Q+A: Corin Dann interviews Bill English
Q+A: Corin Dann interviews Bill English
Finance Minister talks down property
market, warning rising house prices are “dangerous” for
the country: “People just seemed to assume that no matter
what happens, house prices are going to go up. That has
turned out to be quite dangerous for New Zealand. So we
don’t accept that house prices automatically have to
rise.”
Promises government action on housing
affordability, including changes to local government and
resource consent laws.
“Thrust” of government
reforms will be to open up more land both brownfield sites
in cities and greenfield sites on the outskirts to get more
houses built. “There’s a lot of
urgency.”
Admits political concerns of people not
wanting “a block of three-storey, more dense housing next
door” on brownfield sites and “urban sprawl” on
greenfield sites.
English says existing homeowners
may have to ‘pay a price’ if we want to keep the Kiwi
dream of homeownership alive.
“If the wider
community decides that they want to lock up the housing
market to drive up the value of the existing houses and keep
other people out, then we won’t get there. But, look, I
think most people understand that the fact that they’ve
achieved the dream is a good thing, and they’d like others
to be able to achieve it.”
Suggests National will
intervene to help first-home buyers out of rentals and into
the property market.
“[Tax-funded rental]
subsidies are growing quite fast, so the government has a
direct interest in enabling those people into the market”
and “we’ve also got to provide access for those
households who are caught in this high-rent situation where
they can’t make savings.”
Government wants to
coordinate councils, banks and developers to get more houses
built, especially cheaper houses.
“There’s a
real shortage of good quality lower-priced housing”, says
minister. “…for the lowest quartile incomes, there’s
really no new housing being produced, apart from what the
government is building.”
English ‘worried’
about rising cost of government’s accommodation
supplements rising $200m per year.
“We’ve got
to be careful about government not blundering in here too
much into council business.”
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Q+A
CORIN DANN
INTERVIEWS BILL ENGLISH
CORIN
DANN
Good morning, Mr English. You’ve said the
housing market is still a serious problem. It’s not
working. Why isn’t it working, and how isn’t it
working?
BILL ENGLISH - Finance Minister
Look, it’s very complex, so any explanation
is partial, but it looks to us as if there’s a number of
problems. One is the cost of building. That does appear to
be pretty high, particularly compared to Australia.
There’s a lot of work being done on why that might be the
case. More scale, building regulation - all of that can be
improved, and that process is underway. We’re also
concerned about the supply of housing coming to the market.
It does look like the councils have got a very difficult job
ensuring that there’s enough new land but also enough
development within our cities of more dense housing to
enable enough housing to come on to the market to stop
prices rising unnecessarily.
CORIN I
mean, we’ve talked about housing affordability being the
problem here. Is it just a case that house prices are too
high and that somehow you need to get the house prices
down?
BILL
Well, in very simple terms, yes. New Zealand has,
by international standards, high prices for its urban land
and high prices for the total housing package. It’s way
higher than it
was.
CORIN
How much are we
overvalued?
BILL
Well, there’s various measures, but one of them
is median house price over median wages. We are now
somewhere between five and six times the median wage for a
house, and it used to be somewhere around two to three times
that 20 years
ago.
CORIN
And this has damaging effects on a number of
fronts, doesn’t it, not just for the economy but also for
the social cohesion of New Zealand. So how much urgency are
you going to put on this
issue?
BILL
Well, there’s a lot of urgency, and you need a
lot of urgency because getting something to actually change
is very difficult. But it does undermine social cohesion.
The Productivity Commission Report showed that for the
lowest quartile incomes, there’s really no new housing
being produced, apart from what the government is building.
There’s a real shortage of good quality lower-priced
housing.
CORIN
Why is that? We’ve got 4500 builders. Why can’t
we seem to build low-income
houses?
BILL
Well, look, at the moment one of the reasons is
simply that people are being very careful about
over-investing and over-borrowing. But as the economy picks
up, demand is going to pick up, and we want to be in a
position where by that time, our building industry is better
regulated, that government has been working with councils to
ensure that more supply can come on stream in response to
the demand. Because if that doesn’t happen, the prices
will spike, they’ll rise. We’ll end up with New
Zealanders borrowing more than they need to. That makes us
more vulnerable to our overseas lenders. We’ll end up with
investment being diverted into housing unnecessarily when we
want it in our productive business, creating
jobs.
CORIN
All right. So, you’ll be taking a paper to
Cabinet tomorrow outlining your response to the Productivity
Commission’s report on this issue. They clearly identified
that supply of houses in places like Auckland and
Christchurch, to some extent, is the problem here. How are
you going to speed up the number of houses that are built
and boost that supply? I mean, something like 10,000 more
houses are needed in Auckland a year
alone.
BILL
That’s right, and we’re well short of that at
the moment. So, look, we’ll be looking at a whole range of
measures because there isn’t one big thing. Councils, such
as the Auckland Council, have quite a difficult job. On the
one hand, the existing homeowners don’t always want new
houses. They don’t always want their views
spoiled-
CORIN
This is the NIMBY thing,
right?
