Government looks at special purpose vehicles to fund Auckland Council to support housing

The government is looking for ways to finance local councils who can't access its designated $1 billion housing infrastructure fund as they've already reached their debt limits.

The contestable fund, announced last July for use mainly by Auckland Council, was for interest-free loans for councils in high growth areas. It uncovered a lack of ready-to-build projects and an unwillingess by the Auckland body to take on substantial new debt because it is already close to limits that could affect the city's AA credit rating.

At the social services select committee meeting this afternoon, Building and Construction Minister Nick Smith said the government is looking into "special purpose vehicles" - separate debt entitites - as an alternative approach for councils facing up to their debt limits.

"You may have an urban development authoirty that could work like a special purpose vehicle - ie, the urban development authority legislation is intended to create new entities that are a mix of central and local government, there would be a mix of funding and a key part of what those authorities do is provide infrastructure. That is a work in progress."

The special purpose vehicle would be separate from the $1 billion fund which Dr Smith said there has been high demand for.

The government has received $1.5 billion worth of bids from council’s across the country for funds.

Under the scheme, the government will invest up front to ensure infrastructure is installed. But councils will have to repay the investment or buy back the assets once houses have been built and development contributions paid.

Dr Smith says he does not know how much councils have applied for or even which councils have put in a bid.

“We’re leaving that to the panel to make those decisions; my understanding is that the bids are from major cities such as Hamilton, Tauranga, Auckland and Queenstown.”

He says the panel is due to make recommendations next month with decisions due by the end of the year.

Dr Smith denied the fund would be useless for Auckland. "The advice I've had to date is that there are likely to be compliant bids that can work from Auckland," he said. "Not for all of their projects, but for some."

The minister used his half-hour at the committee to defend the government’s approach to building houses.

He says the growth in KiwiSaver withdrawals to help buy a home has tripled in three years, jumping from $200 million in 2014 to $600 million last year.

He also touted figures from Statistics NZ, which reveal New Zealand has had six straight years of growth in residential construction, which “is the longest on record.”

But he butted heads with Labour’s spokesman for Housing Phil Twyford, who quizzed Dr Smith about what the government considered Auckland’s housing shortfall.

“There is an estimate that [there is] a between 30,000-40,000 deficit, according to reliable sources and that’s getting worse, even if you assume 10,000 that have been consented in the last 12 months," Mr Twyford says.

Moments later he clarified, saying the “between 30,000 and 40,000 figure” came from the Reserve Bank.

Last week in Parliament’s finance and expenditure committee, when asked by Labour’s finance spokesman Grant Robertson what he sees as the housing shortfall in Auckland, Reserve Bank governor Graeme Wheeler said he relies on Auckland Council figures.

“[Those figures] talk about a shortfall of somewhere between 25,000 and 35,000 houses [in Auckland].”

Nothing to see here
Despite this, Dr Smith was adamant things were heading in the right direction.  

“The best measure of what is going on in a housing market is price – that’s supply and demand.”

He says it has been “universally accepted across the commentators” since October last year that house prices in Auckland “have not moved an iota.”  

After the committee meeting, he would not give an estimate of what he thought Auckland’s housing shortfall was when asked by reporters.

He did, however, say the Unitary Plan indicates Auckland needs 13,000 more houses a year – “I think that’s reasonably reliable.”  

(Additional reporting by BusinessDesk)