The government’s KiwiBuild reset is an admission of how flawed the policy was in the first place.
The 10,000 houses it said it would build wasn’t a target, it was a figure plucked out of the air, completely distanced from reality.
Worse than the unrealistic number, was the money wasted on houses no-one wanted to buy and houses sold to people who should not have been beneficiaries of taxpayer assistance.
Now Housing MInister Megan Woods has announced another plan, with no targets, which includes selling the houses no-one wanted – almost certainly to be a win for the buyers and a lose for the public.
There’s also a government backed low equity scheme that sounds horribly like the Fannie Mae and Freddie Mac scheme in the USA that precipitated the Global FInancial Crisis.
The Taxpayers’ Union points to the potential dangers that poses to taxpayers:
Replacing KiwiBuild with easy credit policies for first home buyers places significant risk on taxpayers, says the New Zealand Taxpayers’ Union.
Taxpayers’ Union Economist Joe Ascroft says “The American housing crash and ensuing Global Financial Crisis was driven in part by the American Government’s decision to offer subsidized mortgages to low income households, who then failed to meet debt repayments when interest rates increased. Our Government’s decision to adopt a similar approach by offering taxpayer-backed mortgages to households who can only scrape together a 5 percent deposit is an uncomfortable echo to those easy credit policies which induced a housing crash overseas.”
“If households on ultra-low deposits ever failed to meet repayments due to rising unemployment or interest rates, either taxpayers or the banking system would be put under significant pressure.”
“Of course, the best approach to housing unaffordability isn’t to load on more debt and subsidies – which will inevitably push housing prices higher – but to enact meaningful supply-side reform. Allowing our cities to become more dense and removing the rural-urban boundary would be good places to start.”
The new policy, like many of this government’s lack details and the Minister’s repeated “we’ll build as many as we can as quickly as we can” is no substitute for a target tand a concrete plan to get there.
The root of the housing problem is simply one of supply not keeping up with demand, this hasn’t been helped by Prime Minister Jacinda Ardern’s calling a halt to development at Ihumātao.
The solution is more houses, faster which requires sorting out the infrastructure restraints, regulations that make the consent process so long and costly, and building here so much more expensive than in many other countries.
Anything which gives people more money without increasing the supply of houses will only make them more expensive.
KiwiBuild failed because it didn’t deal with the underlying causes of the problem and the so-called reset will do very little, if any, better.
We’d all benefit if the government set about addressing the constraints on supply rather than throwing more taxpayers’ money at policies that will benefit a relatively few people at considerable cost and risk to all of us.