Creating Healthier and More Affordable Homes for Kiwis
Hon Dr Nick Smith
Minister of Housing
10 August 2013
Address to National Party Conference:
Creating Healthier and More
Affordable Homes for Kiwi Families
Prime Minister, President, delegates.
Housing policy is one of the great challenges of our time.
It matters because for most kiwi families the equity in their home is their greatest asset.
It matters because we’ve seen how mis-managed housing bubbles can bring the world’s biggest economies to their knees.
It matters because old, cold and mouldy homes compound into health problems.
It matters because part of the kiwi way of life is that through hard work and careful saving New Zealanders should be able to afford their own home.
We are embarking on a comprehensive package of reforms that will make homes more affordable and will reshape New Zealand’s approach to state housing.
I’ll start with housing affordability.
You can’t have affordable homes unless you have low interest rates.
In the post war years when home ownership rates soared interest rates were five per cent.
This reversed by the mid-80s and I can still remember the day I received a letter from my bank, as a first home owner, telling me that my interest rate was going to 24 per cent.
While interest rates follow the economic cycle, they are also the reward for good economic management.
It is no coincidence that they have consistently gone up under Labour and down under National.
We should be very proud of our record over the past five years that has enabled New Zealand families paying a mortgage to have the lowest home interest rates for nearly 50 years.
But that alone is not enough.
We also know that house prices have soared over the past 15 years.
I find it ironic that Labour is beating the drum so loudly on house prices when it was during their watch that prices grew out of control.
From 1999 to 2008 house prices increased by 100 per cent – or around eight per cent a year.
They’ve increased by a further 13 per cent over the past four and a half years – or about three per cent a year.
But that’s still too much.
That’s why in March 2011 we commissioned an in-depth inquiry into housing affordability by the Productivity Commission.
Its substantive report said we needed to deal with land supply, infrastructure, building materials costs, building sector productivity, and compliance costs to improve housing affordability.
Our Government is advancing work on all five of these.
I contrast this with our political opponents.
Not one of the 100-plus submitters nor the 12 month inquiry by the Productivity Commission found any effect from foreign buyers on house prices.
They also specifically considered and rejected a Capital Gains Tax.
They noted that our tax law already requires that anyone developing and trading in property must pay income tax.
Nor did they recommend a massive state house building programme.
Follow Labour’s logic.
You make power cheaper by the Government being the only buyer and seller.
You make houses cheaper by the Government building them.
Are they next going to bring food prices down by nationalising our supermarkets?
Labour’s greatest weakness is that they refuse to accept that land regulation is any part of the problem.
They have ridiculed the Productivity Commission – calling them dinosaurs.
They are opposing our special housing areas legislation and our longer term RMA reforms.
Let me give you some of the facts on why freeing up land supply is a must-have component to improving housing affordability.
We released in February a joint Government/Council study on section availability and price in Auckland.
It showed that the number of available sections in Auckland has plummeted from 4,100 to 1,400 in the past decade.
Remember we need 13,000 new houses per year to keep up with Auckland’s population growth.
The same study showed section prices soared from $100,000 to $325,000.
I have a question for Mr Shearer and Mr Twyford.
How are you going to build thousands of homes in Auckland for $300,000 when the section price is $325,000?
I think they are digging themselves a hole.
Further evidence of the land supply problem is in un-improved land values.
This block of 29 hectares of land at Flatbush was bought in 1998 for $890,000 but is now on the market for $112 million.
That’s a 38 per cent compound return for 15 years.
No wonder people are speculating on land prices.
This obscene raw land price is the product of Auckland’s Metropolitan Urban Limit and comes at the cost of kiwi families wanting to own a home in our largest city.
The rationale for such a tight urban limit around Auckland is flawed.
Auckland’s future will be a mix of greenfield and brownfield developments, but we must not let rigid planning dogma get in the way of affordable homes for kiwi families.
The Housing Accords and Special Housing Areas Bill is about breaking this planning impasse in the interim until Amy’s next phase of RMA reforms roll in.
It reduces the time for consenting a new greenfields housing developments from three years to six months and for brownfields from one year to three months.
It will enable the fast-tracking of 39,000 new homes over the next three years.
