National and Labour agree there’s a problem but are divided over a solution

Auckland's home affordability headache won't be solved in a hurry but both National and Labour now have quick fixes for desperate home buyers.

The National Government's announcement on Sunday of an extra $218 million for first-home buyers marks its biggest commitment of cash so far to tackle the issue.

National is straying into Labour territory with a substantial additional wedge of taxpayer cash, showing it knows how important it is to voters, particularly young Aucklanders.

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The money takes its total assistance package to first-home buyers to $435 million over the next five years, but that is dwarfed by Labour's $1.5 billion KiwiBuild policy.

The differences in the flagship housing policies illustrate underlying philosophies. Those differences are also apparent in their responses to the land supply constraints they agree are holding back new home construction. The two major parties are also poles apart on whether property speculation - including by foreign investors - is keeping large numbers from achieving the dream of home ownership.

National's HomeStart doubles the grant available to homebuyers who have been in KiwiSaver for three years and who withdraw their savings for the deposit on a first home.

Couples who have been in KiwiSaver for five years or more will be eligible for a grant of up to $20,000 to add to their savings if they're buying a new home.

Understandably, the Government highlighted that figure when announcing the policy. But that left National open to criticism that by increasing the amount of money chasing a limited supply of houses, prices would rise as a result.

The shortage of homes in Auckland is particularly acute at the more affordable end of the market. The Productivity Commission's report on housing which the Government's policy draws on extensively estimates that only 5 per cent of new builds in recent years have been in the lowest quarter of the price range.

However, the Government's policy seeks to address that by earmarking the greatest assistance - the grants of up to $20,000 - for the purchase of new homes only.

It reasons that restriction will minimise any price impact on existing houses which is why Prime Minister John Key was able to claim the policy received a pass mark from the Reserve Bank.

The policy also allows home buyers to sidestep the Reserve Bank's loan to value ratio (LVR) restrictions on low deposit loans by permitting 10 per cent deposits through the Welcome Home Loan scheme.

The HomeStart grant is available to buyers of existing homes but only at half the level for new home buyers.

National's logic is that the additional money available will increase demand for new houses and incentivise developers to build more of them. It estimates about 22,500 new homes will be bought using loans under the scheme over five years.

Labour's KiwiBuild policy is far more ambitious and direct. It would pay hundreds of millions of dollars to building companies and developers to construct large numbers of "modest entry level" homes including apartments, terraced housing and standalone houses.

It believes it can build 600 homes in the scheme's first year, 4500 in the second, 8000 in the third and 10,000 a year thereafter and aims to build 100,000 in total over the life of the scheme.

It estimates it can build and sell standalone houses in Auckland for between $380,000 and $460,000 and terraced houses and apartments for $280,000 to $360,000.

Labour counters scepticism that homes can be built in Auckland for those prices by saying the scale of the programme means it could get lower prices on building materials.

Working with developers and building companies would ensure the homes being built would be in the locations and of the type desirable to buyers.

Labour would commit as much as $1.5 billion to the programme with money being reinvested as completed homes are sold.

National's policy stems from its greater faith in markets to be part of the solution than Labour - a "classical philosophical difference" between the two parties, according to Housing Minister Nick Smith.

"Empower the homebuyer then let them make the choice with the house building companies to get the house type they want as opposed to the Government deciding what type of house will be built."

Labour's housing spokesman Phil Twyford says his party's view is that "the current market has failed so badly, the causes of the problem are so intractable and difficult, we think that only a more hands-on approach by the Government as demonstrated by KiwiBuild is capable of breaking through the problem and delivering a significant volume of housing".

The two parties are in agreement that a shortage of land for building stemming from decades of dysfunctional urban planning is at the heart of the issue but again they differ on the long-term solution.

As a shorter term fix, National passed legislation - with Labour's support - allowing for Special Housing Areas to fast track the local authority consenting process for new subdivisions.

One senior Cabinet minister told the Herald last year that "bulldozers at work across Auckland" in election year would illustrate to voters the progress being made.

The launch this week of HomeStart at Weymouth, the most advanced development in a Special Housing Area, was intended to emphasise progress but consenting and building of homes across Auckland has hardly taken off, according to recent figures.

In the longer term the Government believes substantial changes to the Resource Management Act (RMA) are required to free up more land for building. It wanted to make changes to the RMA in a bill that was before the House this year but which lost the support of the Maori Party and United Future over concerns it would unduly favour economic development over the environment.

National plans to pass the bill if it gets a third term and would be supported by Act or the Conservatives who both want sweeping changes to the RMA.

Labour believes more land can be freed up under the existing RMA by issuing a National Policy Statement which would direct local authorities to prioritise housing developments or face legal sanctions.

Meanwhile, there is virtually no common ground between National and Labour on the extent to which property speculation is contributing to high house prices.

Labour believes the buying and selling of houses in Auckland for capital gain is rampant, a view shared by some prominent economists.

Two of its higher profiles policies are aimed at that issue - its capital gains tax and its ban on non-resident foreigners purchasing existing houses here.

The Government's view is that while there is no accurate data, Inland Revenue figures suggest only 2.5 per cent of New Zealand's houses are owned by overseas tax residents, of which a third are New Zealanders living overseas.

The Government also says it took significant action against property investors in the 2010 Budget when it removed depreciation write-offs on property which it says added $1 billion a year to its coffers, more than Labour's capital gains tax will raise.

National claims it has passed more housing legislation in the past year than in any other year in the past decade.