When David Shearer proposed getting the state into the housing market and building and selling properties, his advisers came up with an excellent name for the scheme. KiwiBuild was meant to imply the same values and credibility of Jim Anderton’s KiwiBank. And various other Helen Clark-era Labour projects were given the same sort of nomenclature, such as KiwiSaver and KiwiRail.
As the faults in the KiwiBuild scheme are ever more apparent, Labour’s flagship housing project has attracted parodying versions of the name – including KiwiFarce, KiwiFail and KiwiGate.
Surely the most apt, however, is KiwiSpeculator – because it’s becoming clearer that the scheme is going to benefit a select few lucky ballot-winners who stand to make significant capital gains through buying the properties at below-market rates.
The latest KiwiBuild development merely confirms this pro-speculator reputation. Newshub’s Jenna Lynch reported on Wednesday night that the Government has made yet another change to the scheme, which makes the deal even better for KiwiBuild buyers who might want to quickly onsell their houses for big gains – see: Housing Minister’s backdown on penalties for KiwiBuild property flippers.
Here are the details: “Phil Twyford has secretly backed down on penalties for KiwiBuild buyers who sell up. When Labour announced the policy in 2016, its plan to stop buyers reaping windfall gains was they must not on-sell their home for five years – or else they had to hand all the money they made to the Government. That’s now changed to if buyers sell within three years, they must give up 30 percent of their profit.” And the same penalty applies to those that get permission to sell, and those that don’t but get caught.
Opposition politicians and commentators are aghast. Here’s what Newstalk ZB’s Mike Hosking had to say: “So if you buy a house in Papakura, and the average price in Papakura rises from $569,000 to $700,000, so you make $131,000 in profit, once upon a time you needed to give that to the government, but now you only need to give 30 percent. So you would make more than $90,000. The government is essentially handing out $90,000 to the graduate doctors, and the marketing executives. The middle-class New Zealanders are looking at massive payouts on us, the taxpayer” – see: Kiwibuild scandal just gets bigger and bigger.
It’s likely that the watering-down of the penalties has been forced on the Government by banks. Previously it was reported that mortgage lenders had complained to the Government about the stipulation that capital gains would go back to the state if the properly was sold within three years, because that meant the banks would be taking a larger risk and it would restrict their ability to deal with defaults.
Another name change has been suggested for the scheme: KiwiAirBnb, because the rules have also now changed to make it easier for the new owners to rent KiwiBuild properties out. Previously owners were to be penalised if they did this, with the Government taking such proceeds off the landlords. But the new deal is that only 30% of that money would be taken, and that’s only if they get caught during the first three years of ownership – see Jenna Lynch’s ‘Is this Kiwi Airbnb?’: National slams Govt over KiwiBuild renting penalty.
The consensus builds against KiwiBuild
Yesterday the Otago Daily Times published an editorial that warns the Government’s main housing scheme – and indeed, “one of Labour’s primary policies” – is gathering a perception that it is something other than what was promised: “It was sold as a helping hand to those locked out of the housing market as well as a means to scale up housing supply and do so rapidly. The perception of it at the moment is very different” – see: Cracks appear in KiwiBuild.
The first problem is that the scheme now looks like it’s “a lottery for yo pros (young professionals) who might be able to buy houses even in expensive places such as Auckland and Queenstown Lakes anyway”. The vast majority of those needing a house are immediately cut out because the houses are “expensive” and “It is also necessary to have loan financing in place before entering the ballot.”
Second, KiwiBuild could be “seen as simply rebranding houses that would be built anyway”, and therefore “just spin” by the Government. Third, “It will be detrimental, too, if the view KiwiBuild is a useful hand-up for developers through guaranteed sales becomes the norm.”
It’s not surprising, therefore, that the National Party’s eyes are starting to light up when Labour says the Government’s re-election will depend on the success of KiwiBuild. The NBR’s Brent Edwards reports that “National Party leader Simon Bridges believes the government’s KiwiBuild policy can help National win the next election” – see: KiwiBuild an election winner for Nats, Bridges says (paywalled).
Bridges says KiwiBuild has “been dysfunctional and shambolic. It’s been more PR than reality.” He claims that large developers have told him that they’re reluctant to be involved: “The word some of them used, certainly one of them used, was ghettos and they don’t want to be part of that.”
A PR disaster or triumph?
The Listener’s Jane Clifton has written this week about How KiwiBuild turned into a PR disaster. Essentially the problem is that the Government has decided to help out failing property developers by rebranding their houses as KiwiBuild: “New-build supply in Auckland’s bonkers housing market has been stalling because some developments have fallen over. The Government, rightly thinking “waste not, want not”, took over some projects that happened to be at the upper-midpoint of the market, and has presented the early fruits of this as part of KiwiBuild. This has been hopelessly confusing. Housing Minister Phil Twyford’s bombast has helped stoke the impression that KiwiBuild was all about low-income battlers and starter homes, when some of the projects are a bit flasher than that.”
