Patrick Gower interviews Nick Smith

Smith commits to improving the Auckland housing shortage – estimated by the Productivity Commission to be 32,000 and growing – by the next election.

Housing Minister insists foreign buyers are “not having a significant effect” on the Auckland housing market and rejects Labour’s claims offshore Chinese buyers could be buying as much as 30% of houses.

“I don’t believe that for a moment… I don't actually think fair-minded New Zealanders are going to make a judgement on the basis of people's Chinese-sounding names.”

Asked if he is keeping his promise to make buying a house in Auckland easier when prices have gone up $3000 a week in the past year, Smith says: “No. Quite clearly, the Auckland market is overheated. Quite clearly, house price increases of 20% in one year are not sustainable” but says the problem of home ownership goes back 30 years.

Says the information being collected by IRD in October is “not a register” of foreign buyers.

Describes Auckland housing as a “challenge” not a “crisis”.

National is “open” to iwi having “input” into governance of New Zealand’s lakes and rivers alongside councils and to discussion about improving water management.

Smith encouraged that “iwi are not looking for a financial cut”.

Rejects Sir Mark Solomon’s claim he acted contrary to the Treaty of Waitangi’s spirit of cooperation when he didn’t talk to Ngati Whatua about first right of refusal on Crown land; “The first right of refusal is held by a limited partnership of 13 iwi. And so we sat down with the party that we owed the legal obligation to.”

