It’s a bit like that frenetic film about the Chinese immigrant, Everything Everywhere All At Once. The scope of this Government’s housing market changes is breathtaking.
Forcing most building inspections to be remote, reforms to release a “flood” of new houses to the market by strong-arming councils to liberalise planning regimes, fast-track consenting, granny flat incentives, Resource Management Act reform, banning rules discouraging tiny apartments, reversing pro-tenant laws, allowing landlord tax deductions again, cutting timeframes on taxing house sale profits, scrapping first-home buyer grants, promoting build to rent, having Sir Bill English review Kāinga Ora, talk of reviewing the $2.34 billion-plus accommodation supplement – just some of the changes from the Government in the last few months.
Last Tuesday, Building and Construction Minister Chris Penk announced plans to make most building inspections remote, explaining how he wanted videos on applications used in pandemic times by Auckland Council and due to its vast geographical spread by the McKenzie District Council.
On July 4, Bishop’s Going for Housing Growth announced a six-step plan which he said was aimed to “flood” cities with houses:
But as well, this Government has an appetite to review Kāinga Ora’s role in state housing.
Undoing what Labour did to landlords and tenants, reversing key pro-tenant moves like no-cause terminations but somewhat surprisingly, liberalising the pet regime are other moves.
Landlords can once again claim tax deductions on expenses: 80% from April 1 this year and 100% from next April 1.
As well, the coalition has from July 1 reined in the bright-line test, from 10 years back to two years making it less punishing from a tax perspective for people who sell faster.
In May, the Government scrapped First Home Grants, is pondering the transfer of state houses to community providers and examining the $2.34 billion accommodation supplement which could mean a change to helping 364,000 tenants and mortgage holders who can’t afford where they live. Bishop said the $2.34b was “two Transmission Gully motorways”. Bishop said his comments did not mean the accommodation supplement would be cut, but that the money spent on housing support could be better used to provide support.
What’s the reaction so far to so much so fast?
Will it work?
Powerful Auckland Council building inspection manager Jeff Fahrensohn tagged Penk in a post of a video made for a recent Building Officials Institute of New Zealand national conference showing how remote building inspections were higher risk.
More than 20% of building inspections fail every day in Auckland, Fahrensohn said.
“To put it into perspective, last year our building inspectors failed around 45,000 inspections! Truth be told, I’m a big fan of remote inspections. We use them daily however on higher risk elements, face-to-face inspections are crucial to manage risks and ensure honesty among certain practitioners. All I’m saying is don’t throw the baby out with the bathwater,” Fahrensohn said. The post was his own personal opinion, not the council’s.
John Duguid, Auckland Council planning and resource consents general manager said in reaction to Bishop’s speech to “flood” cities with more houses: “There are aspects of the Government’s announcements that could be at odds with the council’s strategy for managing Auckland’s growth, which is set out in our future development strategy.”
The council supports development occurring in greenfield areas as part of a balanced approach to planning for Auckland’s growing population. But this should be timed for when new infrastructure can be funded and built, to ensure communities have access to the amenities they need, Duguid said.
John Gray, Home Owners and Buyers Association president, expressed qualms about remote inspections but wants a faster regime, so he isn’t 100% against Penk.
“It could be acceptable for some. But some builders, sadly, have proven they can’t be trusted. We also need to look more deeply into the self-certification regime and there needs to be greater consequences for breaching the law,” Gray said.
But like Penk, Gray is also concerned about the length of time it takes to have buildings inspected.
“We’ve had feedback from builders in despair, waiting weeks for inspections. But the overarching point is there needs to be greater consequences as the Government moves towards removing red tape,” Gray said.
The Building Act needed to be reviewed and builders who breached that with serious consequences needed to face “criminal consequences”, Gray said.
Arena Williams, Labour’s Building and Construction spokeswoman, said councils were already using remote inspections but she said the Government should stop blaming councils for being too slow.
Labour’s housing spokesman Kieran McAnulty said in April the changes were “same old, same old from National. These changes alongside bringing back interest deductibility will make it harder for renters and first-home buyers. Nothing tangible that will see more houses built, just increasing the competition on existing housing stock instead of building more homes”.
