On Newshub Nation: Lisa Owen interviews Housing Minister Phil Twyford 23/06/18

Lisa Owen: Auckland Council has just announced plans to count the number of homeless in the city, around six weeks after the government said it would create an extra 1500 social housing places by the end of winter. That’s one of a number of ambitious targets for housing minister Phil Twyford. There's also the small matter of constructing a thousand KiwiBuild homes this year and a hundred thousand over the next decade. Phil Twyford joins me now.
Phil Twyford: Good morning, Lisa.
Lisa: Good morning. Your target is 1000 homes within a year, 100,000 in 10 years, you need to ramp things up. So, you’ve talked about pre-fabrication in the past; how are you going to use that industry?
Well, you know, off-site manufacturing, or modern pre-fab, offers us a fantastic opportunity to tackle some of the very real obstacles and capacity restraints that we’ve inherited to build up the numbers. And so I’m really happy to announce today that cabinet has agreed that the government invite expressions of interest from construction firms and investors, both internationally and in New Zealand , on how we can work together to establish a modern off-site manufacturing house building industry in New Zealand.
So you’re asking them to put their hands up if they’re interested in pre-fabricating KiwiBuild houses, at what scale?
Well, scale’s the critical thing here. And that’s the wonderful opportunity that KiwiBuild offers. We can contract work, thousands of houses a year over multiple years, to firms that can scale up. You know, one of the very real problems we’ve got is the high cost of building. Build costs have gone up by per cent over the last decade and at the moment they’re running at three times the rate of inflation. The international benchmark for off-site manufacturing of houses can deliver a build cost of $1200 per square metre; that’s half of what we’re achieving in New Zealand at the moment. So this is a wonderful opportunity. And we’ve had discussions with investors both here and abroad, people like Tex Edwards, the entrepreneur behind 2degrees. He’s now very focussed on how we can shake up the construction industry in a similar way to what they did with the telecommunications industry; and off-site manufacturing is the big opportunity.
Ok, so there’s a couple of things there. First, what percentage of KiwiBuild houses do you anticipate would be made by prefabrication or off-site construction?
Can’t really put a number on that at the moment. It’s going to take a few years before we could, for example, working with the private sector, establish a factory at scale to do this. In the meantime, we’re getting on with building houses in the traditional way. But I would hope within a few years when we’ve ramped up to 10,000 or 12,000 a year, a substantial proportion of that would be built in a factory using high-tech, high-precision gear.
So more than half?
I would hope so, Lisa. But it’s very early days to be putting a number on that.
Ok, well, you mentioned finance and investment there, because it is very difficult for first home buyers to get mortgages for pre-fab houses. So how would this work? Would the government underwrite pre-fabricated houses, essentially pre-buy them and then on sell them to first home buyers? Or how would it work?
That’s certainly how it could work. But when we’re building we’ve got, for instance, the state house building programme, we’ve got KiwiBuild houses. The idea is to bundle up that supply and then contract that work, in much larger numbers than we’ve ever been able to do in New Zealand, to firms that can deliver at the kind of scale and pace and cost that we want.
So you might not underwrite? You might ask investors to put all the money up-front, pay for the pre-fabrication and then on sell them so that first home buyers don’t have to get a pre-fab mortgage, as such?
That’s right; it could quite possibly work that way. It’s the scale of the orders, the amount of houses, that’s the thing that we’ve never had in New Zealand And if we were to contract work, let’s say 3000 houses a year every year for five years, what the investors and the private sector tell us, is that that would give a firm the confidence and the ability to invest in the plant and the technology.
So you would give them an up-front contract so they could afford to invest and expand, you would tell them how many houses they’re going to get?
Yes, that’s what we’re thinking.
But you don’t know how many houses you’re talking about just yet?
No, it’s too early days. But the government now wants to have a conversation with investors about exactly how we can work together to build this capacity. There are already some great firms in New Zealand, very entrepreneurial firms, who are doing pre-fab, high-tech, modern pre-fab already.
So how serious are the conversations you’ve been having and who are they with? Which investors are keen to actually put money down?
I don’t think it would be fair for me to talk about specific investors now. But we have had some serious conversations, and they’re ongoing.
Ok, so let’s talk about one investor you might be prepared to mention. The Super Fund has been interested in infrastructure, they’re interested in rail. Are they interested in KiwiBuild?
Yes, they are, Super Fund have been in discussions with us. And the Super Fund, they recently spent some time in Europe with some other interested investors, visiting some of the world’s biggest off-site manufacturing house building companies.
Ok, so you would be interested in considering the Super Fund as an investor in KiwiBuild?
Absolutely. But we’re open to talking with everybody about this, Lisa. And it’s not an exclusive thing. But we welcome the Super Fund’s interest.
All right, well, pre-fabricated houses, they still need land, and that’s one of your big problems. Half of these KiwiBuild houses are supposed to be in Auckland. So where is that land for your pre-fabricated houses?
So, one of the ways that we’re going deliver KiwiBuild is through large-scale urban development projects. And you know recently we announced the purchase of 29 hectares of land at the Unitec block in Mt Albert.
So that’s one. You said when we spoke about it you would like up to ten developments of that size. So where are the nine other ones?
So, we’re working on that now. The KiwiBuild unit which was established within the Ministry of Building Innovation and Employment, that’s the embryo of the urban development authority that we hope to establish next year. That’s already doing this work and identifying a number of sites. And we’ll be announcing some of those sites in the coming weeks and months.
