The Luxon-lead government continues its attack on anything that the Labour Party ever managed to do, with the release today of news about the Kainga Ora housing projects. Most of them, it seems, have been killed off. “Brakes put on more than 370 Kāinga Ora housing developments nationally”. While they are spread out around Aotearoa, most are in Auckland, while in Wellington they note the following projects are stopped: Arlington redevelopment and Evans Bay Parade, with other projects stopped in the Hutt, Naenae, Wainuiomata, and Porirua. The list says “paused” but I know a dead duck when I see one.
Do I blame Luxon? Well, no, like much of National policy, he’s not in control here. Who is the Minister for Housing? Why, that’s Chris Bishop of course, the Minister for Nearly Everything, who commissioned a report from Bill English, who tried to kill NZ’s public housing before, by selling off the public housing stock. This time they may succeed. The issue, of course, is money.
National is taking the line that Kainga Ora is out of control, and has spent too much money, saying that KO is not making a profit. Let’s not fuck spiders here: it certainly is a lot of money. “Kāinga Ora’s debt grew from $2.7 billion in 2018 to $12.3 billion in June last year. It’s forecast to grow to $23 billion in four years’ time. The current asset-to-debt ratio is about 0.25.” says Tom Kitchen at Newsroom. Sounds like a massive amount of debt. But, as Bernard Hickey is quoted in the article:
“You could argue actually that there isn’t nearly enough debt inside Kāinga Ora, because for most people, they are able to borrow quite a bit more than 25 percent of the value of their home. Certainly, if you valued Kāinga Ora like any other home, you’d say to yourself, actually, it’s been a stonking financial success over the last five or six years, because the value of its homes, in particular the value of its land, has risen much faster than the value of its debt, just as every other homeowner in New Zealand can claim credit for unearned gains, because land prices rose dramatically.”
He says it’s “magical thinking” on the part of both the government and voters to think the government could increase the number of homes and not take on extra debt.
“If you said that to a regular person who was looking to buy a new house, they would say that’s not possible and [so] would the bank. That’s the irony here – the Government says it wants to build lots of new houses but doesn’t want to do it with any of its own borrowings – which would be totally impossible for a regular home buyer.”
I’m of a similar opinion. While the debt is a mind-boggling high amount of money, when would you ever expect to be running a public housing department that actually ran at Zero, or made a profit? New Zealand has to be in this for the long term, building houses for New Zealanders who can’t afford a house – which, let’s face it, is most of us these days. That’s not to say that the system needs to provide ALL the houses – but it does need to provide some of them. And you won’t get there by stopping their construction, or by selling them off.
National-Act-NZFirst want the private sector to do all the heavy lifting, with private rental properties being the answer for all the housing needs. And not just the Mum and Dad landlords NZ has had in the past, but corporate investors, so that the system can be financed by the big lenders and borrowers who are friends of National. The problem with that is that they either need to be setting rents at market value, which is way out of the league of many people, or the other solution: subsidised housing. So that means that instead of the Government paying for the houses and also owning them, now the Government would be paying for the housing, but owning nothing in return.
That is the ideological rub right there – Natactfirst see this as a good solution, while I see it as dumb. It’s the long term vs the short term. It’s the Eye of the Fish versus the Rotting Fishead of Mr Bishop, boy wonder, meathead supreme. While the projects have been “paused” at present, that is just corporate speak meaning “for sale to the private sector at a loss” which is the more likely outcome. How do I know? Well, like many of you out there who have been working on KO projects over the last couple of years, projects that have now been stopped, we have been asked if we (architects) want to buy the project and take it private. It’s a tempting deal, sweetened by the promise that it will be sold at a loss, so in theory we would make profit on the deal. So, public money down the drain, move it off the public books, draw a line under the loss, and meanwhile the Fish takes on the property debt and the development risk. Perfect! Just the thing I need – more mortgage.
In reality, what of course will happen is that a corporate investor, someone with oodles of money, will buy the scheme instead, dilute any good design out and squeeze more houses in, or build smaller, shittier houses which are fine by Chris Bishop, virtually guarantee a future slum, fund its completion privately, and then suck on the government’s sagging milky teat for the next five decades, pulling in a healthy profit along the way. Corporate backers are happy. Tax breaks for Landlords and all that. Foreign money will pour in, probably from China, to reap the benefits of a NZ Gov backed investment stream guaranteed for decades of steady returns. Personally, I despair.
Foreign money from China? I don’t think so. Try Blackstone.
