John Armstrong's opinion: Labour must 'stop bathing in its own mythology', admit KiwiBuild reset is hopeless

September 6, 2019

Among the changes: officials are abandoning the plan to build 100,000 homes over 10 years.

This week’s confirmation that Labour is ditching its longstanding promise to build 100,000 new dwellings over a period of 10 years should have surprised no-one.

What is surprising is that the ruling party is not going the whole hog and dumping altogether the complete and utter fiasco which goes by the name of KiwiBuild.

KiwiBuild has survived what was termed a “reset” — a touchy-feely term to describe a top-to-bottom review of policy.

The result of the reset is perverse. The problem with KiwiBuild is not so much its target. The problem with KiwiBuild is KiwiBuild.

The policy never had a hope in Hades of meeting a target which Megan Woods, the country’s Housing Minister of all of 10 weeks, has described as “overly ambitious”.

That phrase was carefully chosen. The deployment of such a euphemism avoided Woods being seen to be heaping guilt and shame upon Phil Twyford, her already humiliated predecessor in the housing portfolio.

In politico-speak, however, “overly ambitious” translates as something akin to “fundamentally flawed” or “hopelessly hapless”.

The $400 million investment in new home ownership schemes is being welcomed, but some say it lacks detail.

Woods’ verdict on the target could be summed up by two other words — “mission impossible”.

Twyford’s demotion was a very necessary first step in what is going to be a very slow and very long process in Labour recovering even a modicum of credibility in an area of government activity where the party has assumed it has occupied the political high ground almost as of right.

This week’s announcement by Woods of the outcome of the policy reset was a further exercise in trying to recover the ground Labour has lost from the disastrous experiment that has been KiwiBuild.

Not that Jacinda Ardern had any choice in the matter.

In the end, the figures dictated the fate of a promise which carried so much weight in terms of expectations — and, ultimately, too much weight — that when it came to the “Kiwi Dream” of property ownership, Labour would deliver.

Megan Woods’ announcement comes after the scheme’s been marred with numerous issues.

Since the scheme’s official launch 10 months ago, KiwiBuild has delivered the grand total of 258 completed homes, with another 537 currently under construction.

That leaves a mere 99,205 to go. You did not have to be a genius of the mathematical kind to work out that the chances of KiwiBuild meeting its original target were zero.

In retaining the target, Labour was slinging an albatross around its leader’s neck.

You can call it a back down. You can describe it as a U-turn. Regardless, policy flip-flops by governments don’t come much bigger than the mega-sized example of Wednesday’s announcement.

The upshot was that the media focussed on the discarding of the target and the lack of a replacement.

Left unanswered was the question why KiwiBuild had not been consigned to the rubbish tin altogether, rather than just the target.

The answer is that the politics do not make that possible.

With the election little more than 12 short months away, there is simply not enough time to develop an alternative model - and trial it -before letting it loose in its entirety across the housing market.

But neither is it an option that Labour goes into the election campaign with the page in its election manifesto titled “housing policy” left blank.

What we got was a tweaking of KiwiBuild’s settings. A patch-up job in other words. To be more precise, a patch-up job that Labour hopes and no doubt also prays can enable the scheme to limp through election year still intact and functioning at a level that makes it no longer quite the embarrassment that is most avowedly the case currently.

The best that Woods can reasonably be expected to achieve in advance of next year’s election is to neutralise what — apart from the state of the economy— is the prime issue for the public in Auckland, the country’s prime market for votes.

The mechanism which Labour clearly hopes will produce a turnaround in its fortunes on the housing front is a “dashboard” of statistical indicators which will provide a single source of information relevant to tracking the progress being made by the Government’s housing programme.

The PM couldn't say how many of the 16,000 homes originally due to be completed by the end of her Government's first term would be delivered.

Those statistics will be pulled together on a monthly basis. They will include a myriad of measures as varied as Reserve Bank figures on first-time borrowers; data on the rental market; the number of building consents for new houses and apartments granted each month by local authorities; the number of social housing units, the number of houses sold or under construction bearing the KiwiBuild tag and so on.

Normally, the vast gamut of statistics covering housing matters exist in not-so-splendid isolation from one another.

The creation of such a dashboard could well turn out to be a very clever move. If those indicators are by and large pointing in the right direction, Labour can claim that its overall housing policy is working.

It is a big gamble, however. If the indicators start pointing in the wrong direction, Labour’s housing headache will be further compounded.

More fundamentally, the dashboard does nothing to resolve the anomaly at the core of KiwiBuild which makes it impossible for the policy to work.

To understand why KiwiBuild is doomed to fail you have to go back to the massive state house building programme of the 1930s and 1940s.

The famous newsreel footage of Michael Joseph Savage carrying a dining-table through a throng of cheering spectators and into what was the first state house built by the first Labour government is an iconic moment in Labour’s history.

Since then housing policy has occupied a special place in Labour’s heart.

Fast forward some 75 years. Add a crisis of supply in the housing market. Add the growing frustration of ever increasing numbers of both lower-income and middle-income earners finding it more and more difficult to get a foothold on the property ownership ladder. It all totted up to an enticing recipe for another massive house-building programme.

Megan Woods and Kris Faafoi are joining the under-fire Phil Twyford as the Government tries to tackle the housing crisis.

There is one crucial difference between then and now, however. Labour’s earlier house-building programme was all about building state houses. KiwiBuild is about building “affordable” homes in the private property market.

As a major player in the rental market, the state can influence the level of rents paid by tenants in the private rental market.

KiwiBuild was constructed on the premise that the state could determine prices in the home ownership market.

To succeed in battling market forces in the property market would probably require bankrupting the Treasury. It was thus a false premise.

Wednesday’s announcement was therefore all about some very big chooks coming home to roost. It should have been the day Labour stopped bathing in its own mythology. Twyford was steeped in that mythology. KiwiBuild was regarded as sacrosanct. Unveiled at Labour’s annual conference in 2012, the policy never got the scrutiny it clearly needed to check its functionality.

During his 20-month stint as Housing minister, Twyford somehow managed not only to surrender Labour’s advantage over National in the handling of Auckland’s housing crisis, he also handed that advantage holus-bolus to National.

The project is so big, John Tookey told Breakfast, that it takes a long time for changes to take effect.

That is Twyford’s legacy. Whether Woods will do much better is still very much a moot point.

While Wednesday’s announcement dangled an expanded assortment of financial carrots to make it easier for would-be first-home owners to get a toehold in the residential property market, the reset failed to address let alone remedy the glaring structural faults in the KiwiBuild model.

These are described in Cabinet papers as as the “fundamentals of land supply, development capacity and infrastructure provision”.

These documents highlight problems with the planning and consenting requirements faced by developers in bringing new housing to the market, as well as the high price of land and chronic deficiencies in infrastructure to get work under way on subdivisions.

Further examples of the obstacles to affordability include shortages of soled labour in the construction sector along with high construction costs.

Woods’ response to the latter was to suggest to Commerce Minister Kris Faafoi that a market study into building materials be “prioritised” by the Commerce Commission.

If that action — or inaction — is an accurate gauge of Labour’s willingness to tackle KiwiBuild’s shortcomings then it might well be best to put the scheme out its misery, if not now then after the election.

In particular, Woods’ claim that the KiwiBuild re-set is demonstration that when Labour’s policies are not working, “we are honest about that and fix them” rings especially hollow.

In short, KiwiBuild is still broke and it is going to take a lot more than what was on show this week to fix it.

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