This means they have to rent the property for $500/week, just to cover costs. Add in a 5% return on their equity and its $692. Anything less than that and you are just providing social housing.”

Overall, he said: “This risks being ‘the straw that breaks the camel’s back’. Landlords are facing negative returns, flat prices & the threat of a capital gains tax. If interest rates go up, as predicted, it would only take a small move in a flat market to convince many landlords to get out of the market.”

Australian research indicates similar issues left to fester

AHURI – the Australian Housing & Urban Research Institute – introduced a paper published in May 2012 this way: “More Australians are renting for longer periods, yet do not enjoy the benefits of secure occupancy. Changes to improve the security of occupancy in the Australian private rental system can be informed by international experiences.”

The paper was based on research conducted by Professor Kath Hulse at the AHURI Swinburne-Monash Research Centre, and Associate Professor Vivienne Milligan & Dr Hazel Easthope at the AHURI UNSW-UWS Research Centre. They examined the provisions for secure occupancy across rental systems in Australia & other similarly developed countries, and considered the potential to adapt these provisions to Australia.

Key points:

  • Secure occupancy is important in creating a home, regardless of tenure, and is a foundation for many aspects of wellbeing
  • The Australian private rental sector is characterised by relatively insecure occupancy compared to either social rental or home ownership
  • International experience demonstrates that it is possible to have a large private rental sector with smallscale investors & higher levels of secure occupancy for tenants. Changes to the regulatory framework and policy settings are required to achieve this.

This study argued that secure occupancy is linked to whether households are able to:

  • participate effectively in rental markets
  • access & remain in adequate, affordable & appropriate housing with protection of their rights as consumers & citizens
  • receive support from governments or other social service agencies if & when necessary to obtain &/or sustain a tenancy
  • exercise a degree of control over their housing circumstances and make a home, to the extent that they wish to do so.

European examples

Provisions for secure occupancy are stronger where rental systems are large, such as in Germany, the Netherlands & Austria, where, respectively, 60%, 43% & 30% of households rent. All of these might be categorised as integrated systems, with more uniform policy & regulatory approaches to rental housing.

While the latter 2 prioritise the social rental sector, the German system relies mainly on a private rental system. In these countries, secure occupancy in rental housing has been supported by supply subsidies. By contrast, other jurisdictions (Scotland, Flanders, Ontario, New Jersey & Australia) tend to have highly differentiated systems with strong security in social housing and relatively insecure occupancy in the private rental sector.

Largescale investment & professional management

Countries with large social renting sectors (the Netherlands, Austria, Scotland & Ireland) or higher corporate/institutional investment (Austria, the Netherlands, New Jersey, Ontario & Germany) also have a stronger tradition of professionalised management than in Australia.

This enables investor risks to be pooled and decisions about occupancy for individual households to be made at arm’s-length from decisions about investment.

Germany provides an interesting example, where, although there is larger-scale investment, most landlords are smallscale but are investing for the longer term, enabling more secure occupancy for tenants.

Legal provisions for secure tenure

There is a range of lease types across the countries studied. The typical practice in Australia of offering short-term fixed leases followed by month-to-month arrangements was only found elsewhere in Scotland & Ontario. New Jersey also has month-to-month arrangements, though these renew automatically unless a notice to terminate is given by either party. Other countries have the practice of longer-term or unlimited lease terms.

Of the jurisdictions studied, only Scotland compares with Australia in terms of having short-term tenancies that can be terminated readily without grounds. Even jurisdictions like Ontario & New Jersey have specified grounds for ending a private sector tenancy.

Supporting lease terms that meet the long-term needs of householders

Some jurisdictions have also been better at assisting people to personalise their dwelling and use the property according to their wishes, and so improve their autonomy. In the German private rental market, the standard lease provides capacity to personalise or even renovate the house and facilitates access to people with disabilities. These are only found in other jurisdictions on a lease-by-lease basis.

Links: Labour policy: renters
Ahuri, 14 May 2012: How can secure occupancy in rental housing be improved in Australia?

Attribution: Labour policy & release, Property Institute & First National releases, AHURI research paper.

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Access matters most

On this website, access is the most important consideration. The real estate catchcry, “Location, location, location,” relies on your ability to get there.

