Applaud the intent, but reality challenges remain

Peter Thompson, Managing Director, Barfoot & Thompson
Applaud the intent, but reality challenges remain

The Government’s recent Unitec land development announcement has the potential to be a game changer for housing nationally.

The Government has made big and bold promises in relation to affordable housing, and the Unitec announcement – which will see up to 4,000 homes built on surplus land on the Mt Albert, Auckland site – has been heralded as the first major development of its KiwiBuild programme.

There is much political capital riding on the Government delivering large numbers of quality affordable homes (generally regarded as homes costing under $600,000) quickly, and in the process ‘solving’ what it has positioned as a housing ‘crisis’.

At the ceremony announcing the development, there was naturally a fair degree of hype around the speed with which the site would become a model community of affordable Kiwi homes, state housing, open housing, new parks, shops, and potentially a new school.

While no solid timelines were given as to when the first homes would be completed there was the suggestion ‘building was likely to begin next year’.

I am extremely positive about the Government’s announcement, and overall intent in relation to housing, as Auckland in particular needs a sustained flow of new builds to reach the market to house its ever increasing population.

What the announcement said to me is that the Government is serious about solving some of the big issues that are acting as a sea anchor to getting more new homes, of any size and price, built quickly.

The first of these issues is the speed within which it’s possible to transform a green or brown field site from existing use to ready to live in housing.

Based on the Unitec announcement, the Government is hoping to achieve the consenting process and start building at the Unitec site within 18 months, or at the outside two years.

If this is setting a precedent that will apply to private sector developers as well, it will be music to everyone’s ears. One has only to think of the incredible long lead in times that developers of the Stonefields (St Johns, Auckland) and Three Kings (Mt Roskill/Royal Oak, Auckland) developments went through to achieve permission to proceed.

The intent seems to be to reduce what is currently a marathon into a 100 metres sprint.

Achieving this will require some intense discussion with pressure groups that will claim their right to consultation is being withdrawn, let alone putting aside a great deal of precedent around consenting.

The second major issue that needs to be resolved is the reality of developing a site through the planning and earthworks stage, the provision of the necessary infrastructure and then building a house (whether it is prefabricated, terraced or in an apartment block) which can then be on-sold for $600,000.

The Government has not been specific on this issues to date, but commentators have had a field day speculating on various forms of joint ownership that could make it possible, including leasehold, with the Government retaining ownership of the land and the buyer owning the building.

I am all for developing new forms of ownership models that enable first time buyers and those on modest incomes to achieve home ownership, and I applaud the Government for looking to push the boundaries.

However, there are deep, ingrained beliefs around home ownership that might need rewiring before new ownership models become popular.

For example leasehold does not have a particularly good name in New Zealand while the major lenders of mortgage finance will also need to be convinced that the security offered in the form of the building alone gives them the level of security for which they traditionally look.

A side effect of this may be to reconfirm to potential buyers of existing homes that a standalone property (consisting of house and land) with a garden (which can be used to safely park cars) which sells for (say) around $1 million represents good value to one costing $600,000 where you lease the land.

Given that most of the capital increase in homes relates to the increasing value of the land (and not the building) the medium to long-term investment return is also likely to be higher.

We are in for some interesting times as the Government wrestles with the reality of turning its intentions into actions.


Peter Thompson

Managing Director, Barfoot & Thompson


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