Housing Minister Megan Woods has identified a "clear market failure" in the quest to fix the housing crisis: no one wants to step in and build roads, pipes and other necessary infrastructure.
"There is a clear market failure in getting new houses off the ground and a significant missing link is ready-to-build land with infrastructure in place," Dr Woods said on Tuesday, as the Government outlined measures to help solve the housing crisis.
She said after talks with local government, it's become clear that investment in "critical but costly infrastructure" - such as roads and pipes - is seriously lacking, and no one has been prepared to step in and fill the expensive gap.
"Before houses can be built - particularly at the scale we need them - this ground work must be built and paid for. It's a stumbling block that's stopped developers and councils in their tracks. It makes housing more expensive and puts councils on a collision course with ratepayers - nobody wants to pay for it at the pace that is required," Dr Woods said.
"We simply have to find a way to get passed this."
She said that's why the Government is introducing a $3.8 billion fund to boost infrastructure on land the Government owns and in areas where councils can demonstrate both housing need and willingness for momentum to increase new-builds.
In addition, Government agency Kāinga Ora will be making strategic land purchases to increase the pace, scale and mix of housing developments, including more affordable housing rental options, with the ability to borrow $2 billion extra.
"Cabinet has agreed in principle some criteria around the fund and what that will be," Dr Woods told reporters. "It will require some commitments from third parties. Fundamentally what we need to see is a commitment to increasing housing supply."
It's expected the first of that money will be out the door from the mid-year.
Fixing a housing crisis
The $3.8 billion Housing Acceleration Fund will sit alongside other initiatives such as the Land for Housing programme, which buys land and sells it to developers in return for them to deliver new housing.
There are 10 developments underway, with an estimated 2000 homes to be delivered.
The Government has come under fire for using the programme to purchase the disputed Ihumātao land in December for $30 million, when there is no concrete guarantee it will be used for new housing developments.
The Land for Housing programme sits under KiwiBuild, Labour's flagship housing policy, which failed to meet its initial targets. It promised 100,000 houses in 10 years, but so far has delivered around 800, with 1000 under construction.
The Government is also fast-tracking some new developments through the COVID-19 fast-track recovery legislation, which essentially bypasses the restrictive Resource Management Act (RMA), allowing developments to get approval more quickly.
The Government is facing some backlash over this too, after Finance Minister Grant Robertson revealed that only 49 out of 170 of the Government's $3 billion shovel-ready project initiative have begun construction.
The Government is trying to fix the lack of housing supply by replacing the RMA, which has long been blamed for holding back new developments. But with over 800 pages to be replaced, it won't be passed until 2022.
The National Policy Statement on Urban Development will require councils to reduce planning constraints and plan for growth, allowing for greater intensification in cities, but critics says it won't have any impact until 2024.
In July last year, the Government made apprenticeships free and has seen more than 100,000 learners supported. It's helped boost construction in New Zealand, at a time when COVID-19 threatened to collapse the industry.
Recent Stats NZ data showed construction sales reached $19.6 billion in the December 2020 quarter, up $897 million - or 4.8 percent - from the same time the year before, in part driven by home building.
But it hasn't stopped property prices soaring, with the median house price in Auckland now $1 million. The Government is blaming investors taking advantage of low interest rates and tax loopholes. From June to November 2020, the amount borrowed by investors increased by 116 percent.
To help first-home buyers get a foot in the door, the Government is cracking down on property investors by increasing the bright-line test - the tax on property investors - from five years to 10 years.
It's also removing the ability for property investors to offset their interest expenses against their rental income when they are calculating their tax.
"Property investment is often funded through large mortgages with investors allowed to write-off interests costs against the income they make from the property - so-called interest deductibility," said Finance Minister Grant Robertson.
"However, this deduction is not available for home owners."
The Government is also increasing the amount of people who can qualify for its deposit subsidy scheme - meaning people only need a 5 percent deposit - by expanding the income caps and regional price caps.