2018/19 Estimates for Vote Building and Housing

Transcription

1 2018/19 Estimates for Vote Building and Housing Report of the Social Services and Community Committee July 2018 Contents Recommendation... 2 Introduction... 2 Housing and Urban Development appropriations... 2 KiwiBuild programme... 2 Buying Off the Plans initiative... 3 Redeveloping Housing New Zealand properties... 3 Development at Tāmaki... 4 Establishing an Urban Development Authority... 4 Housing New Zealand s evictions policy... 4 Building and Housing appropriations... 5 Training for the building and construction sector... 5 Infrastructure to support new developments... 5 Urban development... 6 Using innovation in the construction industry... 7 Use of aluminium composite panels... 7 Appendix... 8 Gareth Hughes Chairperson

2 Vote Building and Housing Recommendation The Social Services and Community Committee recommends that the appropriations for the year ending 30 June 2019 for Vote Building and Housing, as set out in Parliamentary Paper B.5 Vol.10, be accepted. Introduction In 2018/19, the appropriations sought for Vote Building and Housing total $ million. This includes an estimated $ million to be spent in 2018/19 from multi-year appropriations. Of the total, the Minister of Housing and Urban Development is responsible for appropriations of $ million. The Minister for Building and Construction is responsible for appropriations of $ million. We heard from Hon Phil Twyford as the Minister of Housing and Urban Development and the Acting Minister for Building and Construction. We discuss these two hearings separately below. Housing and Urban Development appropriations KiwiBuild programme The Government s KiwiBuild programme aims to build 100,000 affordable homes for first home buyers over the next 10 years. 1 Two new multi-year appropriations for the programme were introduced on 1 April 2018 through the Supplementary Estimates. They total $1.88 billion from 2017/18 to 2020/21. Budget 2018 seeks appropriations totalling $ million for the programme in 2018/19. This includes $210 million for acquiring, constructing, and providing KiwiBuild housing, and $270 million for capital expenditure. The capital would purchase 1,200 sites for affordable KiwiBuild homes for first home buyers and for the new Ministry of Housing and Urban Development. Other appropriations are $7.697 million for facilitating and implementing the KiwiBuild programme, and $5 million for operating expenses for acquiring and developing KiwiBuild houses. In December 2017, the KiwiBuild unit was created within the Ministry of Business, Innovation and Employment to deliver the programme. In June 2018, the Minister of Housing and Urban Development announced that a new Ministry of Housing and Urban Development would be established from 1 August The new ministry will eventually incorporate the functions of the KiwiBuild unit and oversee the KiwiBuild programme. 1 The price cap for a three or more bedroom home in Auckland or Queenstown is $650,000. In other parts of New Zealand it is $500,000. 2

3 Buying Off the Plans initiative The Minister told us that the Government aims to build 800 KiwiBuild homes through the Buying Off the Plans initiative in 2018/19. The initiative involves the Government accelerating private developments by underwriting or purchasing new homes off the plans. In exchange, more affordable KiwiBuild houses can be built. On 8 May 2018, the Ministry of Business, Innovation and Employment released an Invitation to Participate (ITP) for the initiative. It sought responses from qualified developers by 8 June About 90 submissions were received from developers. The KiwiBuild unit is now assessing them against KiwiBuild criteria, such as price caps. The Minister hopes to be able to report in the coming weeks about which proposals can be supported. We asked how the Minister will ensure that the initiative is not used to prop up projects and developers that may be failing for valid reasons. The Minister responded that the initiative is about exercising good commercial judgment and sharing risk. We heard that, with fewer than 5 percent of new builds considered affordable, the market is not building the homes that New Zealand families need and can afford. By working with the private sector, the Minister believes that developments that are stalled can progress. The Minister said that the Government is incentivising and guaranteeing a supply of affordable housing that would not otherwise be built. Proposed financial structure for the initiative We asked about the proposed financial structure, noting that financially robust developers do not need government support for their developments. The Minister told us that KiwiBuild would buy agreed homes off the plans within a development where developers are struggling, either financially or to progress their project. These homes would have to meet design criteria and price caps. We heard that the pre-sale and injection of capital into the project may make it easier for the developer to get finance for the rest of the development. The Minister said that the Government could also offer to underwrite properties. KiwiBuild would commit to buying properties at a certain price if the developer was unable to sell them at their ideal commercial price. The Minister expects that the Government would not underwrite the full market price. The Minister emphasised that the Government would not be bailing out failing developers who had bad developments because they could not get finance. He described the development market as highly cyclical and volatile. Some developments might have stalled in the past six months due to Australian banks tightening up on lending because of their exposure in the Australian market. This had a flow on effect to the banks lending practices in New Zealand. Redeveloping Housing New Zealand properties In 2018/19, Housing New Zealand plans to build 200 KiwiBuild homes among its properties that are being redeveloped. The Government also plans to build large-scale developments in 3