Sam Lotu-Iiga and his team have done a great job on the bill at select committee that was reported back last week and I hope to have it pass into law next month.
This means that by Christmas we will have opened up thousands of new housing lots in Auckland.
We must also tackle the costs of council development levies.
They have trebled over the past decade, rising faster than any other component cost of a completed house.
They now average $13,000 per section but are as high as $64,000 per section in some areas.
The cause for this was a law change in 2002.
It gave licence for councils to charge developers whatever they liked.
The then Government argued this cost would just come out of developers’ margins.
In truth, the cost was just passed on to the section or home buyer.
In February, we announced proposals for reform that will put a check on these costs.
Final decisions will be announced this month and legislation before Christmas.
We’ve also got work underway on building material costs.
The Productivity Commission report noted that some building materials are as much as 30 per cent more expensive here than they are in Australia.
Commerce Minister Craig Foss and myself initiated in March a market study on the costs, including reviewing our standards system, tariff levels and competition laws to ensure kiwis get access to more affordable building materials.
We will be releasing options for reform next month.
Colleague Maurice Williamson is also hard at work on bringing compliance costs down with proposals for an online building consenting system and standardised nationwide multi-build approvals.
He also has important work underway on reviewing our building liability laws and investing in sector productivity improvements.
Improving skills is an important part of this and that’s why the Prime Minister’s announcement at the beginning of the year with Steven Joyce for thousands more apprentices is part of the solution.
Reversing the generation-long downward trend in home ownership and affordability won’t be solved by gimmicks or sound bites.
If there was an instant solution it would have been done long ago.
It is going to require hard team graft.
Our group of housing affordability ministers from Bill on finance, Steven on skills, Amy on RMA, Maurice on consenting, Craig on materials costs and Chris on development contributions are working in tune to make housing more affordable for New Zealand families.
I now want to talk you through the parallel changes that we are making in the area of social housing.
It too is based on solid research.
The Vision for Social Housing report was authored by people like Major Campbell Roberts of the Salvation Army, Dianne Robertson from the Auckland City Mission and Brian Donnelly from the Housing Foundation.
For more than a century New Zealand housing has been bisected into private housing and state housing.
The big idea in that report is that we need to grow a third sector of community-owned social housing.
This is not a new idea.
In fact, New Zealand is now out of step with international best practice in social housing.
In the United Kingdom, 58 per cent of social housing is now provided by the community sector.
I spent a week in Australia over the July recess researching their community housing sector.
Over the past ten years it has trebled to 80,000 homes or 19 per cent of social housing.
It has been so successful that the Commonwealth Government in Canberra has set a target that 35 per cent of all social housing will be delivered by the community housing sector.
In Queensland, the Liberal/National State Government last week announced a policy of transferring 90 per cent of state houses to the community sector by 2020.
The Labour/Greens Government in Tasmania under a Greens’ Housing Minister is similarly transferring large stocks of state houses over to the community sector.
I found four major strengths of community provision of social housing in visiting dozens of providers in Australia.
The first is better tenant relations.
Whereas the state tends to be bound by clunky bureaucratic rules, these community social housing providers were consistently rated by tenants as more user-friendly and providing a better service than state housing agencies.
The second is better and more consistently maintained housing.
It is a matter of record that when the board of Housing New Zealand recommended major repair work in 2002 the then Government redirected the money into new builds.
There are not many photo opportunities in basic maintenance.
Community housing providers have a far better record in consistently keeping their housing stock up to standard and fit for purpose.
The third advantage of community social housing providers is that they are better able to provide the network of services that people in social housing need.
These are people with significant disabilities.
Many have problems with mental health and addictions.
Many community housing providers specialise in working with a particular group and provide services that state housing could never deliver.
The fourth strength is that community housing providers are much more successful in helping people transition to independence.
Government housing agencies worldwide have a serious cultural problem of state houses being viewed as a house for life.
There are some people for whom this is appropriate but community providers do a much better job of ensuring that their houses are for people with the greatest need.
My ambition is to grow the community housing sector to 20 per cent of New Zealand’s social housing over the next five years.
You may be wondering who these intended housing providers are.
