On Tuesday, the government finally announced that five councils would get a share of their $1 billion Housing Infrastructure Fund (HIF). This is the fund they announced a year ago, open to a handful of high-growth councils, to enable the building of some of the bulk infrastructure needed for new greenfield growth. While I appreciate it means that it frees up councils to fund infrastructure in brownfields areas, I can’t help but feel the government are only trying tilt the field against the councils (especially Auckland) to only encourage certain types of development.

The government talk about how this will see up to 60,000 houses built but of course, like initiatives like the Special Housing Areas, of which many have resulted in no houses, it is no guarantee that any houses will actually be built.

The successful proposals are in critical high growth areas including:

  • Auckland Council – $300 million – 10,500 housesGreenfield development (North-west) at Whenuapai and Redhills.
  • Hamilton City Council – $272 million – 8,100 housesGreenfield development (Peacockes) on southern edge of Hamilton.
  • Waikato District Council – $37 million – 2,600 housesTe Kauwhata (new development on the shore of Lake Waikare).
  • Tauranga City Council – $230 million – 35,000 housesGreenfield development at Te Tumu (eastern end of Papamoa) as well as a capacity upgrade to the Te Maunga Wastewater Treatment Plant and a new (Waiari) water treatment plant (at Te Puke).
  • Queenstown Lakes District Council – $50 million – 3,200 housesTwo new greenfield sites (Quail Rise South and Ladies Mile) on the Frankton Flats and an extension of the Kingston township.

Some rough maps of the areas affected is here.

To me one of the more interesting ones is the Te Kauwhata development. The town only has around 600 houses right now so this is a massive increase. It will also result in another pearl on the string of 5-10k people towns right along the rail line between Auckland and Hamilton, further increasing the need for an intercity rail service.

Of course our main focus is on Auckland. Here’s what the government say about how it’s being used.

“The infrastructure funding will pay for five roading projects including a new bridge crossing to the West Harbour ferry terminal, three waste water projects and two stormwater projects.”

And here’s a map of what is being funded in Auckland. There’s certainly an element of PT wash going on by suggesting one of the roads is about connecting the road to the ferry terminal – something the council claim in their press release too. I’m also concerned there is as yet, no mention of the NW Busway. Getting that in, and extended past Westgate is going to be critical if people are going to have any hope of travelling anywhere in a reasonable time given how busy SH16 already is.

As for what it will deliver, the claim is that it will deliver 10,500 houses but it turns out most of that will still be 5-10 years away at best.

“More than 2,000 houses will be delivered in the first five years, with another 8,500 to be delivered in the following five years,” Dr Smith says.

What’s more is I don’t think this is the first time these houses have been announced by the government or council. Back when the government and council were dishing out Special Housing Areas, Redhills was one of the areas approved. It appears, on the surface at least, that the developer promised to build a lot of houses and now can only do so with a big chunk of government and council investment.

Hugh Green Ltd, the Westgate Joint Venture and Nuich Trust plan to develop a site at Redhills/Westgate (opposite the proposed Massey North Metropolitan Centre) into approximately 3,500 new sites and dwellings over 10 years.

Development of the 200ha area will commence from January 2017. The finished development will provide a mix of site sizes and housing types, matched to current shortages.

Set within a 600ha catchment area, the staged development over 25-30 years includes significant reserves and riparian areas, a projected new school and local centre.

The land is currently a combination of farmland, lifestyle properties and small business operators. It is zoned Future Urban under the Proposed Auckland Unitary Plan.

What is also noticeable about the announcement is that Auckland, which is expected to get around 50% of the country’s growth over the coming decades, is getting less than a third of investment. We also know that the city needs billions of investment in infrastructure, so the $300 million here is just a drop in the bucket. It appears that because the HIF is a loan and therefore is debt the council is incurring, if Auckland was to get more it would affect the council’s credit rating (along with the rating of all other councils). As such the government are now hinting at a separate package for Auckland which they’ll announced in coming weeks.

“Auckland has additional housing infrastructure projects it is seeking help with outside of the Housing Infrastructure Fund as it doesn’t have further debt capacity on its balance sheet,” Mr Joyce says. “Discussion on those options are continuing and the Government will have further to say on those matters in the weeks ahead.”

We’ll certainly look forward to seeing what the government announce.

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29 comments

    1. Forget too little, too late, how about we give up on this government’s empty disingenuous housing announcements.

      They are full of shit, not saying they won’t be re-elected despite the appalling mess housing in this city, not to mention the country that National have been complicit in, but give up on these guys changing anything.

      They do not care nor know how.

  1. More housing is great, but this is not in the areas where it needs to go. Whenuapai and Redhills are poorly served by transport infrastructure meaning more urban sprawl and more cars on the roads. Unless they use the North Western busway which National seems to have no plans to implement on the motorway their government agency administers.
    Likewise, the Te Kauwhata SHA will just lead to the same thing, except dumping the load on another council (Waikato District)

    1. Redhills and Whenuapai have their issues but a lack of ‘transport infrastructure’ generally isnt one!. Being at the intersection of 2 motorway class state highways (SH16 and SH18) and a former SH (Fred Taylor Drive) it would be hard to identify a location with better (road) connections.

