Labour: KiwiBuild money 'spent more than 20 times'

Phil Twyford (Getty)
Phil Twyford (Getty)

Labour is rubbishing the Government's claim it can't build 100,000 new houses for $2 billion.

On the weekend, Labour updated its KiwiBuild policy, explaining how it plans to build 100,000 affordable homes over a decade to solve the housing crisis, half of them in Auckland.

Finance Minister Bill English says for $2 billion, you can only get 4000 houses.

"They will have to build and sell 4000 houses every five or six months for 10 years," he told Paul Henry on Monday morning.

But that's exactly what Labour wants to do.

"Our $2 billion for KiwiBuild is a revolving loan fund," says housing spokesperson Phil Twyford.

"Over the course of a 10-year period that money gets spent more than 20 times. Every time a house is built, sold to a first-home buyer, the money is recycled back into the fund… over the 10 years, for the taxpayer it's fiscally neutral."

"We've spent three or four years building up the pipeline - that is just not credible," says Mr English.

"This Government has been in office for eight years and they have run out ideas," says Mr Twyford. "It's all 'too hard'."

Rather than low-cost "ghettos", Mr Twyford says the Hobsonville development in Auckland is the blueprint for what Labour wants to build.

"You've got a range of rentals and owner-occupiers, you've got a range of affordable to high-cost, you've got schools, parks - it's beautifully designed. That's the kind of development we're going to do, but instead of one of those developments taking 10 or 15 years, we're looking at doing 10 or 15 all at once across Auckland."

But is there the manpower to do it? Mr Twyford thinks KiwiBuild itself will create 5000 new jobs in the construction sector.

Building industry magazine publisher Mark Graham says the kind of plan Labour's announced is possible if enough money and staff is thrown at it.

"We just need to build a lot of houses which are basically the same, pre-build a lot of them, put them in, throw lots of builders at them, ensure there's good quality and that's a big concern for me right now," Mr Graham says.

He says at the end of the building boom in 2004, there were 30,000 new dwellings built a year, compared to around 22,000 now.

Following the Global Financial Crisis, Mr Graham says up to 6000 building companies - many small employers  were shutting down each year.

"New Zealand building industry is made up of a lot of small operators and that's part of the problem you have - you don't get that scale."   

Mr Graham, who owns Aim High Publications which produces the Building Guide and the Design Guide, says only the state can build affordable houses on such a scale.

"You cannot build affordable housing in Auckland and make a profit - there's a market failure here.

There's only one player who can get in there." 

Economists have recently begun calling for a deliberate crashing of the Auckland housing market. Former Reserve Bank chair Arthur Grimes told RNZ last week they had to come down by at least 40 percent, while ex-Reserve Bank Governor Don Brash thinks it should be closer to 60 percent.

The Prime Minister has called such suggestions "crazy", and Mr Twyford is inclined to agree.

"Look what happened in Ireland a few years ago where real estate took a hit of 40 to 50 percent - the Irish economy still hasn't recovered. It would be an economic disaster," he says.

Instead, he wants prices to stabilise where they are now, so existing owners aren't crippled, and let inflation eat away at values over time.

"We want to squeeze the inflation and the speculation out of the housing market. If we don't do that, our kids will never own a home in this city again."