In Auckland, a 30-minute car journey can take 90 minutes, but estimating timeframes is also hazardous at pretty much any time of day.

The Government resolutely opposed rail innovation until the super-city’s first mayor, Len Brown, won the support to proceed with the city rail link and forged ahead, notwithstanding the funding gap as the Government sat on the sidelines. Eventually, this year, the Government signed up.

Cars have quickly filled the extra lanes on a short patch of the Northern Motorway and will quickly fill the Waterview tunnel & North-western Motorway expansions.

As I wrote 6 years ago about travelling on the western, industrial side of the isthmus: “Occasionally I stray into Neilson St, Onehunga, and quickly realise it was a mistake. There’s no need to be quick about the realisation, of course, because it’s going to be a while before you can escape.”

Construction of the East-West Link, the State Highway 1-20 road route through that western area, is before a board of inquiry, Mill Rd between Papakura & the southern edge of Flat Bush at Redoubt Rd & into Murphys Rd is becoming a more significant arterial and is now the subject of upscale talk, but the arrival of still more congestion isn’t being beaten.

Now, it seems, the third track on rail’s main trunk line will be built, and perhaps the fourth track as well.

Labour’s new candidate for prime minister, Jacinda Ardern, upped the ante yesterday when she said Labour would build light rail between the city centre & airport within a decade, extending to West Auckland in the same timeframe and later to the North Shore.

She would introduce a regional fuel tax, infrastructure bonds & targeted rates.

National’s finance minister, Steven Joyce, again ruled out a regional tax, which he’s previously argued is inefficient. So, too, is doing nothing while Auckland’s population grows by about 50,000/year, with 10-year projections from Statistics NZ of 29,000/year (medium) to 35,000/year (high).

A party in power for 9 years has no room for innovative policy without the audience asking why these policies weren’t already in place and, while both National & Labour issued transport policies yesterday, Miss Ardern had to have the front running.

We are set up, then, for a serious battle of wits over primary infrastructure & housing in Auckland – and the skilful politicians will at least appease the rest of the country, if not produce some sound economic offerings, so the election doesn’t just become about Auckland.

For the voter who thinks more about policy than party allegiance – and these voters, I think, are likely to decide who comes to govern – there are questions not just about policies but about strategies, and particularly funding methods.

Among those questions today:

  • Why has it taken so long to introduce new central government funding for extra housing infrastructure support?
  • Why has the Government steadfastly opposed new forms of tax, or a greater sharing of tax to support regional initiatives & infrastructure?
  • Why have key Auckland transport decisions been delayed so long in the face of record immigration?
  • Why is a board of inquiry examining one proposed section of transport infrastructure – the East-West Link – in isolation from other components such as the third & fourth sections of main trunk rail track and the future port location & consequent transport links?

Those are questions which are obviously aimed at the incumbent government. Other parties have released policies on some of these issues.

Labour has a policy to build, or finance the building of, an extra 10,000 houses/year and Miss Ardern talked yesterday of using a regional fuel tax.

The key transport – access – decisions need further input from all claimants for the government benches. The central issue is integrated decision-making, and the absence of such integration has long been a feature of central government (including bureaucrats) versus Auckland.

Attribution: Party speeches & release.

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National promise of 34,000 houses/decade for Auckland may add 2000/year

The headline is what matters in an election campaign, and the headline is that National is promising that, as the government, it will build 34,000 new houses on Crown land in Auckland over the next 10 years.

New Zealand has a record of not electing governments beyond 3 terms and National is ending its third term as the majority in a coalition, which jeopardises the chances of it being in a position to carry out the promise.

Social Housing Minister Amy Adams.

Amy Adams, Social Housing Minister and Minister Responsible for Housing NZ, revealed the figure in a speech at the Property Institute in Auckland yesterday. And then she proceeded to whittle it down.

The 34,000 is made up of 13,500 new social houses & 20,600 affordable & market homes.

Under the Crown Building Project, the Government will take down 8300 old, rundown houses.

