Is Labour's Kiwibuild policy Talk Big but Think Small?

10:45 am on 31 May 2018

The most ambitious interventionist economic plan pursued by a New Zealand government was named after a race.

Construction starts on the Kiwibuild project

Construction starts on the Kiwibuild project Photo: RNZ/ Sophia Duckor-Jones

Think Big won the Melbourne cup twice in the mid-1970s, making quite an impression on Allan Highet, a long forgotten Minister of Racing in Rob Muldoon's government.

When Highet addressed the 1977 National Party conference he used the name Think Big to describe the large scale industrial projects to be bankrolled by the government.

Now that might seem relevant only to your next pub quiz outing or Trivial Pursuit game but of course history casts a long shadow.

Many of the Think Big power and energy assets, like the Clyde Dam, are still with us today. But so are the cautionary tales of a government borrowing too heavily and running up huge external deficits bringing us to the brink of ruin.

So now we Think Small. Even Labour governments do this, despite claiming to be interventionist and hands on. They have to. Well, they have decided they have to. This government has set itself a rule of having debt at no more than 20 percent of GDP.

That's their call. The problem comes when you Talk Big but Think Small. Which leads us to KiwiBuild.

This week the Salvation Army joined a growing and diverse list of groups with strong concerns about the policy, which promised 100,000 affordable homes over a decade.

Speaking on Morning Report, Alan Johnson said the price cap of $650,000 for a three bedroom KiwiBuild home in Auckland could not be described as affordable.

"If this is as good as it gets then what is the point of doing the programme?"

I put a similar question to Prime Minister Jacinda Ardern a few weeks back.

If the home costs $650,000 and requires a 20 percent deposit of $130,000 then does it count as affordable? She conceded that for "too many people" it would not be.

"People are saying we may fail. I would rather try than do nothing at all," she said.

But why isn't the alternative actually to do more rather than to do nothing? The government can borrow at under 3 percent and, unlike in Muldoon's Think Big days, its books are the envy of the world.

National refused to call it a housing crisis. That didn't make it go away. Labour is happy to call it a housing crisis but it doesn't seem to want to act like it is a crisis.

What was sold as a massive, state-driven housing programme has morphed into one where houses that were being built by developers will be underwritten or purchased as KiwiBuild houses.

Of course there will be new KiwiBuild houses as well but one of the four main channels for delivering the policy is now the 'Buying off the Plans' initiative.

Now, I know Housing Minister Phil Twyford is trying. Just a month ago he issued a press release saying he was "incredibly proud" that the first KiwiBuild homes were under construction. He said the 18 houses in a South Auckland development would be ready by August.

But look at the scale of the problem. According to the Ministry of Building, Innovation and Employment, New Zealand is about 71,000 homes short. If, on top of that, you are bringing in 70,000 new people into the country every year then how does 10,000 KiwiBuild houses a year cut it?

I wonder what Highet, the forgotten minister of racing, or indeed Muldoon himself, would think of a Labour government that is too worried about its debt profile to borrow for housing.

Ironically, the last call for big intervention on housing came from the political right too.

John Palino's second unsuccessful tilt at the Auckland mayoralty included an idea for a satellite city in South Auckland.

It was laughed off as Palinoville and buried with his mayoral aspirations. Or was it? The idea surfaced again late last year with Infrastructure New Zealand talking about a satellite city just north of Pukekohe.

Media reported interest from Auckland Mayor Phil Goff and from Mr Twyford, although nothing seemed to come of that.

Auckland mayor Phil Goff and Housing Minister Phil Twyford

Auckland mayor Phil Goff and Housing Minister Phil Twyford Photo: RNZ

I haven't seen serious analysis on whether this is a viable plan. But it's an example of the scale of the thinking required to solve the problem.

The welcome sign is obvious: Welcome to Philville: We Think Big.

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