Some will grow from existing small social providers like Vision West in Auckland and other housing trusts in places like Nelson, Queenstown and Tauranga that have sprung up in response to high housing needs.
Others will grow from well-established nationwide providers like Habitat for Humanity, the Salvation Army and the IHC.
There is also strong interest from iwi who now see under National a financially sustainable role in social housing.
We are implementing these reforms with our Social Housing Reform Bill introduced to Parliament as part of Budget 2013.
The game changer in those reforms is enabling community providers to have access to the same income related rent subsidy as Housing Corp.
I am hugely excited about these reforms.
We know that the old state housing model is broken and in need of reform.
We know there will always be people in society who will need the support of social housing.
We know from international experience that we can provide better housing support for those people by empowering the community sector.
This is a once-in-a-generation opportunity, in parallel with Paula’s welfare reforms, to change for the better New Zealand’s social housing.
There is another dimension to these reforms announced in the Budget – the development of a Housing Warrant of Fitness.
This was an important recommendation of the Expert Advisory Committee on Solutions to Child Poverty.
It interlocks with our policy to more generously fund social housing providers.
The quid pro quo is that the housing is of good quality.
The problem is there are no consistent, up-to-date standards for housing.
The closest we have is the 1947 Housing Improvement Regulations.
Our intention is to replace these long out-of-date regulations with the sort of practical requirements we can rightly expect of housing today.
We will firstly apply the Housing Warrant of Fitness to our state housing – the onus is on us first to get our own house in order – and then to apply it to those houses where the Government is paying a good share of the rent.
The reason this matters is the compelling research showing the links between poor housing and disease incidence rates like Rheumatic Fever.
We are making good progress in raising the bar on housing standards.
We can be very proud of our record in insulating cold, damp houses in both the public and private sector.
The warm-up New Zealand programme got a further boost in Budget 2013 with $100 million targeting low-income households for home insulation.
Your Government, in parallel with this programme, has been getting on and insulating our state-owned homes – another 46,000 that will all be finished this year.
In total we are talking about 320,000 warmer dryer houses or 800,000 people living in healthier homes.
Nowhere is the housing challenge as difficult as in Christchurch.
Of our 6,000 state houses, 5,000 have significant damage requiring major repairs.
The $320 million insurance settlement we reached earlier this year is enabling us to bowl over old, severely damaged three bedroom homes on quarter acre sections and replace them with three new two bedroom apartments like this site in Wilding St in St Martins.
From now until the end of 2015, every working day we will be building a new replacement home and completing repairs on another 10.
We’ve built four temporary villages to provide transitional housing for families while their home is repaired.
We’ve partnered with the private sector in providing extra worker accommodation.
With Corrections we’ve got prisoners refurbishing red-zoned houses for relocation.
We are embarking on a wider nationwide programme of reconfiguring our housing stock to better meet today’s needs and to make better use of the Government’s land holdings.
Our problem is that we have tens of thousands of standard three bedroom state houses, many of which are half empty and others of which are overcrowded.
We are currently out for tender on Project 324&5 that will add an extra bedroom on 1000 houses and two extra bedrooms onto another 1000.
We are also using surplus Government land to house thousands of families.
A prime example of this is the surplus air force land at Hobsonville being converted into a stunning new suburb of Auckland.
We’ve got new schools, a new ferry terminal and the development has specific conditions requiring at least 20 per cent of the homes to be in an affordable price range.
The chief executive of the Hobsonville Land Company has announced that with our Special Housing Areas legislation he will be able to bring forward another 1000 homes.
Let me conclude.
Home ownership is in National’s DNA.
We understand that part of the kiwi dream is having your own place.
A place where you don’t have to worry about getting a 90 day notice.
A place to celebrate birthdays and anniversaries.
A place to call home.
Our policies are about substance over sound bites.
Our policies are about keeping interest rates lower for longer.
We are about slashing red tape to free up land supply.
We are about shifting from failed state housing to community housing.
National is about practical programmes and not just political posturing.
We are directly building more houses than any Government in a quarter century.
We are insulating hundreds of thousands of kiwi homes.
It is all about creating healthier and more affordable homes for kiwi families.