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Street: Home ownership – protecting the Kiwi dream

Hon Maryan Street
Minister for Housing

20 February, 2008 Speech

Home ownership – protecting the Kiwi dream

Speech to Nelson Chamber of Commerce

Good afternoon and thank you for asking me here today to speak to you all. It has been a busy week since Parliament resumed last Tuesday.

It has also been a particularly exciting week for me as the Minister of Housing, because as you are probably aware, the Prime Minister’s Statement to Parliament last week included the announcement of a comprehensive plan of action to help more families into home ownership.

As the Prime Minister said in her statement, the Labour-led government has been motivated by one goal above all – to secure the best possible living standards for all our people.

Household incomes are up in real terms by 25 per cent in the past eight years – that’s 25 per cent over and above cost of living increases.

We have made major investments in families. However, there is still more to be done and we have big policies to roll out and progress this year. Our plan to increase the supply of affordable housing is one of these.

House prices are beginning to stabilise, but have nevertheless risen sharply in recent years in New Zealand and other comparable countries, including Australia, Britain and Canada.
Home ownership rates have fallen from 74 per cent to 67 per cent between 1991 and 2006. If current trends continue this rate will fall to about 62 per cent by 2016, a scenario New Zealanders clearly do not embrace.
In Auckland alone, the number of working households unable to buy a modest house that meets their needs rose from 20,400 in 1996 to 54,900 in 2006, an increase of 169 per cent.

Things of course aren’t much better in Nelson, where incomes are comparatively low when considering the cost of housing, making it one of the most expensive places in the country to live.

While the house price rises are in some ways a reflection of a buoyant economy, the government recognises proactive steps are now required to ensure the Kiwi dream of home ownership remains able to be realised.

Taking those steps requires a stocktake of changing construction, living and other trends, which have affected the housing market.

Over the past 15 years, for instance, the size of new houses has increased by 50 percent, making homes more expensive and putting them out of reach of more and more first home owners.

It is also estimated that 18,000 too few houses are being built each year. At the same time, starter homes are not being built in new developments.

In addition, more people are renting. Renters have become a more diverse group, including households with children and older renters who will increasingly out-compete single parent and single person households which have traditionally relied on the rental sector.

Without affordable rental options, households are spending too much in rent and less is left for other essential living costs; compromising the ability to save a deposit to buy a first home.

The plan announced by the government last week is a result of a great deal of careful research and policy development; and it marks a bold new direction in housing policy in New Zealand. It recognises the issue of housing affordability is complex and difficult, requiring a broad, multi-faceted response.

I want to spend a few minutes today explaining some of the steps we are proposing to take and why.

Firstly, Land Information New Zealand will carry out a review of public land holdings. Starting in Auckland, LINZ will look at what available and appropriate Crown land could be opened up for housing development.

And I can assure you, that contrary to apparent suggestions by some Opposition members, the government is not considering using Auckland’s zoo for one of these developments!

The Department of Building and Housing is going to tackle some of the regulatory costs that have added to the cost of building a house. While these are not the largest drivers of house prices, the government is committed to ensuring that housing is produced as efficiently and cost-effectively as possible without compromising on quality.

We will start by looking at how to simplify the design and building consenting process for starter homes. Starter homes are modest-sized houses with designs that can be built using simple construction methods and have basic fittings in rooms such as the kitchen and bathroom.

The Department of Building and Housing is also tasked with gathering more information on land availability. While there is significant land zoned for housing in our major urban centres, there is little accurate information regarding timeframes in which it is likely to be available for development – despite a range of assertions to the contrary reported in the media. The department will further investigate to provide policy makers with more detailed information.

In July this year, Housing New Zealand will launch a shared equity scheme targeted at new builds to help people in high cost areas to get onto the home ownership ladder. Focusing this scheme on new builds will avoid adding to competition for existing houses.

The government is also looking at setting up an Urban Development Agency.
Urban Development Agencies (UDAs) have been set up overseas to develop master-plans for similar large scale projects and we are examining whether these would be appropriate here.

UDAs have been established in most states in Australia and have been able to demonstrate commercially viable and sustainable housing development, high-quality design, and urban regeneration.

The Victoria government’s VicUrban Redevelopment Authority, for example, has designated four regional centres for development within the greater Melbourne area, including Dandedong.

The Revitalising Central Dandenong initiative involves a partnership between VicUrban and the local council to improve development approval processes and encourage private sector investment to the tune of over $1 billion.

The amalgamation of strategic sites and the relocation of a bus depot have laid the groundwork for the revitalisation project.

Urban Development Agencies generally have been used to coordinate faster urban development of large, strategic sites with roles including: land acquisition and amalgamation; fast-tracking regulatory approvals; specification of design, quality standards and affordable housing requirements.

What makes the agencies unique is that they are able to undertake specific development projects that are of a scale and complexity that would not generally occur in the private sector alone.

In some areas they have facilitated major urban renewal projects and investment opportunities where there was previously little market interest.

To increase substantially the supply of affordable housing New Zealand needs to develop large scale urban housing projects which incorporate realistic numbers of affordable homes. The private sector and central, regional and local government need to work in partnership to deliver these projects.

The responsibility falls on all our shoulders if we want to address declining home ownership levels and protect a cornerstone of our much-valued national identity.

Of course, there are commercial advantages too. Let’s not forget that great insight of Henry Ford’s when he launched the affordable motorcar, which was that if he only made cars for wealthy people, he wouldn’t sell many!

New Zealand has a long history of the types of partnerships I’m talking about, dating back to 1937 when the very first state homes were built by Fletcher Construction.

More recent examples would be the Hobsonville and Tamaki redevelopments, where central government is partnering with local government and the private sector to provide more affordable homes. Similar developments are also planned for Papakura and Weymouth.