4 Auckland and around the country. It has purchased 29 hectares of land at Auckland s Unitec Institute of Technology for this purpose. Development at Tāmaki We heard that a substantial number of KiwiBuild houses will be at the Tāmaki development a regeneration project for Tāmaki introduced under the previous Government. The houses will include affordable, State, and private housing. We note that two- or three-bedroom houses at Tāmaki are selling for about $850,000. This is $200,000 more than what is considered affordable under KiwiBuild. We also note that these are mass developments, bought off the plans, and the affordable houses have had the price of land written down. Therefore, some of us consider it will not be possible to build affordable houses without massive Government subsidies. The Minister said he is disappointed with the progress in Tāmaki. He believes that the project has enormous potential and can be improved. The Hobsonville Land Company (HLC), which developed land at Hobsonville, is helping with the master planning and development at Tāmaki. The Minister said he appreciates that the Tāmaki redevelopment is about more than houses, and described the Tāmaki Regeneration Company s engagement and commitment to the community as fantastic. However, he said that the commercial redevelopment part has not worked, which is why HLC is now involved. Establishing an Urban Development Authority The Minister told us that that the Government s urban growth agenda includes planning reform to ensure that cities can grow both up and out. He considers that central government should be more involved in working with local government to plan for the growth of cities. The Minister said that the Government does not intend to amend the rules around planning and the Resource Management Act 1991 for KiwiBuild homes or developments. However, it plans to create the Urban Development Authority a central government agency with planning, consenting, infrastructure, and financing powers that only local government has at present. The agency will still be governed by the Resource Management Act but will have cut-through powers to speed up large-scale urban development projects. We heard that the policy work to create the authority is progressing. The Minister hopes that legislation to establish the new agency will be before Parliament by the end of We look forward to following the progress of this work. Housing New Zealand s evictions policy Housing New Zealand has recently announced that it has moved to a zero-evictions policy for its State housing tenants. Instead, anti-social tenants will be referred to appropriate support services. We discussed this issue in further detail in our hearing for Vote Social Housing. Some of us are concerned that private buyers will be reluctant to buy into developments with a lot of State housing because of this policy. 4

5 The Minister told us that the Government is committed to building more State houses to provide opportunities for people who would otherwise struggle in a private housing market. He said that a mix of affordable and public housing needs to be built in areas where housing is needed, which will mean mixed communities everywhere. The Government believes that mixed communities are stronger communities. Although we agree with this statement, some of us consider that a person looking to buy in an area with significant State housing will need to take Housing New Zealand s evictions policy into account. This is because they might live next to a tenant who becomes antisocial, with no possibility of recourse from Housing New Zealand. Building and Housing appropriations Training for the building and construction sector We asked why the Minister for Building and Construction was unable to confirm, in her responses to our written questions, how many people are employed in trades training in the building and construction industry. The Ministry of Business, Innovation and Employment said that it is aware of how many people are in industry training organisations. However, the construction workforce is very large and fragmented and people develop skills through training programmes in different ways. This makes it difficult to provide a complete picture. We note that the number of people in trades training has not changed much since last year. We asked whether there was any Budget bid for skills training in the building and construction sector. We heard that no direct bid came from the sector. However, the ministry said it is working to ensure that the skills and training can support programmes like KiwiBuild. The Acting Minister acknowledged that workforce constraints are a significant barrier to meeting the Government s goal of increasing housing supply. Over the past six months, he has worked with the Minister for Building and Construction, officials, and the industry to determine what is needed to develop the workforce. He expects that information on this will be released in due course. The Acting Minister said the Government recognises that it will have to recruit skilled workers from overseas because New Zealand does not have the workforce it needs. He told us that the Government is working hard to overcome this obstacle. Infrastructure to support new developments Gladstone School, Kowhai Intermediate, and Mount Albert Grammar have recently announced that they have changed their enrolment zones. The changes will mean that students from the housing development at Unitec are excluded from these school zones. Some of us are concerned that schools are reacting negatively to the Government s housing policies by closing their zones. The Acting Minister disagreed with this, noting that schools that have changed their zones are already at capacity. 5