Tova O’Brien: Last week The Nation and the Weekend Herald kicked off what’s been an all-consuming debate on foreign buyers. A snapshot of Auckland home sales from February to April this year showed that almost 40% of homes were bought by people with Chinese surnames. But what the data couldn’t prove was residency. Cue outrage, claims of racism and claims by National that Labour was playing the race card. But is it doing enough to gather information and manage house prices? An interview we’ve been very much looking forward to, Housing Minister Nick Smith is with Paddy.
Patrick Gower: Good morning, Minister, and we’ll start first, actually, with your reaction to Mark Solomon, who there was calling for co-management of New Zealand’s fresh water, saying he wants a deal where iwi-appointed representatives sit alongside, effectively, elected councils and have a say over who gets access to water and how much. Are you open to that?
Nick Smith: Well, I was actually quite encouraged by Sir Mark’s interview with you in that he was very moderate. ‘We’re not going to get into divisive argument about who owns the water, that, actually, no one does, that it’s an argument about improving our management.’ The truth is New Zealand’s been pretty slack around its management of fresh water. You know, in 2011, we brought out that national policy statement, in 2014, the national standards. What’s really constructive about Maori is that they have substantive economic interests in sectors like farming, as well as having this very strong environmental tone. And in my experience, they’re playing quite a constructive role in bringing what was previously a very divisive argument between, sort of, the economic interests, the farmers and the power companies, and the environmentalists. They have both those interests, and so I think their input is constructive to New Zealand lifting its game.
Okay, because by input, and that’s the word that Sir Mark used as well, he is talking about iwi representatives appointed, non-elected, sitting alongside elected councillors—
I listened to his interview very carefully. He didn’t actually say that. He did certainly—
But would you be open to that?
We’re certainly open to input, so the Government’s view is that you can’t—
You’re open to input in terms of iwi representatives alongside a council?
Oh, absolutely. So if you look at, for instance, the deal we first did when we became Government with the Waikato, around the Waikato iwi authority, the final decisions on the way in which the Waikato River is managed is by the elected regional council. But we have a co-governance body…
Sure.
…the Waikato River Authority, that has substantive input. This week I’ve been in Lake Taupo, where we’ve just marked three years early negotiating a 170-tonne reduction in the amount of nitrates going into that, New Zealand’s biggest water body, of which Tuwharetoa have been an absolutely vital party.
Yeah.
Now the Government’s view is—
The concern here, though, is something extra than that, isn’t it? It’s sitting alongside the council and having a say, and we’ve seen in places like New Plymouth where talk of appointed iwi representatives and stuff like or of Maori wards—
And that didn’t fly there.
Didn’t fly there. So will you go there? Are you prepared to go there?
Well, the Government’s view is that we are open to a discussion – how we can get a more effective input for iwi into the way in which we manage fresh water. We think that’s part of the game that New Zealand needs to do to lift how we manage fresh water.
Sure. Whatever happened to the National Party and one law for all? Because this sounds like they are going to get something a bit extra.
Well, certainly, the Government’s view is that iwi does have rights and interests in water, and we need to be able to practically express those in a way in which we manage it. That’s where the discussions are very constructive, and I’m very much encouraged by the sorts of comments from Sir Mark this morning in which he’s saying that, look, iwi are not looking for a financial cut. What they’re looking for is effective input so that New Zealand can do better at how it manages that fresh water resource, and that’s in everybody’s interests.
Okay, what we wanted to talk to you about this morning is, of course, foreign buyers, and I want a yes or no answer to this first question. Are offshore foreign investors a problem in the Auckland market or not?
Well, the issue is whether they’re having—
Yes or no?
Well, it’s whether they have a significant input. All the advice that we’re getting—
Are they are a problem, yes or no?
All the advice that we are getting from whether it be the Treasury, whether it be the Reserve Bank, whether it be the Productivity Commission or my own ministry, is they’re not having a significant effect.
So, no, they’re not a problem?
Well, no, I’m simply saying that our advice is that they’re not having a significant effect and that, actually, the core issue around housing affordability is supply.
So, okay, you want give a yes or no answer. Are you okay with the current level of foreign investment in the Auckland property market?
Well, we are going about legislation in the Budget to get further information in that space. What I’d say to you is that the really important issues, if we’re going to make it possible for the average young Kiwi family to be able to own a home…
We’ll get to that. We’ll get to that.
…is that the key issues—
Are you okay—?
Absolute key issue is supply, and I have no information—
Yes, we’re going to come to supply.
What we've got from Labour last week is a bunch of information about Chinese-sounding surnames. Now we are not going to make judgements on an important issue— we're quite happy to have a well-informed discussion around what the appropriate levels of foreign investments are in New Zealand.
So would you go as far as to say— would you go as far to say that the level of foreign investment in the Auckland housing market is a bit of a non-event?
We are saying it's not the dominant issue in respect of making houses affordable for Kiwi families.
Because you sat here before the election last year and said it was a non-event. Do you stand by that?
I certainly say it's not the significant issue. If we want to make houses more affordable, we need to deal with land supply, infrastructure costs, productivity in the sector, materials -
Yes, we'll come to that.
Those are the real things.
Let's look at Labour's figures — 9% of the population in Auckland is Chinese. They came out with figures showing about 40% of those Barfoot & Thompson house sales went to Chinese. Basically, saying it could be up to 30% are foreign buyers. Do you rule out that it could be that high, though?
Well, Barfoot &Thompson, who actually own the data, do not agree with Labour's analysis of it. They're saying it doesn't— it's not a credible way. And I don't actually think fair-minded New Zealanders are going to make a judgement on the basis of people's Chinese-sounding names.
But could it be that high? Could it be as high as 30%?
No, I think people, though— I think Labour claimed that 39% of house sales were going to overseas Chinese buyers. I don't believe that for a moment. That is not consistent.
What do you think it is? Do you think it's about 1% to 2%, because that's what you said last year?
We've got legislation before Parliament. I'll tell you what information we do have. We do know that there are 25,000 off— out of New Zealand, non-residents claiming either deductions for renting a house or income from renting houses, so that's about 1.2%. Right, so that over the total housing stock.
So that's what you think it is?
And that number has been quite consistent for about the last 15-20 years. We accept that that information's not imperfect. That's why at Budget time, we introduced legislation into Parliament that is going to give us far better information. We don't mind having a discussion, quite properly, about the appropriate levels of foreign ownership in New Zealand, but what we're not going to have is one of these cheap, ill-informed debates that targets one ethnic group. That's not fair. That's not the New Zealand way.
