Brian Rudman: It's bold, but Labour housing scheme looks do able

Mr Shearer said houses could be built for less than $300,000 each under the KiwiBuild scheme. Photo / Mark Mitchell

Whatever the eventual outcome of Labour's leadership struggles, let's hope the brave and adventurous Kiwibuild housing project announced by leader David Shearer at last weekend's party conference, doesn't get lost in the melee. Any young Aucklander seeking to buy a first home, knows from bitter experience that the sainted "market" is failing to deliver homes they can afford to buy.

Housing Minister Phil Heatley tried to steal Mr Shearer's thunder on Friday by turning up at the Housing New Zealand's development at Hobsonville Point to promise that 500 to 600 of the 2500 to 3000 new homes in that ten-year project would be "affordable" - by which he meant half would be less than $400,000 and the other half, between $400,000 and $485,000.

Mr Heatley said the initiative would "demonstrate innovative commercial market-based solution that could be replicated in the affordable housing market elsewhere in New Zealand."

Putting aside the matter of whether $400,000 plus houses are "affordable" for first time buyers, the minister ignores the reality that the market is just not interested in building at this end of the market - for a range of reasons. And that what he was announcing was not a market-based decision, but one engineered by his minions.

Also, he sidesteps the fact that the 50-odd houses a year he promised are just a drop in the bucket when you consider predictions that Auckland's population is due to grow by 1 million over the next 30 years, with reports suggesting the need for 10,000 to 13,000 new homes a year. At the moment, somewhere between 3000 and 4000 are being built.

Instead of waiting for the market, Labour's plan is to build 100,000 affordable entry-level homes to buy over a ten year period, with two-thirds of the houses built in the first five years located in Auckland.

Mr Shearer said they could be built for less than $300,000 each, and housing spokesman Annette King followed up in a television interview, suggesting a breakdown of around $250,000 for the house, and $50,000 for the land.

Despite scepticism from political opponents, industry sources confirm that even in Auckland, this $300,000 benchmark is achievable, able to produce a one or two bedroom, 90 sq metre, two-storey terrace house, all wired and piped and ready for occupation. That's based on a conservative costing of $1,000 a sq metre for 120 sq m of land, and a 90 sq m home, costing $2,000 a sq m to build.

Labour says it will build in partnership with the private sector, community agencies and local government , using the Housing New Zealand as the lead agency. It says the Crown is "the only player large enough to make a real difference to the home affordability crisis".

The Hobsonville Land Company, set up by the Labour Government in 2006, as a subsidiary of the Housing NZ to create a 3,000-home community on the old Hobsonville airbase, is living proof that public agencies can do this sort of thing well. Of course the Hobsonville target of 100 houses a year, rising to 250 if demand requires, is small fry compared with the Kiwibuild project, which has been labelled "the largest public building programme in over 50 years".

Still, Hobsonville is a great model - with private enterprise, and local and central government working together to achieve good outcomes - even if you put aside local MP John Key criticising the inclusion of 500 state rentals as "economic vandalism" and pledging to remove them if he became prime minister, both of which happened.

Around 25 per cent of the cost of developing a new house and section in Auckland can go in paying for infrastructure development and various council charges. There are all sorts of regulatory hoops to jump through as well. At Hobsonville, the Auckland Council and the land company have worked to bend and cut through the red tape. Last week, deputy mayor Penny Hulse said "to facilitate some of the housing types envisaged as part of Hobsonville Point's affordable housing programme, the council is working hard to ensure that zoning and other regulations support opportunities for innovation".

Such co-operation, combined with the economies of scale associated with large developments, have helped keep costs down. Saving can only be magnified in developments of the size envisaged in Labour's new policy.

Still to be fleshed out is where the new low cost housing is going to go. The Hobsonville development highlights the advantages of "pepper-potting" various styles and priced housing throughout a development. A lower-cost home doesn't need to be of poor quality, it just has two bedrooms, with courtyard, against to the four-bedroom, two-car-garage with garden, property alongside.

Labour's publicity says the houses will be built on new land, or on existing developments, and by looking at "reconfiguring and subdividing some existing state house land as opportunities arise."

We'll have to wait and see whether Labour's solution for the rental crisis is equally brave.