Economist reveals how to make Kiwibuild homes cheaper

An economist has come up with a way to slash hundreds of thousands of dollars off the price of a home built under the government's flagship KiwiBuild policy.

It comes after a Newshub Nation investigation revealed the government has been told the so-called affordable homes may be too pricey.

But Shamubeel Eaqub says the answer could be leasing the land to the homeowner instead of selling it.

"Six hundred grand is not affordable," the economist says. "It is an extraordinarily large sum of money."

It's also the government's target price for one of its 50,000 KiwiBuild houses in Auckland. Yet Ministry advice released to Newshub Nation says it could be too pricey for first home buyers.

"Trying to force people into ownership with really stretched finances is not a good idea," says Mr Eaqub.

He has another idea. Half to two-thirds of the cost of building is the price of land, so he suggests the government keep the land and lease it very cheaply  to the home owner in what's known as a 'peppercorn" rent.

"Leasehold in New Zealand has a really bad rap, because of the unexpected increases in cost and all  the complexities that go with it. 

"But if it's with the government, with a trusted partner and with a very well agreed, say a 99 year peppercorn lease, then there is absolutely no reason why a bank or a buyer should be afraid."

He says it could slash two to three hundred thousand dollars off the price.

Leasing the land is not a new concept - it happens in London and other major European cities. But is there enough government land to do it here?

That same Ministry advice on Kiwibuild says no. 

The policy's "land requirements significantly exceed the amount of vacant and underutilised Crown-owned land that's available."

Housing Minister Phil Twyford has said the Government will acquire more land for Kiwibuild, but lack of land is only one road block to affordable housing,

There's also the chronic shortage of builders, cost of products, and the consent process.

KiwiBuild is not the only house building programme - Auckland Council has its own plans.

Housing expert Leonie Freeman says she's optimistic the Government will hit their targets. 

"I believe if we do the disruptive changes that we need and the whole sector gets behind this, then both Kiwi Build and the council targets are achievable."

Freeman says it could take three years for the industry to scale up, and then only if everything goes perfectly.

So far it's not - despite years of talk, Auckland is still only building half the 14,000 new homes it needs every year.