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What is KiwiBuild?

What is KiwiBuild?

By Architect Don Bunting

 

I am hoping that KiwiBuild is more than just another government slogan or over-ambitious call to arms for the industry.

So while 100,000 affordable homes within 10 years has a nice ring to it, it does seem to be based on suspiciously round numbers.

What if we saw a return to the highest level of housing consents in our history — the 40,000 dwelling consents issued in 1967? This would provide a maximum of  400,000 dwellings over 10 years.

This means that 25% of dwellings consented would need to be built, be eligible for and sold as KiwiBuild homes.

Statisitcs New Zealand figures for May 2018 showed that 3407 building consents were issued for dwellings — encompassing houses, townhouses, flats, units, apartments and retirement village units.

If this level were maintained for 10 years, it would give a total of 408,840 dwelling consents.

However, full year statistics over recent years have shown a high of 38,000 consents in 1974 down to only 30,000 in 2016.

Achieving 10,000 KiwiBuild homes per year out of these numbers, or in addition to these numbers, seems more aspirational than likely.

 

What is a KiwBuild home?

The Ministry of Business Innovation and Enterprise (MBIE) defines a KiwiBuild dwelling as fitting under a price cap — $500,000 to $650,000 for Auckland and Queenstown (1 to 3 bedrooms), and a maximum of $500,000 elsewhere.

There doesn’t appear to be any requirement for a minimum/maximum size or levels of quality and amenity, other than compliance with the building code.

The MBIE describes the scheme as being for “aspiring first home owner-occupiers who are currently locked out of the market”. The eligibility requirements for ownership are:

Applicants must be New Zealand permanent residents or citizens,

Be first home buyer(s) or in a similar financial position, ie meeting an asset test

Intend to live in the home for three years

Have a household income of no more than $120,000 for a single purchaser or $180,000 for more than one purchaser (normally a couple I assume)

Intend to live in the house as their principal place of residence.

There will be a ballot if applications for available homes in an area exceeds availability.

 

So who is it aimed at?

Phil Twyford has said that the $180,000 KiwiBuild household income threshold has been set that high because the programme is not welfare, but an aspirational middle-class policy. So it’s not just for those who cannot afford to buy a home — but what is affordable?

This depends on who you ask. For example, a $180,000 income for a couple, assuming they had a 20% cash deposit, would mean they should cope with a $400,000 mortgage on a $500,000 home, or even stretch to a $520,000 mortgage on a $650,000 home.

But the current New Zealand median income is $38,116, or $76,232 for a couple. For them $500,000 to $650,000 is not an affordable figure — it is a cruel joke. And one played by a Labour Government no less.

 

How can we make homes more affordable?

Beacon Pathway is a research-based organisation. One of its key aims is to facilitate and provide robust research which builds a fact-based platform for sustainable, affordable, buildable and comfortable homes.

Beacon has developed a “Cost Tower” to show the costs of delivering a home, broken down into seven main elements: land costs, development costs, professional fees, consent fees, construction costs, finance/real estate costs, and GST.

Construction costs dominate at 51%, with bare land at 25%. So if significant savings are to be made, these are the areas on which to focus our attention.

Statistics New Zealand figures show that the average size of a dwelling has grown from 110 square metres in 1974 to 182 square metres in 2016.

The 182 square metre average size figure might be low, considering the growth in the number of very small apartments included in the statistics. Nevertheless, reducing the size of a KiwiBuild home is one obvious way to reduce final costs.

The acceptance by the market of terrace and multi-storey housing is helping to reduce plot size, which is a positive step towards affordability.

However, the real elephant in the room is the cost of construction products which are at a scandalous level. Breaking down the current product supply chain would offer huge savings.

Prefabrication of individual elements and whole dwelling units is being touted as the answer and, certainly, far too much of our construction processes still remain back in the dark ages.

However, it is moot whether our industry is large enough to justify the high development costs of a significant prefabrication industry.

 

More bureaucracy?

Housing Minister Phil Twyford is now rushing around placing his own authoritative approval on a number of developments already underway.

He is also planning to establish a new Ministry of Housing and Urban Development and, in Auckland, an Urban Development Authority able to override the Unitary Plan on certain key sites.

This is all under the umbrella of “building more houses more quickly”.

Mr Twyford went on to say: “We have to do this because if we don’t, our kids will never be able to afford to live in this town”.

At $650,000 for a so-called affordable home, I think he’s right about lack of affordability. But establishing more expensive government agencies is not going to help.

 

Am I missing something?

I see that the MBIE has appointed a chief executive for KiwiBuild. I wish him good luck, but don’t have any confidence in a scheme based more on hope than substance.

Am I missing something? Do let me know if I am.

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