Weeks? Weeks, you say?
Yeah, we’re working closely with Panuku — Auckland Council’s development agency. It’s part of a strategy to really do some large-scale urban intensification projects in Auckland.
OK, so how many of those sites have you identified in the Auckland area on a shortlist?
There are about eight major sites in Auckland that we’re doing due diligence on at the moment. And in the coming weeks and months, we’ll be announcing those.
Would you consider them central sites? You were very clear about the fact that Unitec— When you were dropping clues about Unitec, you said it was a central Auckland site. I mean, proximity, these sites?
The most important thing, actually, is really good transport connections. And we want to build off the big investments in the rail network of recent years. The critical thing is to build these urban communities with really good transport connections.
Okay, well, you had called for expressions of interest from private developers who were doing apartments and multi-unit dwellings. You’ve told us that you’ve got about 100 proposals from developers. How many are likely to go ahead?
I can’t say that at the moment. The team are working through all those proposals and casting a beady eye over them to look at the commercial viability, the quality of the projects and so on. I’m very confident, though, that the buying off the plans programme is going to deliver several hundred KiwiBuild homes in the first year of the programme from July 1.
Time frame for announcing which of those people you’re going with, if any?
Within the next few weeks, we’ll be making announcements about specific projects, locations and numbers of homes.
Okay, David Parker said this week that the Government’s going to adopt this select committee recommendation to relax foreign buyer rules. So I’m curious about this. Because does that mean that the Government could be underwriting apartment buildings where some units are KiwiBuild and going to be sold as KiwiBuild and others are just going to be sold off potentially to foreign buyers?
Well, the first thing I would say is that the Bill that’s before the Parliament at the moment is designed to encourage offshore investment in new developments and new building. That’s always been our intent. But yes, KiwiBuild investment through the buying off the plans programme could be underwriting or buying off the plans KiwiBuild homes in, say, a large scale development that is also supported by foreign direct investment.
And are you happy for that to happen?
Very happy.
You would be underwriting projects where a significant chunk of them would be going to offshore buyers.
So, we want foreign direct investment in new builds. That’s always been our position.
Okay. So the first 18 KiwiBuild homes in Papakura — they’re due to be ready in August. Are they on track?
Yes, they are. And my hope is that, Lisa, we’ll have families moving in in October into those homes.
Okay. So have they been sold?
No, not as yet.
How many people are interested? And when do you start that process?
So, on July 1 — in that first week of the KiwiBuild programme — we’re going to be setting up a whole process for people to pre-register for these homes. And as we’ve discussed before, we expect that in the early years of the KiwiBuild programme, people will go into a ballot. We’re expecting there’ll be a lot more demand than—
So around July 1, you’ll be giving us those details about how they do it?
That’s right.
Okay. You have said that no one needs to sleep in their cars this winter. And in May, you promised to secure 1500 new social housing places before the end of winter. How are you tracking? How many of those 1500 are available right now?
Yeah, so a little more than half are available right now. We’ve made really good progress with the emergency and transitional housing — that’s the core of that commitment. This is fixed term, short term housing with services to—
So are you confident you’re going to make the 1500 by the end of winter?
Yes, I am. Yes.
Okay. What about longer term solutions? Because under the previous government, community housing groups could apply for up to 50% of the money upfront to build social housing units. Is Labour going to honour that proposal?
Yeah. The first thing I want to say is that it’s very important that we build a really good safety net to house the homeless, but we have to build— the real solution here, the long-term sustainable solution is to—
Are you going to honour—
…build more permanent public housing. And so we’re committed to working with the community housing sector. And in the Budget, we announced that we’re investing about $4 billion in the building of a net additional 6400 new public houses over the next four years.
I’m asking about the mechanism specifically, because we’re being told by community housing groups that they’re in limbo at the moment under this proposal. That they put forward all these proposals, and they’re now hearing noises that maybe you are not going to honour that capital contribution upfront, and that they’re potentially being told to go and find private equity partners. Is that right?
We are going to continue to work with the community housing sector. So of the 1600 additional homes a year, Housing New Zealand will be building at least 1000 of those. But I expect that most of the other 600 homes a year will be built by the community housing sector. We’re going to continue to do what the previous government did, which is to provide a commitment of the income-related rent subsidy — that’s the amount between—
Yes. So you’re going to do it?
Yeah. Between the social rent and the market rent. An upfront commitment with a premium on top of that that will help the community housing providers, who are doing fantastic work, to continue to build new homes.
I’m sure they’ll be pleased to hear that. The other issue is that the schedule of pricing for those properties— You, yourself, have raised the price of a three-bedroom KiwiBuild property $50 grand to $650,000 in Auckland. These community housing groups are expected to build three-bedroom houses for $615,000. Are you going to have to revise that figure? Because you can’t build for that price. Do you expect them to build for that price?
Yeah, one of the problems that we’ve got is that build costs have been going up so steeply. So the negotiations with the community housing providers are ongoing. We want them to do more—
So you’ll review the number? You’ll review the $615,000?
Look, I’m happy to take advice from my officials and relook at that. But I— Lisa, let me say this, we want the community housing providers to do more. Iwi, local councils — they want to do more, but they lack access to capital. And I’m working on ways that we can create new sources of investment for those organisations.
All right. Well, come back and tell us about that sometime soon.

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