Corporate, yes, Blackstone. But “mum and dad” investor level – the wealthy capitalists in China and India have millions to spare. The level of immigration into NZ relies on a people being young and healthy and well educated – and getting immigration points that way. But those that are not young can get in another way – by being wealthy. Large amount of people effectively buying their points by “investing” at least $500k into NZ (something like that). Essentially that means come here, buy a property or a small business, pay $20k bribe / immigration advisor, get a passport with a silver fern on the front. What was it – 120,000 immigrants last year? Probably half of them already have family here and get in via other, less expensive means. But of the remaining immigrants, the fresh meat, at $500k each, that’s (by my figures, which are all really approx) $$$ billions each year incoming to NZ Inc… and NZ don’t want to stop that !
I think it’s easy to say KO’s debt has risen, blah blah, but let’s give more thought to the fact that between 2018 and 2024 the prices of everything has increased 55%. Just look at your grocery bill, electricity, not to mention the prices of rentals, mortgages, etc. Everything has increased in price, it’s only normal the cost of land, building materials etc would increase as well. KO have done an amazing work, & the govt is being power punks. They are in control of the situation & they just want to make KO look bad at the cost of others lives. How did Luxon avoid to pay that massive tax pay back the other day ?
Oah that’s right, because he’s the govt ? ?
I actually agree with everything you say here.
Of course it’s Luxon’s fault. It’s the same in health, education and infrastructure, with new hospitals, schools and ferries all stopped. These would be Cabinet level decisions, and the fact it’s across the board means Bishop is likely just following the leader.
Well, who knows what goes on in Cabinet – but I am fairly sure that Lux will have a large number of hidden advisors, as well as daily links with the following: Willis, Peters, Seymour, Brown and Bridges. The rest of the Nats are fairly inconsequential, and the rest of ACT and NZF are to be avoided with a long stick. Yes, Lux will be headlining the decision, and taking the heat, but the advisors will (I believe) make most of the decisions. Same with Mayor Whanau – its not down to her, but the Council Officers, and Whanau is just left to front to the media, shake hands, kiss babies, and screw up interviews.
Same goes for the Politics in the USA – I bet Joe Biden makes few of the current decisions. We all saw what went batshit crazy in the USA when Trump decided to actually make decisions himself. Total chaos.
And there you have it:
https://www.stuff.co.nz/politics/350439844/government-step-and-underwrite-new-private-house-building
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Yep – unbelievably cynical play from Bishop. One minute “There’s no money for housing so we are cancelling Kainga Ora” and Nek minute: “Money for private housing though at cheap low rates”
Things are going to get way worse for so many people in this country & the world.
The Bible does fortell, past, present. & future.
We need to stop being distracted & focus on the second coming of the Messaiah King Jesus.
AMEN
Annette – really? Assuming that you are serious, and are not a spam bot, please tell me more! How and when is the second Coming of Our Lord and Saviour Jesus Christ, and what has the Bible said about the appearance of Cerberus, this three- headed dog of a government?
And so the advancement of funding for private homes has started promptly, less than a week after the cancellation of the public funding of social housing:
“The Government will today unveil a radical new plan to underwrite construction of new private houses, as high interest rates and an economic downturn make it tough for developers to get finance for new projects. The new time-limited scheme is designed to de-risk developments, making finance easier to obtain for developers to start building. Developers often have to pre-sell a proportion of dwellings in any development in order to secure finance, which has become much more difficult in the current economic downturn.”
“In times of expensive borrowing, underwrites are an effective tool for supporting housing supply,” Housing Minister Chris Bishop said. “This is because underwrites increase developers’ access to finance where they otherwise wouldn’t have been able to get it, and therefore wouldn’t have been able to deliver the houses.”
Although to be honest it sounds pretty much a repackage of this scheme of Labour’s from 2023
“The second round of funding of $159 million is open from 29 May, with applications open until 16 June.
““The pathway provides support to unlock third party finance and keep the development moving, so we don’t lose the critical supply of new housing to help fix the housing crisis we inherited,” Megan Woods said.
“The supply of new affordable homes fell off a cliff post-GFC, so these counter-cyclical measures help developers with a pipeline of work, to build more homes for New Zealanders,” Megan Woods said.”
https://www.beehive.govt.nz/release/more-support-get-stalled-housing-projects-moving
Although the big question is will it include the affordable crumbs that Labour insisted on…
“An important criteria for getting this Government support, is that all developments must include affordable housing.”
Yip, the reporter has been totally sucked in
“radical new plan to underwrite construction” , when in reality its basically continuing a concept Labour started
When from this cabinet paper in 2023
“The BRD pathway can offer presale or underwrite support ‘off the plans’ that enables developers to arrange finance with a third party and commence housing construction while the detailed arrangements for end use are worked through.”
https://www.hud.govt.nz/assets/Uploads/Documents/Cabinet-papers/Build-Ready-Developments-pathway-and-Land-for-Housing_Redacted.pdf