Brian Rudman: Housing needs nudge, not a working party

Housing Minister Nick Smith. Photo / Mark Mitchell

The Hobsonville project, like the schemes in Western Australia, is based on the premise that to achieve the required social outcomes, the market needs to be given a helping hand. What a fizzer! Housing Minister Nick Smith and Auckland Mayor Len Brown have their long-awaited crisis summit on Auckland's housing shortage and emerge after an hour of the scheduled two-hour session with a promise of ... wait for it ... a working party.

Talk about peace in our time.

In this space yesterday, commercial property guru Sir Bob Jones' advice was to leave it to the market.

"When imbalances occur in any commodity, inevitably the market reacts, but obviously with housing it can't happen overnight," he said.

Which is fine for him and me, already comfortably housed. But for the politicians, and those electors desperately trying to enter the market, the definition of "overnight" becomes rather more pressing. A year-long night? Five years?

Dr Smith's initial solution was to demand the Auckland Council manipulate the housing market by expanding its boundaries out into the rural hinterland. This would depress prices by swamping the market with "cheap" land.

The mayor's unitary plan alternative is to dampen demand with a mix of expansion outwards and skywards. It's the formula Dr Smith now seems to have fallen into line with, but there's still a scrap about how best to fast-track the process.

But there's no guarantee that expanding the market, up or out, is going to deliver the dream of "affordable" housing that is uppermost in the minds of the politicians and would-be first-home buyers.

Colliers International's national research director, Alan McMahon, was quoted late last year as saying, "It is not the responsibility of private property developers to provide affordable housing. Their job is to maximise profits."

He said, "The danger is that as new land is released, it will be developed in a style and price point that only enables existing house owners to buy," adding, "Developers will not reduce their prices unless they have to."

Dr Smith seems to be hanging his hopes on the opening up of farm land being that trigger. But in a free market, there is no guarantee the owners of the rezoned land are going to sell, especially not at a bargain-basement price.

The "market"can provide affordable housing, but as the Government acknowledges by its actions at Hobsonville Pt in Prime Minister John Key's electorate, it needs to be given a strong nudge in the preferred direction.

This Housing New Zealand project was designed under the Labour Government as a textbook example of a housing development for a cross-section of New Zealanders, a mix of rentals and privately owned, affordable and more expensive.

Mr Key scrapped the state rental component on gaining power in 2008, but late last year, after Labour signalled its ambitious plan to build 100,000 low-cost homes in 10 years, National suddenly promoted plans that up to 600 of the 3000 homes at Hobsonville Pt would be "affordable" - well, $485,000 or less.

It was a reluctant concession from the Government of the need for state intervention in the market to achieve policy goals. If only on a token level.

Elsewhere in the world, government intervention in the housing market to achieve social goals is commonplace, regardless of the political hue of the party in power.

In Western Australia, for example, the right-wing Liberal Government continues to support the Keystart programme introduced by the former Labor Government, which helps fund first-home owners with low-deposit, cheap loans. The income cap for singles is $138,000 and for couples, $163,000, and the maximum property purchase price is $626,000.

Also on offer is a Shared Start loan, under which lower income borrowers can co-own 70 per cent or more of a property with the Department of Housing.

If circumstances change, they can later buy the department's share outright at market value, or sell their share back at market rates.

The Greens are proposing a co-ownership scheme in New Zealand under which instead of a mortgage, the occupants would pay a weekly "rent" which would cover the costs of the Crown loan and buy some of the equity.

Labour's ambitious scheme is targeted slightly higher up the market, at those who can afford the mortgage on the $300,000 to $350,000 dwellings being proposed, mainly terraced housing and apartments.

The Hobsonville project, like the schemes in Western Australia, is based on the premise that to achieve the required social outcomes, the market needs to be given a helping hand.

Hobsonville is the sort of public-private partnership that when it comes to roads and schools buildings, this Government actively promotes.

Dr Smith - new to the housing portfolio - should check it out. Speak to those involved.

It's the acceptable face of interventionism. And without some government intervention in the realm of affordable housing, it's going to be a very long night before the market comes to the party.

Authorities should look at offering a helping hand for wannabe homeowners along the lines of Hobsonville Pt.