It’s been a big PR mistake, Clifton says: “It would have saved a lot of misunderstanding and unpleasantness had the Government shelved the title KiwiBuild and called that particular avenue of its housing policy DeveloperRescue. This PR debacle is what happens when politicians get addicted to photo ops while boasting and swaggering under hard-hats on building sites.”
Such house-building PR is nothing new according to Liam Hehir, who points to a long history of political leaders attempting to “pull the wool” over people’s eyes with fake or dubious housing construction. His prime example is the infamous fake “Potemkin villages” constructed in 1789 in the Crimea, which became the model utilised by leaders from Stalin’s Russia to North Korea today – see: Housing scheme’s morale-boosting propaganda doesn’t tackle crisis.
He warns where this type of lottery scheme could go: “In the worst-case scenario, the programme could end up like the one run by Hugo Chavez, the late president of Venezuela, around 2012. When state socialism – somehow – failed to secure warm and adequate housing in the country, his government took to awarding new apartments to people from the slums by lottery. The whole thing was televised, with “El Commandante” handing over the keys to crying families. For the lucky few, it must have been life-changing. It made for great TV, but it wasn’t a solution to the tribulations of ordinary Venezuelans. They simply continued to suffer as their country slipped further and further behind.”
Hehir concludes that there’s nothing necessarily wrong with “a bit of morale-boosting propaganda… but it probably needs to be executed with more competence”.
In contrast, KiwiBuild should win awards, according former United Future leader Peter Dunne: “when the marketing awards are next given out Kiwibuild deserves first prize as a cunning plan, well marketed, but delivering very little and changing not very much” – see: Kiwibuild looks like one of Blackadder’s cunning plans.
Dunne looks back to what was originally promised by Labour, and says it’s all changed. For example, in terms of what KiwiBuild was supposed to offer buyers, “no longer does ‘affordable’ mean $350-450,000, but $650,000.” Originally, he says, “The implication was unambiguous – Labour’s approach was going to be far more activist than National, and Kiwibuild would be Its primary policy to deal with homelessness and the housing crisis.”
As a result, “in reality Kiwibuild is a very clever strategy of the government doing very little, but making it look like a lot, and all the while being able to milk many photo opportunities for Ministers as the still uncommon achievement of each house being completed happens. Meanwhile, the homeless Labour was so concerned about in the lead up to last year’s election remain homeless”.
KiwiBuild needs to be bigger and better
Perhaps the most interesting and surprising critiques of KiwiBuild have come from rightwing commentator Matthew Hooton, who suggests the KiwiBuild scheme needs to be big bigger and better. In his column on Kiwibuild last month, he strongly recommends to the Minister of Housing that he “rethinks his failing policy and commits to getting on with doing KiwiBuild properly” – see: KiwiBuild needs urgent rethink.
Hooton’s complaint is not that the current scheme is “too socialist” or “interventionist” but that it’s not bold enough, and involves too much gimmicky tinkering. The column lays out his objections to the way KiwiBuild is currently operating, claiming it is going to be ineffective and will actually increase economic inequality, especially because it’s targeted at selling houses to the relatively wealthy, albeit through a lottery.
Here’s Hooton’s key piece of advice to Phil Twyford, assuming he wants to continue with a state-led initiative: “He needs to accept he has wasted his first year and finally understand the magnitude of the KiwiBuild promise. It can only be delivered as the mass once-in-50-years public construction project Shearer’s original announcement envisaged. The Minister needs to forget about a few hundred houses here and there. He needs to lift his sights to imagine small cities being built from scratch to the south and north of Auckland, linked with Hamilton, Tauranga and Whangarei by ultra-fast rail. KiwiBuild must be transformed from the sort of limited initiative Wellington bureaucrats are comfortable with into something China consistently implements without much trouble.”
For an update on this, see Hooton’s Friday column, KiwiBuild fiasco predicted right here. He criticises the PR-heavy approach being utilised at the moment: “Only a Government completely out of touch with the challenge it faces could have thought it was a good idea to proceed with last weekend’s ‘street party’ in Papakura, let alone allow Ardern to publicly compare herself with Michael Joseph Savage.” And like other critics, Hooton points to one of the buyers joking on Facebook that he stood to gain an instant $70k capital windfall.
Finally, when defending KiwiBuild against criticisms from the left, the Government – and their defenders – keep pointing to state housing. Yet, sadly, the projected increase in state housing numbers is incredibly small – see my Newsroom column on this “fricken travesty”, and the need for a massive investment during a time of a severe crisis: Will state housing fix what KiwiBuild can’t?
MIL Analysis+Reportage – EveningReport.NZ