On Newshub Nation: Simon Shepherd Interviews Housing Minister Megan Woods

They came in promising a transformational government, then failed to get a capital gains tax across the line.

Now the government has been forced to admit it has failed in its key election promise to build 100,000 affordable homes.

Kiwibuild helped Labour get elected.

Simon Shepherd began by asking Housing Minister Megan Woods what she would say to those who now feel betrayed.

Megan Woods: We are as committed as the day we were elected to getting New Zealanders into homes, that when something isn’t working the way we want it to, that we’ve got the courage to actually say we need to call time on it, and we need to reset it, and make sure that it is working for New Zealanders.

Simon Shepherd: Your government talks about being transformational. Capital Gains Tax, 100,000 houses, both two big fails. How can voters actually trust Labour now?

Well, voters can trust us because, actually, what we’re saying is that we need this to work, that we’ve seen this problem a long in the making – the fact that we haven’t had enough houses in the affordable end of the spectrum coming through, and we’re willing to say that we’re going to do everything we need to do to fix it. This isn’t easy. Let’s bear in mind the previous government had a target of 39,000 houses through their special housing areas, they delivered 3100. That wasn’t a success. KiwiBuild wasn’t working for us the way we needed it to, so we’re saying that we need to lift the hood, have a look at what’s not working, and find ways to remedy it. We have not given up on our commitment to build houses.

Sure, but the target has gone 100,000 affordable homes in 10 years – scrapped – so how are you going to be held accountable for this policy now?

Every month I’m going to publish the figures of what we are building, what we are consenting, what’s in the pipeline, what’s for sale, what’s sold, but I’m going to put that also within the context of everything that we’re doing in housing, that actually, as a government, we have built more public houses than any government since the 1970s.

Sure.

When we got into government, we realised that KiwiBuild was part of what we needed to do around housing. And I think the other thing, Simon, that we have to make sure that we’re tracking, and making sure that we are keeping an eye on, is what the private sector is delivering at the affordable end of the spectrum, because we were not having those houses coming through.

Yeah, sure.

And what we’re finding is that KiwiBuild is a lever that means the private sector is starting to deliver below the KiwiBuild threshold.

Can I just ask about the targets, though, because it’s okay for you to have a target for state homes when you exceed it. Target 1,600, you built 2,000. Hooray, you say that’s a good target, but not for KiwiBuild. So you don’t want a target when you fail.

No, it’s not about failing. It’s more complicated than that, Simon. When we had a look at what wasn’t working with KiwiBuild, what we found was the targets were driving perverse outcomes. They were meaning that we were going for quantities in an effort to meet those targets, rather than thinking about what is the right house in the right place for KiwiBuild buyers, who are essentially first-home buyers.

Yeah.

When I see a target that’s driving perverse outcomes, not as a way of holding a policy accountable, then I am willing to call time on it, because our fundamental aim has to be building homes that are suitable for first-home buyers, rather than just buying as many as we can to meet a target.

Let’s talk about one of the main policy announcements in the reset – a progressive home ownership scheme – shared equity, rental home. So, when is that going to be up and running?

So, what I’ve said is I’ll take the details around that to Cabinet by the end of the year, and we’re looking to have that up and running next year.

Let’s see if you’ve got any details in mind. You’ve allocated $400 million towards the policy.

That’s right.

How many families will that house?

So, that’s 2,500-4,000 over four years, and that depends on the final design features that we have around how far down the income scale we go, so that’s why we’ve given such a big range, because it will all depend on the number on the final design detail.

So that means that the government’s willing to invest $100,000-$160,000 of equity into each of these houses. Is that right?

Well, it may not be spread evenly across those. It depends. But we are looking at those kind of levels. It is recycled money, of course. This is shared equity – the idea, of course, that the families pay back some of that equity as they go through, and what we see is the Housing Foundation are running a successful scheme with people already that are doing this. So we know there’s so many people that are out there essentially paying a mortgage payment in rent, but what they’re really struggling to do is get the deposit together.

If it’s recyclable, how long is somebody going to have to pay back the government the equity that the government’s put into the house?

So, this is the preliminary discussions that we’ve started having with the people that are doing it already. The Housing Foundation work on a recycle rate of less than five years. I think it’s 4.7 years is their average recycle rate. Habitat for Humanity who are working way down the income spectrum, they’ve got a 10-year recycle rate, so actually it’s got a reasonably fast recycle rate on it.

