Comment

On KiwiBuild’s fringe, the have-nots

What a debate over Wanaka's KiwiBuild houses overlooks, David Williams argues, is a hollowing out of the middle class.

COMMENT: Before giggling and pointing across the aisle in Parliament on Tuesday, embattled National Party leader Simon Bridges asked the prime minister this question: “Did the Government seek any advice on whether there would be demand in Wanaka for two- or three-bedroom homes in the KiwiBuild price caps?”

The question’s genesis is an Otago Daily Times story from last Saturday. It dubbed the Government’s home-building scheme’s first foray into the South Island “a bit of a fizzer”. The developer behind Wanaka’s Northlake subdivision had asked the Government to extend the ballot for KiwiBuild home and land packages, because only 20 entries had been received for 10 homes.

“Some houses have received no entries and the developer has asked us to extend the ballot,” KiwiBuild senior media adviser Mark Hanson told the paper. (The homes cost between $565,000 and $650,000 – well below Wanaka’s recent median house sale price of $1.06 million, according to QV.)

This is a sign of Government ineptitude, Bridges thought. The wrong policy in the wrong place. He asked Jacinda Ardern, if there’s such exceptional demand why have only 20 people entered the ballot?

Ardern pointed to an 18-house KiwiBuild development in South Auckland, in which well over 1100 applications were made. Some of that demand came in quite late, she said.

“What we have seen in the south, as I understand, is that applicants have started the application process but haven’t always completed it. The decision was made to give that additional time.” (The extended ballot closes today.)

You oughta know

Bridges should be well aware of housing demand in Wanaka.

As Transport Minister, he spent plenty of time discussing problems in the Queenstown-Lakes (mainly Queenstown, to be fair), and the new highways needed to cope with exceptional population growth. And as Labour Minister, tourism business owners Bridges talked to would have been tearing their hair out trying to find reliable staff, and wondering where to house them.

Because living in the Queenstown-Lakes is eye-poppingly expensive. Median household income is $72,600 while median house prices in September were a touch over $1 million, according to Interest.co.nz. That gives what’s called a house price-to-income multiple of 13.89. The national average is 6.28 and the only other place in the country in double figures is Manukau – which, interestingly, has a higher median household income than Queenstown-Lakes of $86,400.

Based on the numbers, the Queenstown-Lakes is probably the hardest place in the country to buy a house. A bunch of people living there will never own a home, it seems, without help.

So it’s illogical for Bridges to suggest the district isn’t a good candidate for KiwiBuild. Various political commentators have suggested National hasn’t hit the Government hard enough over KiwiBuild, but this criticism seems misjudged. There may be other reasons, however, for what looks like a lack of interest.

Affordable, modest

In late September, Housing Minister Phil Twyford announced that 211 KiwiBuild homes would be built at Wanaka’s Northlake subdivision. “For first-home buyers who have been locked out of the market, KiwiBuild is providing the chance to buy an affordable, modest starter home in one of the most beautiful parts of New Zealand,” Twyford said in a statement.

Given the apparent crisis in the ballot for the first 10 KiwiBuild homes at Northlake, Bridges asked Ardern on Tuesday if she was confident they’d be able to fill all 211.

Ardern responded she knew which parts of the country had exceptional demand and exceptional house prices: “The reason, Mr Speaker, that we as a Government decided to step into the market, because it had failed, was because we had areas where business was saying they couldn’t get people because housing was unaffordable, we decided to step into those areas and fill that gap.”

To its credit, while it was in Government, National tried to do something about the Queenstown-Lakes housing crisis, too. Its concept was the “special housing area” – a way for developers to fast-track subdivisions by allowing developers to bypass council red tape. It fed neatly into the previous government’s mantra that it was a lack of developable land that was causing the spike in house prices.

But it didn’t work, in Queenstown at least. The first fast-tracked development, near Lake Hayes, was called Bridesdale Farm – built by the same developer as Wanaka’s Northlake. An analysis I wrote for Queenstown’s Mountain Scene newspaper last year found that only 39 of 135 sections – less than 30 percent – were owned by people who were either first-home buyers or didn’t own property elsewhere. In other words, it was a bonanza for builders, investors and property speculators.