For those of you unfamiliar with the Hobsonville project, here is a little more background. The plan is to develop an integrated urban community situated at the former Hobsonville air base.

The project will deliver more than 3,000 new homes, 500 (or up to 15 percent of the total development) of which will be available for first home buyers on moderate incomes. A further 500 will be state rentals and the remainder will be available for other market buyers. The plan is for house construction to be underway in 2009, following earthworks and infrastructure work this year.

Hobsonville will set a new benchmark for sustainable urban development. It will build a community that is available to people from all sectors of society and include schools, employment, heritage areas and reserves.
Another example of government taking the lead is theTamaki redevelopment, which I announced two weeks ago.
Up to 3,000 new homes will be built there, and as with the Hobsonville development, affordable housing for first home owners and renters will be a significant component.
Here in Nelson, through the Centre for Housing Research, the government has funded research in to Nelson Marlborough’s affordability issue.

As it has elsewhere, this research has indicated very clearly that housing affordability is a multi-faceted problem requiring a sophisticated menu of responses. We cannot allow this issue to captured by overly simplistic political debate.

The government is also planning to work with the not-for-profit sector to provide more affordable rental and owner-occupied houses for lower-middle income families or individuals in high cost areas.

The existing not-for-profit sector is small in scale and caters almost exclusively for those in rental homes with the highest housing needs. The change could result in local authorities, iwi and others already working in the not-for-profit sector expanding their role. It could also see the establishment of new dedicated housing entities such as the successful housing associations in the United Kingdom.

Not-for-profit housing providers can provide housing at a lower cost than for-profit providers, and in many cases, they may leverage other resources (and property development opportunities) without being wholly reliant on government funding.

Some housing associations in the United Kingdom now provide the full range of housing options – rentals (medium and long term), shared ownership and full ownership. In Australia the Queensland government and Brisbane City Council have provided funding to set up the Brisbane Housing Company, which is forecast to have a stock of 781 units this year to cater for particular groups of people.

Development of the not-for-profit housing sector in New Zealand is a more medium-to-long term initiative compared with the others outlined above. It is likely to involve a small number of relatively large providers in main urban areas to provide at first affordable rentals and then a pathway into home ownership.

The next step is for the government to consider how it can best encourage the growth of not-for-profit providers and talk to the existing sector and potential providers about their ideas and what might be possible.

Late last year I introduced the Affordable Housing: Enabling Territorial Authorities Bill to Parliament.

What is proposed in the Affordable Housing Bill is not new – the United Kingdom, Australia, United States and Canada are all using the tools proposed in the Bill, which will allow councils to offer a range of incentives to developers such as density bonuses, in exchange for the provision of affordable housing.

It also prevents the use of covenants on land titles that aim to exclude social and affordable housing. These covenants unfairly discriminate against some of our most vulnerable people, such as older people, children and people who require assisted living through IHC. The use of such covenants is a small but growing issue.

The Bill does not aim to address building costs. Nor is it the purpose of the Bill to address land supply or land price issues, although it may have a positive effect on these in the future.
Instead, the Bill balances the need of the community for affordable housing with developers’ needs for consistent and predictable planning guidelines.

It promotes housing choice through ensuring that a range of housing types, tenures and costs are being built in new developments to meet the needs of moderate income households.

Obviously, the definition of affordable housing depends on the market where the housing is located and the size and type of housing. What is affordable in Auckland compared with what is affordable in Invercargill is likely to be quite different.

Consequently, any definition of affordability needs to be regionally specific in order to respond to regional variations in house prices and incomes.

The Affordable Housing Bill seeks to increase the availability of housing for those who live in households with low-to-moderate incomes and have no existing legal or beneficial interests in property. The housing itself must be priced so people can meet their housing and other essential living costs.

The Bill enables territorial authorities to further refine the definition of affordability and target affordable housing to their local housing market.

All of the initiatives I have outlined above have to be balanced carefully to ensure that interventions do not increase demand and contribute to house price rises.

Our overall goal is to create mixed, sustainable communities, with appropriate state housing for those who need it and improved home ownership opportunities for others, who with the right support, can realise these.

Home ownership has significant social and economic benefits. It can promote greater family stability, improve connections within communities and create continuity of education. Home ownership also provides long-term security and a buffer against poverty before and after retirement.

Conversely, a lack of suitably located affordable houses can have negative economic and social consequences. People live further away from work and have to spend extra hours commuting, at a cost to families and the environment. Without a range of house types within neighbourhoods, people have to move out of their community if housing needs change.

Since 1999, we've added 7,500 homes to the state housing stock, and made the rents fair – initially prioritising the housing needs of those on the lowest incomes who had been left vulnerable by the state house firesales of the previous administration.

We've issued 3,200 Welcome Home Loans to help people on modest incomes buy their own home with little or no deposit and created a further avenue to home ownership through KiwiSaver. And we’ve now unveiled the next important steps in our action plan which is resulted from extensive multi-agency research and analysis.

Of course, we’ve introduced a raft of other measures to lift incomes, productivity and skill levels, which will also contribute to improving access to home ownership over time. There is not time to go into all that now, but I do want to make the point that these pathways are interrelated and all underpinned by that Labour-led government goal I mentioned initially – securing the best possibile living standards for all our people.

Ensuring an evenness of opportunity between generations is a key part of this and I believe neither you nor I want a society in which our children cannot aspire to home ownership. We all have a responsibility to do what we can to maintain this tradition.

As I said earlier, there is no easy, simple or quick way to make home ownership more affordable, but by trying to tackle the problem through a range of different measures, we can continue to make sure the dream of home ownership becomes a reality for more New Zealanders.

Thank you again for inviting me here today and enjoy the rest of your afternoon


ENDS

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