Would Kiwibuild solve the housing shortage?

The government has established KiwiBuild to help stimulate the supply of quality, affordable homes for New Zealanders who have been locked out of the housing market.

To achieve KiwiBuild’s objective of putting home ownership within reach of more New Zealanders, eligible buyers must:

  • be a first-time buyer or a ‘second-chancer’
  • have an income of less than $120,000 for a single applicant or no more than $180,000 for more than one purchaser
  • be a New Zealand citizen, a permanent resident or ordinarily resident in New Zealand
  • intend to own and live in the home as their principal place of residence for at least three years.

But the question is Would Kiwibuild solve the housing shortage?

At the moment there are a few Kiwibuild projects being built, one project is in Onehunga, and around 20 homes in Takanini and another 40 or so in Pukekohe.

But is that enough? It doesn’t seem so but the govt is expecting to increase that to 1000 in 2019.

The biggest barrier to getting Kiwibuild done and on budget is the cost of construction. Construction costs are increasing driven by inflation and rising labour costs and labour shortages.

On the face of it, Kiwibuild is a noble cause but actually the house prices aren’t that affordable. House prices start at $579,000 (with a 5% deposit, it will require  a $550k mortgage) and go up to $649000. Plus most of these affordable houses are located all the way out in Takanini and further away. If you factor the price of petrol ($2.50 per litre and rising to $3.50 per litre next year if the Minister of Finance gets his way), the costs of travelling to work is almost prohibitive whether by car or bus. This may actually turn buyers away from buying Kiwibuild homes.

So firstly Kiwibuild houses are not being built fast enough. Prefab homes may quicken up the building process but apparently banks are not too keen on financing prefab homes. Secondly, they are still relatively expensive considering their location. Worse, Kiwibuild homes are being built further and further away from the city centre making the money couples save on housing being used to pay for transportation instead.

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