(Subsequently, the council introduced a 10 percent inclusionary zoning contribution for fast-tracked developments.)

Another fast-tracked development was the Queenstown Country Club retirement complex. The idea was that retired people would sell their homes and move there, freeing up their homes. But, according to a Stuff report from last year, the cheapest Country Club houses are $735,000. It’s being marketed as “arguably the most luxurious and prestigious retirement resort that New Zealand has ever seen”. It’s unlikely, then, that the Queenstown-Lakes homes sold by retirees will help first-home buyers one jot.

“If [Bridges] is suggesting for a moment that there is no problem with our housing market, that there is available to first-home buyers homes at a price-point that is realistic, then that is his prerogative.” – Jacinda Ardern

This week, Bridges accused KiwiBuild of being a taxpayer subsidy. How could it not be, he argued. The Government is guaranteeing to buy houses that might not sell to the market (in the case of Northlake, presumably), at a price that is, by definition, above market price.

Ardern retorted that KiwiBuild uses Government scale and buying power to deliver what the market has failed to. Any suggestion the Government might be scrambling to consider what to do with KiwiBuild houses that don’t sell she dismissed as “hypothetical”.

“If [Bridges] is suggesting for a moment that there is no problem with our housing market, that there is available to first-home buyers homes at a price-point that is realistic, then that is his prerogative. But on this side we do not accept that.”

It seems to me that KiwiBuild is well-intentioned and needed to get first-home buyers on the property ladder across New Zealand. But it needs to go further if it’s going to work in places like Queenstown and Wanaka.

Mean rental prices in the Queenstown-Lakes are $639 a week, the highest in the country, according to Business Ministry figures. That’s a huge rise, considering rents weren’t consistently over $400 until early 2014. The only other areas of the country with rents over $500 right now are in and around Auckland.  

(Competition for rentals is also fierce, especially when the flood of seasonal ski field workers hit town. I heard that a clutch of starting lawyers at one Queenstown firm were living in hostels.)

Treading water

With rents that high, it’s hard to save. And when house prices are so far above your income, some will feel there’s little point in trying to gather a deposit. Many people in Queenstown and Wanaka are treading water, saving nothing at all. Some are saving, sure. A friend of mine saved his deposit by living in a garage with his girlfriend for a couple of years. But then he upped sticks and bought in Dunedin.

As house prices have skyrocketed in the Queenstown-Lakes, people have left. That’s teachers, police officers, lawyers, rubbish collectors. The middle class is being ripped out of Queenstown. What that leaves is the haves, who are buying up more houses, the have-nots, who seem to have no hope of ever affording one, and a decreasing number of people in between. Think about what that does to the social fabric of a town.

Queenstown’s council – which has asked the Government for a $278 million handout, or the ability to collect a bed tax, to pay for infrastructure – is working on ways to keep its workers. Last year, a mayoral taskforce suggested strengthening programmes offered through the Queenstown Lakes Community Housing Trust. Ardern says the Government is considering a shared equity scheme. This is good news.

But until KiwiBuild goes further it seems destined to be imperfect and ineffective. In particular, the qualifying cap of $180,000 per couple seems too high. And last night, Newshub reported the Government had weakened penalties for selling KiwiBuild houses, from a 100 percent penalty if a house was on-sold within five years, to giving up 30 percent of capital gains if sold within three years. Without an overhaul, KiwiBuild is likely to continue to be an easy target for political opponents and unlikely to be a huge vote-winner in the next general election.

Back to the Queenstown-Lakes, whatever Simon Bridges thinks there’s no doubt in my mind that cheaper two- and three-bedroom homes are needed. Without a change to the way they’re built or owned, however, the hollowing out of the middle class there is set to continue.

* This story was updated to correctly state the work of the Queenstown Lakes Community Housing Trust and mention the inclusionary zoning contribution for special housing areas.

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