      1. Wonderful roads. Lots of people like to sit there in their cars listening to their radios. And in 5 years time when SH16 fills up completely all the way into town, they can always get off at Pt Chevalier, and drive along our arterial traffic sewer. Hopefully then the government will widen both SH16 and Pt Chev Rd. That’ll work.

    2. Totally agree, but try doing substantial brownfields development in Auckland. It’s nigh on impossible between resident group litigation, stormwater management, urban design shenanigans and Auckland Transport demands. Like it or not, greenfields development is where we will see the bulk of new housing.

      1. Yes. The government is putting brownfields development into the too-hard basket instead of putting its effort into solving those obstacles. Our future city is being created by following the path of least resistance rather than research-based good design.

  2. This is what Joyce is proposing https://www.newsroom.co.nz/2017/07/11/38289/now-they-go-off-balance-sheet

    Government would own the infrastructure which means it can easily sell it back off.

    What should be down is a State Infrastructure Bank:

    Government funds infrastructure
    How we fund water, civic amenities and even transit will need to change. Development Contributions all upfront are simply not working, not when you have the nation’s largest money handler sitting right in front of you – that being The State! Given the State can access currency and credit at Rates cheaper than any private institution the State is in the best position to bankroll infrastructure funding.

    Thus a State Infrastructure Bank would be set up and loan money to Councils to get the infrastructure built. The term of the loan is 50 years at nominal interest and is repaid as a Targeted Rate on property or properties affected by the new infrastructure to Council who then pays it back to the State Infrastructure Bank. The new infrastructure cost is spread via the Rate applied to the property over 50 years rather than a full upfront cost via the conventional Development Contribution. Regional infrastructure such as motorways or heavy rail should be born by the National Land Transport Fund thus all taxpayers given the often national benefits by such infrastructure (where as Light Rail would be borne by the SIB targeted Rate system).
    With Development Contributions thus the upfront cost taken off the price of a new build and shifted to a Targeted Rate on the affected property over 50 years hopefully both house prices can stabilise out (and more affordable for smaller builds) while infrastructure is built.

     
    Of course there are more finer financial intricacies to a State Infrastructure Bank and how much of a percentage it should bank roll non regional transport infrastructure (heavy rail and State Highways) and so on

    quote context: http://pllqt.it/cWtzOo

    Might seem similar except Government would not own the infrastructure, it would remain vested to the Local Authority.

    1. +1 Ben – good call.
      By spreading the cost of the infrastructure out over part of it’s life is a more productive use of capital and helps to get more properties developed earlier since there is less upfront cost.
      I still think that when we have periods of low inflation, the reserve bank should be “printing money” and using that money to buy up infrastructure bonds. This has the short term effect of keeping some inflation at desired levels (1-3%) and higher employment while providing the long term benefit of increased productivity and a slight reduction in inflation (meaning interest rates don’t need to go as high and consequently our dollar can be more competitive).

      1. Thanks 🙂

        One thing I did miss out was Value Capture Tax that could be useful for Brownfield regeneration. A good example is the CRL route. Values go up so a Value Capture Tax could be used to help pay for amenity upgrades in the area especially if further intensification is triggered.

    2. Logical idea. The only thing I would question is why HR coming out of the Land Transport Fund and LR coming out of the targeted rate? I would have thought all rapid transit should come out of the LTF.

        1. Have a read of Ben’s comment, it was a suggestion in there that I was replying to, I’m well aware that it does not currently come out of the LTF.

      1. “Of course there are more finer financial intricacies to a State Infrastructure Bank and how much of a percentage it should bank roll non regional transport infrastructure (heavy rail and State Highways)”

        I have most likely looked at the inter-regional value of HR and a State Highway while LRT was within a region itself. LRT especially the northern Airport Line would most likely be better funded from a Value Capture Tax than straight targeted rate. The Southern Airport Line would be 50% NLTF and 50% value capture/targeted rate.

        All said happy to put the Airport Lines under full NLTF.

        1. Full funding of some roads and not others, and funding of some modes and not others is a mess and needs reform. It has a poor theoretical foundation and distorts decision making. Sate highways in cities are full of local traffic. In fact they would be freer for more important freight tasks if there was a level evaluation method for complementary systems, what ever the mode or weight, or distance travelled.

          1. The Local Traffic on a state highway issue would be dealt with from Congestion Charging. Shooting on to the motorway and getting off at the next offramp would be pricey compared to staying on local roads.

            You know as I do Patrick congestion is often formed from localised movements on the road. If our AT HOP fares were more equitable we would be penalised using the rail system to go to the next station. But AT like the Planners have the long distance commute mode stuck in their minds while travel patterns are dispersed. Until they shake that mentality your issue of local traffic on highways remains.

