Q+A: Jessica Mutch interviews Nick Smith
Q+A: Jessica Mutch interviews Nick
Smith
Housing Minister Nick Smith has
offered an olive branch to Auckland’s Mayor Len Brown
after weeks of sniping over the super city’s Unitary
Plan.
Smith told deputy political editor Jessica
Mutch that the government and council were not worlds apart
in what they wanted to achieve to alleviate Auckland’s
housing problem.
“There's a lot more agreement
between the Auckland Council and the government than what
some might have you believe. We both agree that Auckland
needs a lot more houses. 25,000 is the agreed
shortage.
“Me and Len are in the same paddock,”
Smith says.
He acknowledged there had been
tensions: “There’s been a bit of constructive tension
between the government and council,” describing his
relationship with Mayor Brown as “constructive,
robust”.
“We’ve just got more work to do. For
instance, you know, if we look at the unitary plan, there
are key parts of it that are a work in progress, where the
council has said, “Well, this is sort of where we’re
going. We’ve got some more detail to do.” And the
government is saying, “Hey, we need to see that detail
because we need to be satisfied that this plan is going to
deliver affordable housing.”
He’s vowing to
work closely with local government over Auckland’s housing
crisis and says without the government on board it could
take a decade for the Unitary Plan to come into
effect.
“If the government
stood back and said, “This is only Auckland’s business.
We’re not going to do anything,” then it would take
between seven and 10 years for that unitary plan that the
council has done tremendous work on to become operative.
Now, Auckland can't wait seven or 10 years. We’ve put a
fast-track process in place that will enable that plan,
which the council is looking to notify in September, to come
into effect probably in about three years. My biggest
concern, and where the dialogue between myself and Mayor
Brown and his council is really important – well, OK,
that’s in the three years. We can't wait three years. We
can't allow house prices to go up in Auckland by another 50
grand a house next year. We need to have a discussion about
some of the short-term measures that are required to take
the heat out of the housing market.”
Tomorrow,
Smith meets with Brown and Auckland Council officials to
discuss the Unitary Plan.
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Q + A – March 24,
2013
NICK
SMITH
Housing
Minister
Interviewed by JESSICA
MUTCH
JESSICA
Minister Nick Smith, thank you very much for joining me this
morning.
NICK
Pleasure.
JESSICA
I want to start off by talking about the Auckland housing
crisis, but let’s talk specifically first about housing
affordability. The latest figures show that the average
house price in Auckland is $618,000. Is that affordable for
the average
Kiwi?
NICK
No, it’s not, and what we’ve seen over the last year is
about house prices increasing about 10%. And you think of
the average, you know, Auckland family beavering away,
trying to save that deposit for a home see the price go up
by $50,000 or $60,000, and we’re sort of losing that key
part of the Kiwi dream. The very early colonisers that came
out to New Zealand had that ambition to be able to own their
little bit of their
country.
JESSICA
And is that an ambition we just have to let
go?
NICK
No, I’m one of those that is absolutely determined to
ensure that ordinary, hard-working Kiwi families are able to
reach that dream of owning. It’s a lot more than about
just a house. It’s a home. It’s a place to celebrate
birthdays, anniversaries. It gives you a stake in a
community. One of my sort of most admired political leaders
was Keith Holyoake, and one of his sayings was, you know, a
capitalist society is great as long as everybody can be a
capitalist. And to many people, that home is that block of
capital. So it’s an economic asset. It’s a social asset.
And for really a generation – 25 years – home ownership
rates in New Zealand have been declining, and that’s why
some change is
required.
JESSICA
So are we going to see two classes of New Zealanders –
those that can afford that dream that you talk about and
those that
can't?
NICK
Well, that’s why the government is giving such a priority
to housing policy. We need to look at land supply. We need
to look at the cost of infrastructure, the cost of building
materials, the cost of the labour and how efficiently
we’re building our houses, and we need to look at the
compliance costs. All five of those elements are absolutely
critical if we’re going to get home ownership to be more
affordable. We also need to note that if you look at New
Zealand history post-war, the periods in which home
ownership has improved is those areas where interest rates
have been low. Now, we’ve worked incredibly hard over the
last four or five years. We’ve got the lowest interest
rates in 50 years. One of the biggest risks from the Reserve
Bank, and also noted by the International Monetary Fund this
week, is that if we don’t address these very rigid
land-supply rules that are constraining cities like
Auckland, they’re going to have to put interest rates up,
and that’s bad for the economy, and that’s going to be
bad for those aspirations of home
ownership.
JESSICA
It’s interesting that you bring that up, because the IMF
this week has talked about soaring house prices that could
then go and crash. Is housing even a good investment at the
moment?
NICK
Well, I think people will always want to own that home –
not just for economic reasons, but for family security. You
know, if you own your own home, you can do the alterations,
make the house your place, not someone else’s place. You
don’t have to think about the landlord giving you a ring
and telling you you're getting your 90 days’ notice. So I
don’t think New Zealand should give up on that
aspirational dream of families being able to own their own
home, and the work the government’s doing in this housing
space is very focused on
that.
JESSICA
So you're perfectly happy with this idea of Auckland
sprawling, basically, so that people can have that
dream?
NICK
My view is very strongly it’s a balance, righty-oh.
Certainly it’s not my view that all of Auckland’s growth
can be simply dealt with by the city growing. I think it has
to be a mix. It’s a matter of getting some intensification
and some greenfields development. And it’s about getting
that right
balance.
JESSICA
Because that’s been the message from the council this
week, and you haven’t agreed with their policy as a whole.
They’re saying a little bit up and a little bit out. Do
you agree with that or
not?
