Growth and Infrastructure Held up by A.C.C Structure

Where’s all the money going?

When local developer, Joe* and his wife heard that KiwiBuild was in need of affordable homes to sell to first-home buyers, they made the decision to offer up two homes to the initiative. Four months down the track, he says there has only been one email back and a distinct lack of interest in the offer he has put on the table.

When local developer, Joe* and his wife heard that KiwiBuild was in need of affordable homes to sell to first-home buyers, they made the decision to offer up two homes to the initiative. Four months down the track, he says there has only been one email back and a distinct lack of interest in the offer he has put on the table.

The two homes that the couple offered the scheme included insulated floors, a new driveway, new kitchens and all for $510,000 each. "I've phoned the organisers of KiwiBuild and left messages with them and haven’t heard a thing back.”

The $2 billion scheme, that aims to deliver 100,000 starter homes for first-home buyers over the next decade allows couples to earn up to $180,000 before they are no longer eligible, and individuals can earn up to $120,000, in Auckland.

50,000 houses will be available in Auckland, while the remainder will be spread around in places like Wellington, Hamilton, Hastings, Queenstown, Tauranga and Nelson. The caps on the costs of KiwiBuild homes in Auckland are $650,000 for a three-bedroom house, $600,000 for a two-bedroom and $500,000 for a one-bedroom home.

While $180,000 might seem like a very high cap for eligibility, the OneRoof Property Report1 calculates that a household would need to be earning $241,200 per annum in order to keep up with the mortgage payments and live comfortably when purchasing a home in the median Auckland value range, of $1,243,037. This would be while paying a 30-year mortgage at 5.79 per cent. First-time buyers would also need to be able to save $248,607 for the 20 percent deposit. For Joe* it’s just a case of “the rich get richer, the poor get poorer and the middle class gets punished.”

With this in mind, it is obvious that someone needs to step in and help first-home buyers to get a foot up, but Joe* isn’t sure if the government has the right answer, just yet. “The issues with Kiwibuild is that it is not a bad idea, it’s just a bit past it’s use-by date and Phil will need to create something that will suit small developments as well as the big ones,” he says.

KiwiBuild isn’t new to Joe*, in fact his father was involved with a similar scheme, which was created in the 1980s when Tim Shadbolt was mayor of the Waitemata. “It worked 20 years ago but you have to ask, ‘what about the Ma and Pa developers or the guys who will buy a section and put a couple of houses on the site? Those are the types of developers that will help us get out of this rut we are in. The large developments might scratch an itch, but they will also create a block on the infrastructure where you are throwing a load of people into one place. It just doesn’t work, you have to spread the population out to create an efficient infrastructure.”

Perhaps not surprisingly, the region that Shadbolt is Mayor of now comes out at the top in terms of home affordability and combined earnings. With the median income for the region coming in at $56,784 – enough to cover the monthly mortgage repayments without going into mortgage stress. “There’s no surprises that Southland came up on top, look who the Mayor is,” says Joe*.

While Shadbolt might have had a positive impact on the Southland region, Joe* believes a lot of the problems with affordable housing and infrastructure in Auckland comes partly because of the way the Super City council has been structured. “We have politicians who are only in power for three years and they are working on how to get into power again for the next elections, rather than looking at long-term sustainable plans for the city as a whole.”

"I don't agree with a Super City, as a concept. You can’t control the size of Auckland with one Mayor, who sits in Queen Street and isn’t accessible to the outer regions.”

For Joe*, the answer would be to build KiwiBuild homes in areas like Pokeno and Pukekohe. “The city is getting too congested. There is talk of a train track that will go straight through from Auckland to Hamilton and it would make it a lot easier for people to commute to town. It would be a lot better than driving to work. Our motorways are carparks.”

He believes that the government can’t keep using our low population as an excuse for not working on the infrastructure. “We live in one of the most-taxed countries in the free world – we pay GST on everything and provisional tax every quarter. We go to the shop and buy a bed and get taxed. We even have a 10 cent roading tax for roads we already own, where is the money all going?”

At the moment, the plan is to build 54 apartments on to Dominion Road “chucking people into one location, with no infrastructure to support them. In some cases, there aren’t even any carparks and it just means that the streets get even more clogged up with cars.”

While many people complain about the way the Resource Management Act is organised, Joe* believes the only issue is that the government doesn’t follow it to the letter of the law. “As developers, we are taking out a considerable amount of money to get started only to find that some consents may not be accepted, while others do. It needs to be a level playing field.”

“It’s not just the delays- it’s the costs too! Where is the money going…. “

References

1 https://www.oneroof.co.nz/news/35359

2 http://ourauckland.aucklandcouncil.govt.nz/media/21725/review-of-the-auckland-council-meeting-demand-programme-final-10-09-18.pdf

Joe* is a local developer, who elocal has chosen not to identify.