            As for the SIB I am trying to cover Greenfield developments in the Future Urban Zones without further burdening the existing urban areas. The Value Capture Tax would be ideal for Brownfield areas if a trunk line water pipe or a heavy rail line got upgraded subsequently.

          2. Well no, Ben. This idea of pricing traffic off motorways and back onto local roads has been expressly, and correctly in my view, rejected. After all it is a more than somewhat absurd idea as the motorways were built precisely to relieve the local road traffic burden.

            The road pricing model being pursued is a region wide all road one via GPS, not a motorway ramp gantry systemic one. The power of road pricing after all is to shape demand either away from peaks or away from driving entirely, not simply to move the same journey at the same time to a different driving route.

            I know the previous Mayor talked of tolling motorway ramps but that is not supported by anyone still involved in the project, and particularly the big central gov players.

          3. This is also why we need a system wide road congestion charging scheme (all Auckland roads) sooner rather than later. To even up the playing field between the different transport modes.

  3. So I wonder what we can expect to be announced in the “coming weeks”. I guess it’ll be voter candy, and determined by the Nats’ excellent market research – do voters in Auckland want interceptor work brought forward and more separation of wastewater and stormwater? Or do they want more roads? Do we need the heavens to pour more water on our aging infrastructure to help keep the issues in sight?

  4. I am a keen follower of your GA.
    There have been many interesting articles and responses.
    I want Auckland to progress in a good way and think that blindly building more roads doesn’t work. There is another way.
    I always wonder what the next story will be, re PT, and the decisions that will be made knowing that there have been many wrong decisions over the years. eg the locating of Parnell station, leaving out bus lanes, forgetting about pedestrians and cyclists, blocking Manukau and Onehunga stations to extend the lines etc.
    Now I await what AT and the NZTA will decide next. They must be near to making some big $billion decisions soon.
    Will the port be moved? a new stadium built on the waterfront? the CRL completed sooner rather than later and which of the 3 finalists get the contract and how they decided? Will they go for an E-W link or a light rail line to the airport? Will the council sell some assets eg Watercare or the airport? Can they find $1 billion to repair the pipes? What about the third line?
    We must get the biggest bang for our bucks and for me it is clear that the CRL and apartments near transport hubs are best.

  5. Typical do nothing nats!
    We have to be seen to be doing something so let’s just do enough to keep enough people (voters) on board.

  6. Rather unusual complications are manifesting themselves in Auckland because of housing. Some will take a few years to surface, mainly longer working hours exacerbated by lengthy travel from outside Auckland where people are going to, to find affordable housing. Add to that large long term debt and the like but some are becoming a new normal.

    Schools can’t attract or retain teachers and there are numerous other professions similarly struggling.

    Another is the amount of people whose lives are on hold because they can’t move for lack of housing, those with chronic relationship problems or can’t find long term affordable housing. It’s like a pressure cooker that’s relief valve is stuck, a stressor that doesn’t go away.

    It’s about now, right now that this country badly needs a government who takes this terrible problem seriously.

    But we have National.

    1. Too True. The problem we have is that English is from Treasury. Treasury believe in the power of the market to solve all problems. If it cant be formed into a market it has no value. Problems are fixed by signalling and the market responds. The signals from a person living in a car can be ignored because they do not have the means to participate in the market. This is why we have the situation where an affordable home is $650000 and this is regarded as entry level. The person who can afford this is not living in a car.

      This is why we originally built state housing. BTW these were also built to meet market demand and provided with low interest loans for those who could afford it. The rest were social housing rented at a fixed rate calculated on the average wage. Up until the 90’s the supply was kept up and provided some competition to the private sector and kept rent affordable. The original money to pay for these was money created by the reserve bank it was not borrowed and it did not create inflation. Unfortunately we have now got ourselves tied up in knots because of modern economic orthodoxy. The governments largest response to the problem has been to sell off most of the remaining state house stock when what was needed was a massive investment and building program to provide both housing at cost at the low end and social housing to fix the crisis.

      This is not radical socialism but are the sort of policies still pursued in many advanced nations who run a Social Democratic or mixed economy. We have drifted so far from where we used to have an inclusive fair society that we regard any practical solution to fix it as radical. We can launch rockets into space and build high tech yachts but we cant house our people or provide jobs that don’t have to be topped up by working for families. We understand the cost of everything and the value of nothing.

      1. Not sure about your argument regarding Treasury, they have been quite concerned about risks associated with high house prices, especially around the need this generates for the government to pay accommodation supplements. This is very much a political decision, the majority of houses are still owner occupied and these voters have been quite enjoying watching the paper value of their houses rise.

        What are you basing your suggestion ‘the governments largest response to the problem has been to sell off most of the remaining state house[s]’ on? This is simply not true.

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