NICK
Oh, yes, I do. And there's a lot more agreement between the
Auckland Council and the government than what some might
have you believe. We both agree that Auckland needs a lot
more houses. 25,000 is the agreed shortage. Both the council
and the government believe there's about 20,000, 30,000
shortage of houses in Auckland right
now.
JESSICA
But that’s only short-term.
Long-term—
NICK
That’s
right.
JESSICA
…you're going to need
400,000.
NICK
And that’s where there's also agreement. Both the Auckland
Council and the government say we need about another 13,000
houses in Auckland per year. Now, there's a power of work
that’s gone into the Auckland Council’s new plan. It’s
a step in the right direction. There's quite a lot of detail
we still don’t
know.
JESSICA
So when you say a step in the right direction, what do you
mean? Do you support the plan or
not?
NICK
Well, the first thing is if we go back to the metropolitan
urban limit, and we do need to learn the lessons of
history. The old Auckland Regional Council in 1999 set a
plan for Auckland, and they said that 70% of the new houses
in Auckland are going to be the intensified ones – you
know, the apartments, the townhouses. Yet in reality what's
occurred over the last decade is the opposite – 70% of
it’s been new greenfield. They haven’t met those targets
of those additional apartments and townhouses, and as a
consequence, we’ve neither provided the greenfield or the
brownfield development and house prices have gone through
the
roof.
JESSICA
Is that because there's a bit of a hangover from this whole
leaky homes, and you and the government don’t like this
idea of in-fill
housing?
NICK
No, no, we see very much the solution as being a mix of
both. But in developing the mix of
both—
JESSICA
What mix of both in what way? What's the percentage you're
talking
about?
NICK
Well, we want to be satisfied that the way in which Auckland
progresses— And frankly this is not just an issue for
Auckland. If you look at house prices in Taupo,
Christchurch—
JESSICA
But we’re just talking specifically about Auckland at the
moment.
NICK
Yes, we are, but in all of those cities, you need to get the
right balance so that houses in cities like Auckland, the
ambition of Auckland being liveable, absolutely – but also
affordable. And the history is one of quite unaffordable.
Let me just give you the numbers. Over a period of just five
years, section prices in Auckland have gone from $100,000 a
section to $325,000 a section. And if the section’s worth
325 grand, then you’re not going to get a sort of
affordable $150,000 house being built on it. So what the
Productivity Commission said is unless you deal with this
issue of land supply – and they use the word
“excessive” land price – and the failure of rigid land
regulation, we are not going to get houses being built that
are of an affordable range for ordinary New
Zealanders.
JESSICA
And this is where the council disagrees with you, because
Len Brown says the reality is we can't solve Auckland’s
houses challenges by land supply alone. You're very keen
that land supply is the key answer to
this.
NICK
No, we agree. No, me and Len are in the same paddock there.
See—
JESSICA
So is it land supply or
not?
NICK
You're too simplistic in your language. You say land supply
alone. No, I don’t, and that is why right at the beginning
of the programme I said, “Look, this is about
infrastructure cost, it is about the cost of materials.”
You know, the Productivity Commission said that the price of
building materials in New Zealand is about 30% higher than
what it is in Australia. Well, that’s not good enough, and
that is why the government’s doing a piece of work in that
area as well. Where we do hold the view is that land supply
is not the only issue around housing affordability, but
it’s a very important one. The Productivity Commissioner
has said that. Motu research has said that. If we look at
all the international experience, it shows that, and that is
why there's this. Yeah, there’s a bit of constructive
tension between the government and
council.
JESSICA
Constructive tension? What do you mean by
that?
NICK
Well, you see, the Auckland Council quite rightly is very
focused, and Mayor Brown has been absolutely up front about
wanting Auckland to be a liveable
city.
JESSICA
So let’s just be simple with this – you're disagreeing
on how this works. You're combative when you're meeting
together.
NICK
No, no, no, actually, I’ve met with Len Brown the very
first week of taking up the role as Housing Minister. Met
with his deputy, Penny. Scheduled to meet with both him and
his senior team again tomorrow. At the same point, we’ve
got officials meeting. There's been a joint officials’
report that’s provided some really helpful data. We’ve
just got more work to do. For instance, you know, if we look
at the unitary plan, there are key parts of it that are a
work in progress, where the council has said, “Well, this
is sort of where we’re going. We’ve got some more detail
to do.” And the government is saying, “Hey, we need to
see that detail because we need to be satisfied that this
plan is going to deliver affordable
housing.”
JESSICA
Is the government nervous that it’s losing control of
Auckland and are you going to step in and
intervene?
NICK
Well, we’re already intervening. We’ve got a bill
currently before Parliament in which we are speeding up the
process of the unitary plan. If the government stood back
and said, “This is only Auckland’s business. We’re not
going to do anything,” then it would take between seven
and 10 years for that unitary plan that the council has done
tremendous work on to become operative. Now, Auckland can't
wait seven or 10 years. We’ve put a fast-track process in
place that will enable that plan, which the council is
looking to notify in September, to come into effect probably
in about three years. My biggest concern, and where the
dialogue between myself and Mayor Brown and his council is
really important – well, OK, that’s in the three years.
We can't wait three years. We can't allow house prices to go
up in Auckland by another 50 grand a house next year. We
need to have a discussion about some of the short-term
measures that are required to take the heat out of the
housing
market.
JESSICA
Just finally, on a personal level, how would you
characterise your relationship with Mayor Len
Brown?
NICK
Oh, constructive, robust. Actually, I really enjoy working
with
him.
JESSICA
Doesn’t sound very positive, but we’ll have to leave it
there. Thank you very much, minister Nick Smith, for joining
us this
morning.
NICK
Thank
you.
ENDS