6 The Acting Minister told us he is discussing with his education colleagues what schools will be needed to support the 3,000 new houses in the community. Waterview School is zoned to cover the development, and it will need extra classrooms and teachers. Some of us consider that the planning for schools should already have been completed. The Acting Minister told us that the Unitec development will be implemented over 10 years, allowing sufficient time for planning the associated social and network infrastructure. Urban development The Acting Minister noted that New Zealand does not have a shortage of land. However, he considers that the planning system creates artificial scarcity by stopping cities and towns from growing both up and out. The Acting Minister told us that the Government intends to replace Auckland s urban growth boundary to permit planned urban expansion. He believes that the price of urban land will decrease if cities can grow up and out. As a result, more affordable houses can be built. Auckland Unitary Plan The Auckland Unitary Plan sets out how the different zones can be used, developed, or protected. It began operating in The Acting Minister acknowledged that the plan has helped modernise the planning rules for Auckland and allowed for more growth and intensification. However, he believes that the planning system can be enhanced to create more high-quality intensification. We asked whether this means that the Government will reconsider the plan or encourage the council to do so. We heard that the Government will discuss this with Auckland Council. The Acting Minister emphasised that the Government s view is that the plan does not go far enough. Some of us are concerned with this view, given that the plan was meant to be long term and create certainty for people. Urban Development Authority The Acting Minister told us that the Government is considering a strategy to intensify housing near public transport. He said that the proposed Urban Development Authority will be able to promote large-scale urban development projects in the city and around highquality transport connections. We asked what role the Urban Development Authority will have in approving large-scale urban development projects. The Minister said he expects to have a master planning agency that will set some basic requirements, which the market can work to. We discussed again the timeline for establishing the agency. The Acting Minister reiterated that he hopes to take a paper with policy proposals to Cabinet within the next few months. He aims to have a bill before the House by the end of the year. The Acting Minister told us he will be publicly answering questions about the policy and releasing Cabinet papers when decisions have been made. Some of us expressed concern about decisions being made without input from people with different views. 6

7 Using innovation in the construction industry We are interested in innovative building materials and techniques, such as offsite manufacturing. Housing New Zealand has recently been using cross-laminated timber in its housing projects. It has found that the projects are two to four times faster than conventional building projects, with significant reductions in cost. Projects using cross-laminated timber are taking about four or five months to complete, compared with the traditional 14 to 18 months. We look forward to seeing whether these techniques can be used across the KiwiBuild programme. Use of aluminium composite panels Following the Grenfell fire in London, the ministry commissioned a fire engineer to audit the certification system for the aluminium composite panels used on high-rise buildings. In November 2017, Dr Tony Enright reported that CodeMark certificates for most of the panels were inadequate, and recommended that the certificates be immediately suspended. 2 He also advised that the panels were a potential fire hazard. In 2018/19, an appropriation of $ million is sought for Building Regulation and Control. The Minister told us a review of building product regulations and insurance systems will ensure that buildings are fit for purpose, safe, durable, and affordable. We are interested in what the review involves and how it will affect CodeMark in relation to aluminium composite panels. The ministry told us that the panels are only one component and they need to work with other fire-protection measures. It noted that CodeMark is a performance-based standard and is one way of providing assurance that a product works to a specific performance level. The ministry told us that it is considering Dr Enright s report. We asked whether the ministry believes that the CodeMark system is working well in New Zealand. The ministry said it is reserving judgment at this stage but it is working on determining its position. It has prioritised work on ensuring that the system is still fit for purpose. 2 CodeMark is a voluntary scheme for certifying products to show that they meet the New Zealand Building Code. It was developed by the Ministry of Business, Innovation and Employment in conjunction with the Australian Building Codes Board. 7

8 Appendix Committee procedure We met on 13 June and 4 July 2018 to consider Vote Building and Housing. We heard evidence from the Minister of Housing and Urban Development and the Acting Minister for Building and Construction, Hon Phil Twyford. We also heard from Housing New Zealand and the Ministry of Business, Innovation and Employment, and received advice from the Office of the Auditor-General. Committee members Gareth Hughes (Chairperson) Darroch Ball Dan Bidois (from 27 June 2018) Hon Judith Collins (until 20 June 2018) Hon Kris Faafoi Hon Alfred Ngaro Greg O Connor Maureen Pugh Priyanca Radhakrishnan Hon Louise Upston Advice and evidence received In addition to the standard Estimates documents, we considered the following documents as evidence and advice. They are available on the Parliament website, Minister for Building and Construction, Responses to pre-hearing questions 123 to 130. Minister of Housing and Urban Development, Responses to pre-hearing questions 1 to 128. Minister of Housing and Urban Development, Responses to post-hearing questions 131 to 136. Office of the Auditor-General, Briefing on Vote Building and Housing, dated 13 June Standard Estimates Questionnaire responses Vote Building and Housing, received 17 May