Bill English's 'thinking out loud' on the affordable housing problem suggests the Government's planning some serious action

By David Hargreaves

Beware of senior cabinet ministers giving speeches that have no apparent purpose and contain no new initiatives. It could be the vacuum that comes before a gale of new rules and regulations.

I confess to having been rather perplexed when a copy of Bill English’s latest musings on affordable housing clunked into my inbox on Tuesday evening. I was further perplexed and intrigued when hearing that the speech, which wasn’t pre-publicised by the Government’s PR machine, had in fact been given last week. What that says is that the musings were intended for a select, businessy-type, audience and then the minister decided they should be shared more widely.

Why was I perplexed? Well in essence the speech doesn’t really say anything. But having said that, I do recommend readers have a look at the whole thing. Because it’s the many things the speech doesn’t say that appear to be the key here. What we appear to have is a very senior and influential member of the Government (arguably THE most, certainly after the Prime Minister) thinking out loud. And that’s why for all that the speech contained no new information and no fresh initiatives it may in time be seen as a significant signpost along this adminstration’s journey.

English is one person in this Government who does appear to think and plan ahead. While John Key is often immersed and swept up in essential issues of the day such as flags, ponytails and pandas, English is this Government’s ‘big picture’ guy.

I remember attending a business-type function Bill English spoke at in Auckland in early 2013. At the time the Government’s planned partial privatisation of the state power companies was the hot ticket. English referred to that, but he also strongly indicated that he was chomping at the bit to do something with NZ’s social housing. Two years on we can see those plans unfolding (or is that perhaps unravelling).

The point is, there’s clearly something the Minister has in mind when it comes to urban/housing planning and my guess is it’s probably a biggie.

The Productivity Commission’s due to come back with the final version of its Using Land for Housing report next month. I liked the draft report, but also said at the time that English’s response to it appeared perhaps a bit tepid. At the time I was inclined to think maybe English thought some of the recommendations went a bit far. Now I’m wondering if in fact he thought they didn’t go far enough. English’s subsequent, post-speech comments that he’s getting ready to request another Productivity Commission inquiry, and that this one will focus on planning, is perhaps the key missing piece to this little jigsaw.

The latest building consents figures from Statistics New Zealand show that in the 12 months to August there were 8600 new dwellings approved for Auckland. That’s the highest number since 2005 and represents a big step up from a trough of 3100 approvals in 2009. But my goodness, it is taking time to wind the rubber band up. Official forecasts are for activity to peak at around 14,000 approvals in the 2017-18 period, which will be the most by around 2000 a year seen in Auckland – certainly since regionalised figures have been collated by Stats NZ.

But assuming all goes to plan, this means that from the trough of 2009 to the new peak will have taken eight or nine years. That’s way too long. Effectively Auckland will have building activity in 2018 based on what the requirement for houses was nine years before. Now if the demand has by 2018, for whatever reason, fallen off a cliff you get the crash scenario that English cautions about.

As a city that aspires to be truly international, Auckland would appear to have a bright future that sees its population continue to grow strongly and therefore over time, as with other major world cities, land and property values should just naturally appreciate. But within that long term anticipated trend, there is definitely scope for short term ‘bust’ situations where there’s a sharp correction in prices and first home buyers and the like are left swimming uneasily in negative equity possibly for some years. So, I don’t know that you can say with absolute confidence right now that building 14,000 houses in 2017-18 will necessarily be a great idea.

But the flip side is true. We might get to 2018 and find that even those levels of construction are just not enough and that disused urinals in ‘K’ Road are now selling for 10 million apiece.

It’s probable that English’s intention in belatedly releasing this speech was to provoke a new round of public discussion – maybe to even give him some ideas on the way forward. But I suspect he has a few ideas anyway.

I hope I’m wrong but I still have suspicions the Government might yet want to centralise urban/housing planning. I instinctively think that would be a mistake.

But by the same token, local authorities have been given ample opportunity to show that they can do this stuff well and generally haven’t.

Creation of new designated regional urban planning bodies, free of the natural conflicts of interest often present in local councils, might on the one hand be seen as yet another nasty layer of bureaucracy. But on the other, it might be the only way to go ultimately. What do you think?

The situation we need to get to is that building activity in any particular area – and Auckland as much the biggest city is clearly the biggest problem – can be ramped up and down very quickly in order to react to changing circumstances.

We are certainly a long way away from being in that situation at the moment. It needs fixing. If English has the solution, come on Bill, bring it on.