Ms Adams said Housing NZ alone had over 50 housing developments under way in Auckland. The forward programme includes other housing projects already announced & underway:

  • Northcote, where 300 state houses will be replaced by 1200 new homes
  • Hobsonville Point, where the Government-owned Hobsonville Land Co Ltd (now HLC (2017) Ltd) is about to deliver the 1000th house in a programme to deliver 4500 homes
  • Tamaki, where the government-council regeneration project has a programme to develop 7500 new homes over the next 15 years, replacing the houses on 2800 Housing NZ properties
  • Other existing projects include 2700 new homes already announced under the Crown land programme, 580 houses under the Ministry of Social Development’s social housing reform programmes, and new homes for emergency & transitional housing.

By Ms Adams’ calculation, the Government would add 24,000 new – not previously announced – houses over a decade, though on the figures above the actual total might be less, perhaps down at 20,000, or an average 2000/year.

Comparing promises

Andrew Little.

That compares with Labour leader Andrew Little’s proposal last year for 100,000 new affordable houses nationally over 10 years, half of them in Auckland, which would include partnerships with private developers.

So, on top of existing projects, Labour has promised 5000 and National 2400 extra houses/year for Auckland.

Labour also promoted a dole for apprenticeships policy which would subsidise employers to take on around 4000 young people for on-the-job training in fields including building & construction.

Phase one of National’s Auckland housing programme, which covers the next 4 years, would cost $2.23 billion and be funded through Housing NZ’s balance sheet and $1.1 billion of new borrowing that the Government has approved as part of the business case.

Phase 2 in the latter years would be funded through the market housing development part of the programme & rental returns.

Ms Adams said ministers had also agreed that Housing NZ would retain dividends & proceeds from state house transfers, to help fund the building programme.

A glance at reality

The promises come after a period of extremely high immigration – a net inflow of 228,000 nationally over the last 4 years, 108,000 of those in Auckland, requiring 40,000 homes at an average 2.7 persons/household.

Building consents in Auckland over those 4 years started low, 6500 for the March 2014 year as the country was still gradually easing out of the global financial crisis, and totalled 34,200 for the 4 years.

Assuming 100% construction of consented homes (which is not normal, but I don’t have the exact figure), Auckland fell short of housing the net migrant inflow by almost 6000 homes over those 4 years. That housing requirement ignores, completely, the net flow of people within the country.

The National proposal might fill the gap if immigration eases, but on the slim information from the minister it would encourage pricing to stay high. On my calculation in February, consents for new homes nationally (excluding land) have risen 34% in value over the last 5 years – after a slow shift from the bottom of the market, between 6-7.7%/year for the last 4 years.

The land price equation in Auckland can be partly met by intensification throughout suburbia, land prices falling because of the freer availability of sites under the new unitary plan, and section sizes being reduced.

That doesn’t require tampering with rural:urban boundaries, which Labour has said it will eliminate. Those boundaries have a role in protecting non-urban land and in directing development into more efficient parcels.

Auckland also needs more infrastructure for housing development, but it needs to be in well devised communities with a supply of jobs nearby, not on the basis of rural carpetlaying. The local job requirement is fundamental but has been ignored as Auckland has spilled out along motorway corridors.

To catch up, New Zealand needs more builders with a longer future in the trade than the typical construction cycle allows. To do that, either the Government or some other industry supporter needs to ensure trade skills are being taught to enough people before a boom gets underway, and it makes sense to reduce booms, and therefore busts, with some smoothing of economic cycles (but not the total smoothing the US tragically & farcically tried in its attempt to avoid what became the global financial crisis).

As a cyclical high recedes, the building force needs attractive alternatives other than leaving for Australia. Some of that can come through infrastructure projects, which ideally should be separated in time from highs in house & commercial construction, thus reducing cost pressures as well.

Link:
Full Adams speech, 16 May 2017: Launch of Crown Building Project

Earlier stories:
16 May 2017: Little calls for end to negative gearing, and Property Institute calls it “cynical ploy”
6 March 2017: Auckland above 10,000 home consents/year again
10 February 2017: Smith exultant about figures that are plainly inflated
19 January 2017: Building consent highs still don’t match migrant demand
11 July 2016: Little sets out 8 planks to remedy housing issues
19 November 2012: Shearer proposes Government scheme to build 100,000 “entry-level” houses over 10 years

Attribution: Ministerial speechnotes & release, Statistics NZ tables, Labour releases, own articles.

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