BILL
Well, the NIMBY thing, yeah. But you can understand
people have invested a lot in their house and they want to
keep their view or they don’t want a block of
three-storey, more dense housing next door to them. So the
council’s got to balance that up. It’s then got to
coordinate the schools and the roads and the public
transport with the new development. So the kind of things
that we’ll be looking at in response to the Productivity
Commission is a broader range of tools that give us more
options for getting those decisions made in a way that’ll
get the houses
there.
CORIN
What are these tools? I mean, are you going to give
financial help to councils to build, say, what they call
green fields out on the outskirts of cities? Because that
will need sewerage and electricity. I mean, they don’t
want to pay for that. I mean, what are the specifics here?
How are you actually going to get councils to do what you
want?
BILL
Well, in the first place we need to understand
exactly what happens now, and that’s not clear. For
instance, in the process of responding to the Productivity
Commission, we’ve spoken to councils and to developers
who, after all, are the people who actually build these
houses. And it’s been amazing the different views about
what impact the plans have. So, you’ll have councils
saying, ‘Look, there’s thousands of sections out there.
There’s no problem. They should just get on and do
it.’
CORIN
That’s right, because Auckland Council says
they’ve got 18,000
free.
BILL
And then developers are saying, ‘Well, once
we’ve done this lot, we actually haven’t got anywhere
else we can go where it’s going to be worth our while.’
So some of it is about how developers actually make a return
on their cash, and some of it is about how the council
thinks the cities should develop. So we’ve got to close
that gap, and that’s been one of the first biggest steps:
the government understanding the problems for councils,
which are many, and then government and councils
understanding how it works commercially so we can actually
get more developers freeing up their land and making it
worthwhile for them to build
houses.
CORIN
So councils don’t seem that keen on the idea of
urban sprawl here, the idea of building on the outskirts,
because they have to fund the infrastructure to make that
viable - the public transport, all that sort of thing. You
want that? This is something you will push for in your
response?
BILL
And that’s a fair enough concern from councils.
In the end, the infrastructure’s going to paid for by
someone, either by development levies or by existing
ratepayers or by the new homeowners. Often the problem is
just timing and coordination. Can we get the infrastructure
built a bit ahead of the market so that we can get the
houses there when they’re
needed?
CORIN
I’m just struggling - the changes that you’re
going to make, how are you going to incentivise for there to
be more houses built in both those outskirts and also in the
inner-city limits? What’s the
incentive?
BILL
Well, look, the incentive for all of us is a more
balanced economy with more investment available for jobs and
growth, and the incentive for all of us is to avoid
unnecessary debt. So our first job is to get a common sense
of purpose here. It’s not the government trying to tell
the councils to do something they don’t want to do. So get
a common sense of purpose. And then we’ve got to look at
what I have to say has turned out in my experience and, I
think, others looking at it, a very complex interaction of
planning and economics that lead to the incentives to build
more or not. So what we’ve got to do is pick our way
pretty carefully through that. We’ve got a couple of
special opportunities - one in Christchurch, where,
essentially, we can change all the rules if we really need
to under the Earthquake Recovery Act. That’s spurred some
controversy, but we’re learning a lot from making a lot
more land available and changing the central city plan to
create opportunities for all the people who lost their
houses in the
earthquake.
CORIN
So that’s in Christchurch where you’ve got
emergency powers, but will you also now change the law for
the rest of New Zealand in this response of yours so that
you can open up more
land?
BILL
That’s possible, and I think we’ve got to work
with council to find the right balance of their decision
making. They’ve got to balance up these local political
concerns and the long-term growth of their towns and cities
on the one hand, and the role the government has. Because
the government has an overall interest in this. If house
prices go up, we spend a lot more on housing subsidies. We
currently spend about $2 billion a
year-
CORIN
I will get to that in a minute. But I just want to
be clear here. So we’re looking at potential law changes
around urban planning, around urban sprawl, that will enable
greater supply of
houses.
BILL
Well, that is the thrust of it. The thrust of it is
to make it easier, both commercially and in the planning
process, to enable more houses - not just green fields, but
also within the cities. Because some of the best
opportunities are within the
cities.
CORIN
And what’s the goal here in terms of how much
cheaper you want houses to
be?
BILL
Well, that’s a very good question. Up until, I
think, the Productivity Commission Report, no one really
believed you could change this. People just seemed to assume
that no matter what happens, house prices are going to go
up. That has turned out to be quite dangerous for New
Zealand. So we don’t accept that house prices
automatically have to rise. And we don’t accept that a lot
of New Zealanders are automatically cut out of home
ownership because they can’t find the half a million
dollars you need for a starter home in Auckland. So we
haven’t got a target in mind. I think there’s a lot more
work to do now that people accept you
can-
CORIN
But I’ve seen figures showing that 30% of
Aucklanders, for example, simply can’t buy a $400,000
house. You know, there’s big chunks of the Auckland market
that can’t even get into a $400,000
house.