Because, you know, with that data that you're going to collect, I mean, here's a couple of quotes — 'wild-goose chase that's going to cost mega million’. That's about collecting data on foreign buyers. Who said that?
Well, look, certainly—
'Wild-goose chase costing mega millions.' Do you know who said that?
Look, I’ve rejected the idea of a register, and I still reject— I still reject the idea of having a register, where you can look up and see whether the property in Mt Eden Road or a particular address is owned by a New Zealander or not. I'm not playing that game. What I am saying, and what we're doing—
You're playing a game with words. You don't want to call it a register because it looks like a U-turn.
No, what we're going to do is we are going to collect better information.
Yes, and that's what you called collecting better information, which is what we asked you about. That's—
No, at that time you asked me about a register. I said at that time—
That's what you've called a wild-goose chase that would cost mega millions, but now you're doing it.
I remain of the view that the key issues around housing are supply, and I’m going to put my energy and effort into those things.
Yes, and we're going to come to supply. The Reserve Bank calls it a register. Why can't you?
Well, I’m not sure what the Reserve Bank— and can play name games. What I think is what the Government has done in the budget is actually pretty sensible.
You're playing the name games, Minister, not the Reserve Bank, not anyone else.
No, I’m not. I'm simply saying— I’m saying the legislation that we provided for in the Budget, that makes sure that people who are investing in property is paying their fair tax. That's going to give us—
So it's not a register? It's not a register.
No, it's not a register, because it's not a register, because you're not going to be able to look up particular property.
Ok. We'll move on. I don't really mind what we call this thing.
What it is going to do is give us better information, and that's good.
What you did say on this programme was that you would make house buying easier. You would make buying a house easier. Is it easier?
Well, if we look at housing affordability data, actually, because interest rates are a fraction—
Is it easier?
If we look at the credible data — Massey University has a housing-affordability index — housing affordability across New Zealand is substantially more affordable than when we became the Government. If I look at the home starts scheme, I am being inundated with applications for that scheme, and that's going to be the most generous support that young New Zealanders have had to get into their first home than what's been provided in a generation.
Why don't we look at some data from the Real Estate Institute, which has put the average Auckland house price at three quarters of a million dollars, going up $3000 a week in the past year? Is that easier? Is that easier?
No. Quite clearly, the Auckland market is overheated. Quite clearly, house price increases of 20% in one year are not sustainable, and that is all the more reason for the Government to—
So you've failed to make it easier, haven't you?
Over the last year, exactly the same way as under the course of the last Labour government, we had increases well in excess of 20% per year; we had house prices double across New Zealand. Housing affordability -
Do you just admit, Minister, that you've failed to make it easier in the last year?
Look. See, the problem of home ownership in New Zealand has been going back for 30 years.
$3000 a week. That's the figure, $3000 a week. Yes or no on this one — is it a crisis?
It is a challenge. And look, we have a— Paddy, we could spend all your programme having an argument as to whether it's a challenge or whether it's a crisis. That ain't going to get a young family into a house.
Let’s move on to something -
We've passed more legislation in the last year on housing than in the last 25 years. Home ownership has been going backwards for 30 years. Anybody that expects— I've been minister for a bit over two years. Anybody that thinks you can solve long-standing problems in that short period is simply incorrect. I am absolutely confident that the measures that we are taking are going to make the long-term difference because it is important that Kiwis can afford homes.
And we're going to talk about those right now, because something that will help a young family into a house in Auckland is supply. Now, the Productivity Commission, which you quoted before, says there is a 32,000 shortfall in Auckland right now. 32,000. Can you get that down, that shortfall, by the next election?
Well, when I became minister, we were building 4000 houses a year in Auckland. We're now building 8000 a year. That is the fastest rate— That has doubled over the course of two to three years. That is the fastest rate of growth. And Paddy, it might be easy to sit in these studios and talk about building another thousand houses. That is a power of work to create the sections, the subdivisions; to get the builders, the plumbers and everything else, and I actually—
Exactly.
To have been able to double the rate is actually a pretty marked achievement. Albeit, I'm saying we have to keep the foot on the accelerator.
Yeah, good job, and it is very, very hard to do, so can you give me a clear answer on whether you can bring that 32,000 shortfall down by the next election? Can you do it?
Absolutely. And if you look at the pace—
Because the Productivity Commission says you can't.
We'll have to mark it around what is the rate of increase, you know? We've put out an accord with the Auckland Council. 9000; year one, we actually got 10,500. Year two, out to 13,000 homes. Year three, out to 17,000 homes; working very hard at opening up those ladders.
So down from the shortfall of 32,000 to what? Give me a number. Come on.
Even anybody making an estimate, Paddy, around what that shortage of those number of houses - I've seen three or four different figures between the Productivity Commission, my own ministry and the like. It's not exact, but what I do know is this — in Christchurch, we had house price inflation of 15%, 18% several years running. We lifted the house build rate from 1000 a year to 4000 a year. In the last year in Christchurch, house prices have only gone up by 2%. Rents have dropped by 5%. What does that tell us? Supply matters. Arguments about Chinese-sounding names is not going to make a vote of difference to the young families we want in homes.
Supply does matter. And another one of your initiatives to increase supply, building on Crown land, and this legal fight that you've got in with Ngati Whatua. We saw Sir Mark Solomon there say that you, that Nick Smith acted completely contrary — these are his words — to the spirit of cooperation under the Treaty. That's what Sir Mark Solomon said about you.
And he's entitled to that view.
But are you embarrassed that Sir Mark Solomon is saying that about you?
Oh, look. I get criticism all the time, Paddy — from you and all others.
Are you sorry for the way that you've dealt with Ngati Whatua?
The way in which for instance a month before the Budget, we sat down. First right of refusal — let's be really clear here.
But let's just be clear what Sir Mark Solomon is talking about. He's saying you acted against the spirit of the Treaty.
No, I don't accept that. Because a month before the Budget, we sat down with the party who holds the first right of refusal. Now, actually, Ngati Whatua does not have a first right of refusal in Auckland. The first right of refusal is held by a limited partnership of 13 iwi. And so we sat down with the party that we owed the legal obligation to.
So when Mark Solomon says that you acted against the spirit of the Treaty, he's wrong?
I disagree with him. I disagree with him. I disagree with him.
All right, Minister. Thank you very much for your time.
Good to talk to you.
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