The government has announced a $1 billion Housing Infrastructure Fund to accelerate the supply of new housing where it’s needed most, Finance Minister Bill English and Building and Housing Minister Dr Nick Smith say.
The contestable fund will be open to applications from councils in the highest growth areas – currently Christchurch, Queenstown, Tauranga, Hamilton and Auckland.
Mr English says the Housing Infrastructure Fund will help bring forward the new roads and water infrastructure needed for new housing where financing is a constraint.
“The Government will invest up front to ensure the infrastructure is in place. But councils will have to repay the investment or buy back the assets once houses have been built and development contributions paid.”
Dr Smith says the fund will be available only for substantial new infrastructure investments that support more new housing, not to replace existing infrastructure.
“To access the fund, local councils must outline how many new houses will be built, where they will be built and when they will be available. Ideally, they will have agreements with developers on these issues.
“Funding may also have other conditions attached, such as faster processing of resource consents. All of this will require close collaboration between central and local government.”
Mr English says infrastructure, and its financing in particular, is one of the three key constraints to building more houses – alongside land supply and consenting requirements.
“Councils have strict debt limits which means some lack the headroom to invest in infrastructure now and then wait for future development contributions to recover the costs. The fund will help provide more infrastructure sooner by aligning the cost to councils with the timing of revenue from development contributions.”
Depending on the number and timing of applications, it will require the Government to temporarily borrow up to $1 billion, which will increase net debt until it is repaid.
Dr Smith says the Government is also considering establishing Urban Development Authorities (UDAs) to help further speed up the supply of new housing.
UDAs have streamlined powers to override barriers to large-scale development, including potentially taking responsibility for planning and consenting and other powers.
“These changes are just the latest steps in the Government’s ongoing, comprehensive programme to increase the supply and affordability of housing,” Dr Smith says.
“They will complement the work of the Housing Accords and Special Housing Areas, our social housing build, our emergency housing programme, the expanded HomeStart Scheme for first home buyers, the development of surplus Crown land, the National Policy Statement, RMA reform and the extra tax measures we took last year.
“We are making good progress in facilitating increased investment in housing with a record $11.4 billion of residential building work underway this year. This initiative to support councils with infrastructure provision is the next logical step in this programme.”
The housing shortage is a result of supply outstripping demand.
It takes time to build new houses and it also requires new infrastructure. The costs for developing that is incurred long before councils start collecting enough in rates to fund it.
This new fund will enable councils to borrow the money needed for new infrastructure – roads, water and sewerage – and gives them 10 years to repay it by which the increased rate-take from the new houses will enable them to do.
It’s a good idea and while $1 billion is a very large amount of money, the cost to the taxpayer is the interest only because the fund is for loans not grants.