The Budget 2018 and Kiwibuild

The Government has committed $2 billion for KiwiBuild, an ambitious programme that aims to deliver 100,000 affordable, quality homes for first home buyers over the next decade. It is expected up to 50,000 of these homes will be in Auckland. But recently we have been told there will be delays in the Kiwibuild program and that not enough homes will be built. REINZ chief executive, was quoted as saying in Auckland there is “a deficit of around 60,000 homes and taking longer to build will exacerbate problems.”

But not everyone is a fan of Kiwibuild. While everyone is aware of the need to solve the housing shortage, not everyone agrees that Kiwibuild is the solution. Take for example, even the government’s own agency the Treasury estimates that at the current rate of progress, enough houses won’t be built in time. Housing and Urban Development Minister Phil Twyford rejected the criticism but acknowledged that he overpromised the number of houses that would be built, underestimated the costs to build them, and likely won’t be able to sell them for the low affordable price he promised. Why is this? In particular, we can point to the construction labour shortages which are so near capacity at the moment. If you don’t believe it, just try calling a tradesman and chances you, they are busy for the next few weeks and won’t have time to service your home until next month. Trust us, We’ve been there.

Plus the service charges a tradesman (builder, plumber, carpenter, electrician, painter) is charging has increased dramatically in the last few years. It’s no longer the construction costs are skyrocketing.

So what’s the solution? There’s no easy answer but it will involve a three pronged approach: lower costs of construction, lower costs of land development, and being more efficient at building homes. Addressing the rising construction labour and material costs will help lower costs of construction. Addressing why councils are charging so high development levies and reducing bureaucracy costs surrounding resource consents will contribute to lower land subdivision costs. And the answer to building efficiently is being addressed by standardising construction parts and techniques.

 

 

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