Private sector needs to step up on the housing front following the government’s $1 billion infrastructure fund announcement, the Property Institute warns.
By Miriam Bell
At the National Party’s annual conference over the weekend, Prime Minister John Key said the government was establishing a $1 billlion infrastructure fund to help boost the supply of new housing.
The contestable fund will be open to applications from councils in the highest growth areas – which are currently Auckland, Christchurch, Queenstown, Tauranga, and Hamilton.
While the government will invest up front to ensure the infrastructure is in place, councils will have to repay the investment or buy back the assets once houses have been built and development contributions paid.
The fund will be available only for substantial new infrastructure investments that support more new housing – it will not be to replace existing infrastructure.
Other conditions, like faster processing of resource consents, may also be attached to the funding and close collaboration between central and local government will be needed.
The government is also considering establishing Urban Development Authorities, which would have streamlined powers to override barriers to large-scale development.
These powers could, potentially, include taking responsibility for planning and consenting and other powers.
Property Institute chief executive Ashley Church said the move, along with the new National Policy Statement on Urban Development Capacity, will go a long way toward overcoming Auckland Council’s objections to opening up residential land on the fringes of the city.
But neither the government, or the Auckland Council can, or should, build the volume of new dwellings that will be required to address the extreme shortage currently facing Auckland city, he said.
“Nothing short of a clear and unequivocal signal to the private sector will bring about the scale of new home construction that will be required to slow down house price inflation.”
To this end, Church said the government now needs to announce a series of initiatives designed to encourage the private sector to step up to the plate and do the “heavy lifting”.
Such measures could include a return of the ability to claim depreciation on dwellings constructed from now; removal of all LVR restrictions on the construction of new dwellings; and an exemption from the ‘bright line’ test where the seller had built a home, rather than purchased an existing home.
“Moves such as these would very quickly create private and investor activity in new home construction and would lead to a focus on the construction end of the market.”
Church also said these measures won’t lead to a reduction in housing prices, but they will contribute to slowing down price growth.
“Talk of moves to ‘crash the market’ or bring down house prices are naïve – that simply isn’t going to happen.
“Instead, we should be focusing on using the private sector to end this boom by building thousands of new dwellings as quickly as possible.”
Political responses to the government’s announcement have been mixed.
Both the Labour Party and the Green Party said the housing the infrastructure fund would allow should be affordable and benefit first home buyers.
Auckland mayoral candidate Victoria Crone said Auckland Council now have no excuse not to speed up delivery of infrastructure projects, consenting and deliver more homes.