BILL
That’s right, and more of those people are
finding themselves in low-quality rentals, and a lot of them
find themselves on government subsidies for those rentals.
And those subsidies are growing quite fast, so the
government has a direct interest in enabling those people
into the market. So what we’ll be doing is outlining a
work programme where changes in local government
legislation, changes in Resource Management Act legislation
and maybe some changes in the balance of government
influence with councils to enable that better
supply.
CORIN
You mentioned the RMA, so we’re looking at
changes here as well. Are you looking at trying to really
speed up the consent process for building, because part of
the problem isn’t just land, is it, it’s making houses
be built
faster?
BILL
That’s right, and the costs of those processes,
it turns out, are really quite high. If you talk to banks
and developers about the
costs-
CORIN
How do you cut those
costs?
BILL
Well, again, about working the councils. The
councils want efficient processes, developers want them,
government wants them. Part of this is about getting that
three-way conversation so everyone understands the impact of
their decisions on the other. A big part of this is a
coordination problem. Getting government, developers and
councils and banks to all work together on increasing
it.
CORIN Do
you think you’ll have good coordination? Do you think
you’ll have the councils on board? I mean, we’ve already
seen the Auckland Council in its submission to the Housing
Affordability Report saying, look, they disagree. They’ve
got plenty of land available they think they could get
houses
on.
BILL
Yeah, and I think what we’ve learnt from that and
in Christchurch is making land available is a long way short
of people being able to rock up and actually being able to
buy a built house on a section. But, look, Auckland Council,
though, has already said in its new plan it’s going to
have an affordable housing strategy. We think that’s
excellent. We’re working alongside them closely. We’ve
got to be careful about government not blundering in here
too much into council business, because we don’t
understand all the local
issues.
CORIN
You talked about the housing accommodation
supplement - effectively, the money you give to, I guess,
tenants struggling, who can’t meet rents. Enormous amounts
of money. How much are you paying on that at the moment? $15
billion a year or
something.
BILL
Well, the government owns $15 billion worth of
houses, and, in most cities, the best opportunities within
the cities is actually on the government-owned Housing Corp
land.
CORIN
And you talked about an extra $200 million a year
being spent on that because of rising rents, and we hear
people say that this is effectively a subsidy for landlords.
You’re obviously quite worried about
this.
BILL
Yeah, we are a bit. We spend $2 billion a year on
direct cash subsidies. 300,000 people have some of their
rent paid by the government, effectively. And so if the
housing market rises, it’s going to cost us a lot more,
and those subsidies are forecast to increase fairly
significantly.
CORIN
Do you think that money could be better used in
other
ways?
BILL
Well, we’re looking at that. We’re looking at
some more changes in social housing, because the people in
the social housing community want more change. But we do
have to be careful there, because people are relying on this
cash for their week-to-week income. So any
change-
CORIN
You can’t just cut
their-
BILL
You can just cut it. You can’t just shift it
around. You’ve got to be very
careful.
CORIN
But you could get community social housing groups
building more houses. Is that the
plan?
BILL
Yeah, that is one of the plans. So we want to do
the response to the Productivity Commission on housing
affordability, which is about the broader market, and then
we’ve got a lot of work going on on the reform of the $15
billion of housing that the government itself owns, and
those sort of changes we do have in
mind.
CORIN
You know, there will be some people who will say
once again this is people with unrealistic expectations.
They want the big, flash house, and they’re not thinking
about starting small and building their way in. Is that
still a fair criticism, or is the Kiwi dream of that house
actually a bit more difficult now than
that?
BILL
Well, some of it is because the standard’s a lot
higher. You know, parents of people our age often went up to
a subdivision where there was a gravel road, there was no
pathways, often they were on sewerage tanks, and that was
their first house. Now that’s not the standard we build to
now. It’s quite a lot higher. Look, there’s room for the
double-income couple who don’t buy their house till
they’re 35 and they’ve got 50% of the value. But we’ve
also got to provide access for those households who are
caught in this high-rent situation where they can’t make
savings. If they could get some savings, they’d need to be
houses they can
afford.
CORIN
Can you guarantee, I guess, that these sort of
changes, that what you’re doing, is going to ensure that
that dream is still alive for our kids, that they’re going
to be able to own homes in New
Zealand?
BILL
I think if there’s a collective will to have more
affordable housing, we can achieve it, and a big part of
that is the wider community believing it’s a good thing.
If the wider community decides that they want to lock up the
housing market to drive up the value of the existing houses
and keep other people out, then we won’t get there. But,
look, I think most people understand that the fact that
they’ve achieved the dream is a good thing, and they’d
like others to be able to achieve it. And if we can get
there by looking hard at the planning process and the way
councils and government make decisions, then I think people
will think that’s a price worth
paying.
CORIN
Finance Minister Bill English, thank you very much
for your
time.
BILL
Thank
you.
ENDS