So you’re going to spread it across those, are you? Across that whole income gap or do you have-?

Yeah, that’s the detail work we’re doing at the moment, is looking at what the spread needs to look like, how it is that we can maximise the number of people we help, but how it is, importantly for me, that we’re actually setting up a scheme that will help people that would otherwise be excluded from the opportunity of homeownership.

How much money would I have to bring into my house to be eligible? What is the income level – household income level?

Yeah, look, that depends on the final design details. We know from what is happening out there already through some of the other organisations. You have Habitat for Humanity who are operating sort of into the high-40s, early-50s, right through to 90,000.

Cabinet documents has some figures on $110,000. Marama Davidson has said $70,000-$90,000. Your coalition partner is sort of off the mark with the Cabinet document.

I think- It’s not the Cabinet document, it’s the advice from officials. So, this is the early advice we’ve got. Since we got that advice, we’ve been talking extensively with the sector about what is possible.

Okay, just quickly, you’ve asked for the Commerce Commissioner to undertake a market study into the building and materials industry. Do you believe we’re being ripped off?

Over the weeks that I’ve had the portfolio, people have been expressing frustrations about how it is they can build a house far cheaper in Australia than they can in New Zealand.

Deloitte did a study this year, which compared Australia and New Zealand, and didn’t really find any major differences.

I’m getting consistent feedback from people who are working in this sector who are doing this every day, who are buying the materials, that they think that there are some things we need to look at, and this exactly why our government made the changes to the Commerce Act so we could have these kind of market studies.

One of the criticisms of the KiwiBuild reset is that there are no new initiatives, really, to speed up the delivery of homes. Is this a missed opportunity to do something radical to address the housing shortage?

I think one of the things that- People were expecting houses to appear overnight, and certainly we set that target for ourselves – 1,000 in the first year. I think when you step back and have a look, actually, if you compare the first Labour government who’s probably held up as the epitome in New Zealand history of a government that built houses, it took two years for them to get the first state houses up and running, and tenants moving into them.

So you’re happy with the state? You’re happy with that rate?

In that time, in that two years- No. No, absolutely not, but what I’m saying is down the pipeline, we actually do have more houses coming, and the changes that we have made in the reset to KiwiBuild about making sure that we’re building the right house in the right place, places that will solve, that we’re getting our capital out of the houses that haven’t sold in places like Wanaka, is all about being able to get that money working in developments where we know there will be demand and we will be able to keep producing more homes for KiwiBuild buyers.

One of the small tweaks you’ve done in the reset is abolishing the asset testing for second chances – that’s people starting again after a separation. How many times can somebody be separated and yet still be eligible for KiwiBuild?

Many people across New Zealand know that once you half your assets after a relationship breakdown, you do find yourself back in that kind of situation. The income test still applies, so you still have to be earning at or below the KiwiBuild income threshold, but we recognise that people who are coming out of-

So it can happen again and again and again?

Oh, well, if you’re below the threshold, yes.

Okay, all right.

But I think most individuals probably wouldn’t want to be finding themselves in that situation. The other really important thing about second chances that is in there is that this could apply to someone who’s moving from one housing market to a far more expensive market, so I think the example that I’ve been using is a teacher from Ashburton who moves up to take a job in Auckland, who finds themselves in quite a different housing market than they were in, but they previously owned a home before.

Okay. All right, just finally, your predecessor Phil Twyford staked his job on the success of KiwiBuild, right? We know how that turned out. Are you going to do the same? Will you stake your job on the success of KiwiBuild?

Look, as a government, we have made a commitment to New Zealanders that we need to be active around getting homes built, and helping people have those expanded opportunities for home ownership. We’re the first to admit that this hasn’t played out the way that we needed it to.

And I know you’ve admitted that, but will you stake your job on it, Minister, just like your predecessor did?

I don’t know that that’s a particularly useful way to put it.

Does that mean that you don’t trust your own policy?

I absolutely trust my policy, and what I also trust is our ability and our courage to call time when things aren’t working and say, ‘We need to change this.’ Let’s remember that we have not had a government active in housing like this in decades in New Zealand. This is a problem a long time in the making. Some of the issues that we campaigned on and that we have implemented and that we have been able to bring through are making a difference for people, and we need to continue to do that, and we are making that commitment to New Zealanders.

Okay. Housing Minister Megan Woods, thank you very much for your time.

Thank you.

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