Gray remains worried about consumers in the mix of all these changes, particularly when it comes to new homes, consenting and councils.
“The National-lead Government espoused the same rhetoric back in 2015. The HOBANZ response today remains the same. The consumer harm that has been perpetrated by the building industry since the Building Act came into force in 1991 is totally unacceptable,” Gray said, talking about wealth destruction from defective buildings.
McAnulty said in May that in six short months, Bishop had shrunk the pool of potential homeowners, removed housing security for renters, re-introduced competition on existing stock between investors and speculators and served power and billions of dollars to landlords on a silver platter.
“The National Government has let New Zealanders down with the decision to sacrifice the First Home Grant, which is why the Labour Party has created a petition to call for the Government to restore the First Home Grant and give first home buyers a fair go,” McAnulty said accusing the National Government of taking an anti-housing stance.
McAnulty said: “We need more houses. And everything we did in Government was to try and achieve this goal. When the incoming Housing Minister said that’s what he wanted too we were encouraged. Such an approach is in stark contrast from what we saw from the last National Government. So in response, we committed to being constructive in Opposition – if we thought something would work, we’d say and if it was there or thereabouts, we’d suggest improvements. And where we felt it wouldn’t work we’d say that too.
“So far it’s been a mixed bag, and underpinning each announcement is an apparent effort to avoid paying for anything. I’ve never seen a house built for free - perhaps that’s what the new Government is hoping for,” he said.
This Government had made it harder to enter emergency housing and had the gall to crow about fewer people accessing it, McAnulty accused.
“Social housing has been gutted. Kāinga Ora is being set up to be flogged off, just like last time they were in. Despite promises to build more social houses than us they’ve cut the funding for community housing providers in half, paid for by cutting many people out of home ownership by scrapping the First Home Grant,” McAnulty told the Herald.
It’s all well and good to require more of councils, but without funding many of them simply can’t afford to do the work - what good is requiring 30 years of planning if the land doesn’t have the infrastructure required to build, he asked.
“We’re open to granny flats and changes to apartments but we’re keen to see the details. So far there have been more concerns raised by stakeholders and the public than there have been answers but we’re keeping an open mind,” he said.
“Density is a good thing, so I don’t understand why the Government has made it optional. This suggests to me it won’t happen, or at least nowhere near as much as it should.”
Reducing the bright-line test and reintroducing interest deductibility would disincentivise investment into new builds and increase competition on existing stock which is counter to the Government’s stated aim of stabilising house prices and increasing the stock, McAnulty said.
The construction sector is struggling and now is exactly the time the Government should be providing certainty by guaranteeing a stream of funding - the very thing they seem hell-bent on avoiding, he said.
“The last Government trained up the workforce, but if the new Government doesn’t show them there will be work, they’ll go to Australia,” McAnulty said.
Economist Cameron Bagrie said New Zealand “very clearly has a dysfunctional housing market and that has both economic and social consequences whether that be housing affordability, poverty, wealth inequality and impacting education attendance. Fixing it is an economic and social imperative”.
The challenge was to bring in a policy prescription that was a genuine cure and did not exacerbate the disease, Bagrie said.
Construction costs have tended to rise at 2.5 times the rate of general inflation. Watching house prices double every decade – which they did over 30 years – had been crazy, he said.
“Some of the Government moves have been good but I worry we are turning 180 degrees from the previous policy prescription which was never going to work to something dictatorial. We need to see more on competition policy locally within the building industry. A full-blown capital gains tax is needed but cut income and company taxes so it’s fiscally neutral. Reforming land use restriction is under way but what are the hooks? We need to address local infrastructure funding needs,” Bagrie said.
He acknowledges a big list of things to do and possibilities.
Satish Ranchhod, a Westpac senior economist, said the experience in Auckland during the past decade was regulations that allowed for greater densification which did support a big increase in housing supply. That had helped to limit the pressure on the housing stock.
“However, even with a supportive planning environment, financial conditions still need to be supportive to encourage development. Right now, the housing market is still soft and interest rates are high. I suspect that developers will be cautious about bringing new projects to market until signs of a material pick-up in the housing market start to emerge,” Ranchhod thinks.
Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.
Fletcher Building, Spark and Ryman are potentially all on the radar.