Infrastructure

Nine percent say NZ doing enough on infrastructure

Housing tops New Zealand's infrastructure woes as far as public perception goes, according to an international survey

Only nine percent of New Zealanders believe the country is doing enough to meet the its infrastructure needs, and housing tops the infrastructure wish-list. 

The percentage of New Zealanders satisfied with the amount of new housing in the pipeline is lower than countries New Zealand often compares itself to - the United States and Australia - but also than others it typically doesn’t.

29 percent of New Zealanders are satisfied with new housing supply and 55 percent believe it should be the top priority for investment. 

Serbians, Colombians, Peruvians, Russians and Mexicans are all more satisfied with the level of new housing in their respective countries.

“Our house prices are not that different to Sydney’s, but our incomes are 30 percent lower." 

The results have come out of an Ipsos global survey which included 561 people in New Zealand. 

Sense Partners economist Shamubeel Eaqub said the results of the survey weren’t surprising. He said he believes that now, unlike in previous years, there is a broad consensus across the political spectrum about the need to do something about the country’s housing supply. 

“Our house prices are not that different to Sydney’s, but our incomes are 30 percent lower,” Eaqub said.

The amount of new housing being built is still of concern despite consents reaching 45-year highs across the country last year, Informetrics economist Brad Olsen said. 

“In the early 1970s New Zealand was consenting 40,000 houses a year, for a population of around 3 million.”

“In 2019, New Zealand looks to have consented over 37,000 [houses], but this is against the context of a population approaching 5 million, and the ability to build denser housing.”

"Where are we at and what can we do?"

Eaqub said it was time to abandon the idea that New Zealand could adopt housing solutions from places with very different political philosophies. 

That included the dream of a Singapore-style state building boom. 

80 percent of Singapore’s 5.4m residents live in housing originally built by the Singaporean government, but Eaqub said such a government-heavy solution was unlikely to take off here.

“It has to be suitable to the political philosophy of a country otherwise it’s not going to be durable,” he said.

“You could try a Singapore-style thing in New Zealand, and it would immediately be branded communist in New Zealand.”

For a steer on the “creative solutions” that might help, New Zealand need only look to its own history, Eaqub said. 

“I think the question is where are we are at and what can we do?”

'Use the State to help'

The last time housing was built at a rapid pace in New Zealand was the 1960s and 1970s where there was heavy assistance for both developers and buyers, Eaqub said.

Large-scale investments by developers were underwritten by the state, consumers could access cheap mortgages with the assistance of the state, and new land for housing was actively set up with housing infrastructure by councils. 

“If you look at the history of companies like Fletcher Building, Naylor Love, they came out of that period because that allowed them to essentially take huge developments on board at very low risk.”

Economists say a historic burst of construction activity still isn't enough where housing is concerned. Photo: John Sefton

The money

Olsen said more money was also needed for councils to pay for the infrastructure for new developments. 

It could come in the form of financial assistance to local government to deliver “anchor” infrastructure investments and increase supply, he said.

“Increasingly, infrastructure is a barrier to greater housing development, either because new housing sites need new infrastructure investments, or because aging infrastructure assets require additional capacity to cope with growth.”

Eaqub said many of the water pipes and treatment plants needed to service housing had been built with central government funding originally, but councils now owned such assets and didn’t have the ability to raise funds for new facilities or maintain them on their own.

Year of delivery?

But more money and policy initiatives are on their way this year too.

The details of Finance Minister Grant Robertson’s $12b infrastructure package will be released before this year's election and a Government National Policy Statement (NPS) on Housing will be finalised. 

Eaqub said the latter will force councils to ease up on rules restricting the supply of housing without having to go through the arduous process of changing things like District Plans.

Affordable Wellington apartments?

At a council-level “creative solutions” are on hand too. A pilot for affordable apartments in Wellington will come online this year.

Tenants of Te Kāinga - a public-private partnership between Wellington City Council and The Wellington Company - are set to move into a converted office building on Willis St in June.

The new apartments are based in converted commercial buildings which means they can be brought to market faster than new builds.

Rents are designed to become more affordable over time, starting at 2019 market rates and rising by the rate of inflation every year from year two onwards. 

There are other market incentives bedded in too. 

Council holds the lease and guarantees occupancy, meaning the developer is able to borrow against the near-certain future income streams of a “gold-star” leaseholder. 

A spokesperson for Te Kāinga said intellectual property around the arrangement itself would be made “open IP” so other developers and councils could replicate the arrangement.

“We recognise that it’s important for supply to increase and the only way that’s possible is for a lot of developers to shoulder that."

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