Bernard Hickey: Who pays the pipes?

Houses may be going up, albeit slowly, but a stalemate looms over infrastructure costs. Photo / Mark Mitchell

The Government is ploughing on with its supply approach to Auckland's housing shortage, but it faces tough choices about how far it can push ahead without stumping up serious money.

The landmine not far down that road is how to pay for the infrastructure needed to support all these houses the Government hopes will be consented for its new Special Housing Areas.

There are already smoke signals drifting up from Auckland Council that it has reached the bottom of its funding barrel for new infrastructure to go with all these houses.

Its debt ratios are stretched and it can't fund much more.

Housing Minister Nick Smith remains bullish about the prospects for lots of new house building but economists and the Reserve Bank are beginning to shuffle their feet.

Figures for March confirmed the trend of falling Auckland consents since last year. The Reserve Bank highlighted that fewer than 8000 consents were granted last year when more than 10,000 were needed to keep up with record high net migration, let alone eat into the shortage it estimated to be 15,000-20,000.

The Ministry of Business, Innovation and Employment is estimating a shortage of 25,000 dwellings in Auckland by the end of this year and BNZ economist Tony Alexander said the shortage could be be as much as 76,000 if Auckland had the same number of occupants per dwelling as the rest of the country.

There may well be a shortage of houses and growing demand, but unless the pipes are laid and the water starts flowing, the Government's strategy will be stuck as lines on maps while prices and rents go through the roof.

Smith is aware of the challenges, particularly around paying for the pipes and connectors needed to link suburbs together, rather than just the infrastructure needed to service the sections in the Special Housing Areas. "That's a big challenge and it's part of the ongoing dialogue with council," he said.

He expected council to pay for the big interconnectors, given the Government was already paying for motorways.

Will the Government's entire housing strategy fall down the cracks opening up in the Auckland Council's balance sheet and be finished off by its reluctance to fund anything but motorways?

The council doesn't want to borrow more and ratepayers aren't keen on stumping up for really big pipes such as the $1 billion Central Interceptor planned between Mangere and Western Springs.

Talk of a 5.5 per cent rates hike will go down badly.

The Government is showing no readiness to quickly fund the likes of the $2.5b City Rail Loop, which would accelerate the growth of inner-city apartment developments.

This infrastructure landmine needs to be defused with some hefty investment by taxpayers and ratepayers in the pipes, roads and rails needed to support the new houses.