Bryce Edwards: The KiwiBuild betrayal

Bryce Edwards: The KiwiBuild betrayal

When politicians win votes on the basis of heroic promises to fix intractable problems, but then break those promises, the public quite rightly feel they’ve been ripped off.

That’s exactly what has happened with KiwiBuild. Labour politicians largely won office in 2017 on the basis of their scathing critique of how badly the National Government had managed issues of inequality and, in particular, the housing affordability crisis. Labour convinced voters they would take action on these problems, and their flagship housing construction policy would swiftly produce 100,000 “affordable” new homes.

It is now evident that Labour will not deliver on this, breaking their election promise. Therefore, commentators and opponents are increasingly talking about the possibility of Housing Minister Phil Twyford being sacked for his poor performance.

The heat was turned up last week, after Twyford gave an interview in which he suggested he was considering abandoning the KiwiBuild promise of delivering 100,000 houses – see Jenée Tibshraeny’s Twyford coy on 100,000-house KiwiBuild target.

This all comes in the context of Twyford and the Government saying that the KiwiBuild programme is now being “recalibrated”, by which they appear to mean that the whole programme is being re-evaluated and a re-launch is expected, in which some of the detail of the scheme might differ from what has been promised.

In the interview with Tibshraeny, Twyford says the recalibrated version will be announced in mid-June (a date that has been continually pushed back). In terms of the 100,000-house promise, he said this was something he’d been “looking at” but wouldn’t comment on, except to say: “It’s like American nuclear ships in the 1980s. It’s a neither confirm nor deny situation”. And since then, neither Twyford nor the Prime Minister have been able to confirm in Parliament that the promise still stands.

Reporting on this, Tova O’Brien pointed out that this wasn’t the first time Twyford has had to admit defeat on the targets: “In its first year, 1000 homes were supposed to be built. That promise was broken in January, and revised down to about 300. A KiwiBuild reset was announced then, but still the mother of all targets remained” – see: KiwiBuild: Is the Government’s flagship policy over?

O’Brien also pointed out that “Earlier this year, Phil Twyford said he’d stake his job on achieving the goals”, but “asked on Wednesday if he would resign, Twyford refused to answer and stormed off, as a proverbial storm brews for the Government.”

It’s still not entirely clear whether the 100,000 target stands or not. Deputy Prime Minister Winston Peters is adamant that not only does it stand, but it will actually be surpassed. Jenna Lynch reports: “Peters is doubling down, saying the Government will build ‘a lot more’ than 100,000. He doesn’t believe the nay-sayers, telling the House that the KiwiBuild target is ‘easily achievable’. He even borrowed a line from US President Donald Trump: ‘The intention is to make this country great again’.” – see: KiwiBuild: Winston Peters says Govt will build ‘a lot more’ than 100,000 homes.

Duncan Garner has reacted to this, saying “Does Winston Peters think we are thick, or does he think we just aren’t watching and listening? We are Winston and it’s time to call you out, stop misleading the public on stuff that matters – housing” – see: KiwiBuild was Labour’s biggest promise, now it’s their biggest failure.

Garner says “it’s a total flop, 84 homes in 541 days, what a spluttering mess.” Looking at how disastrous the programme has been, he concludes that “KiwiBuild should be scrapped and you work on the things in housing that matter and work.”

For Mike Hosking, this was all inevitable and is typical of politicians: “You can’t build 100,000 houses in 10 years. You can’t, and shouldn’t, promise you can, because it isn’t real, it isn’t possible – and any promise to the contrary is dishonest, naive and bound to end in tears” – see: KiwiBuild collapse confirms this is a Government run by amateurs.

According to Hosking, Twyford should have resigned: “If this was a business deal, there would be legal action, the operators would be accused of fraud.”

Henry Cooke is also scathing, writing in the Sunday Star Times this week that KiwiBuild failure is more than a broken promise, it’s a betrayal. He says “this is not just one promise broken – it’s a betrayal of the very foundation Labour built its election campaign on.”

Cooke says that “some level of punishment” is now likely, and “Labour can expect a whole lot more hostility, of distrust in their promises. Its best issue has gone from go-to to embarrassment. It’s hard to come back from that.”

The 100,000 promise should be taken seriously says Cooke: “Now, specificity is its biggest problem. People remember a big number. Suddenly Housing Minister Phil Twyford is telling people he can’t guarantee that number any more, as the entire policy is ‘under review’. The review follows a string of smaller failures. The interim goal of 1000 in the first year was scrapped when it became clear KiwiBuild would have difficulty hitting even 100 homes.”

Cooke reports that there are still serious attempts within the bureaucracy to make KiwiBuild work: “The KiwiBuild unit within the Ministry of Housing and Urban Development is hard at work signing up developers – the disappearance of the interim target and installation of new leader Helen O’Sullivan has allowed the team to re-assess what went wrong with some of the earlier developments.”

Yet there is an intrinsic problem with the KiwiBuild design, Cooke says: “The underlying issue for KiwiBuild is that it is a policy from the middle of last century transplanted into the 2010s. When Labour dreamt up KiwiBuild the party was in the middle of a profound identity crisis, and looked to its history for inspiration – a history that involved the first Labour Government building tens of thousands of state homes. But that Government did it with state-employed builders, a politically-controlled interest rate, and a very cushy deal for a guy named James Fletcher. That is simply not the way Governments are run these days.”

Similarly, Hamish Rutherford wrote in February that KiwiBuild is the solution you come up with when you don’t want to fix the problem. He argues that the Government is looking for a simple solution to the housing crisis but is inadvertently making things worse: “Rather than focus first and foremost on removing the barriers which make housing so expensive, the Government’s solution is to add fuel to the fire.”

This comment came in the wake of the Reserve Bank explaining that the KiwiBuild programme was actually going to “crowd out” other developers from constructing houses. Reserve Bank governor Adrian Orr had explained that “If they [KiwiBuild] were going to build 100 houses, that means that between 50 and 75 houses elsewhere aren’t built.”

Commenting on this, Newsroom’s Thomas Coughlan said: “It added further evidence to fears the programme was broken beyond repair. A little over halfway through its first year, there appear to be two major issues with the programme. First, ironically, is a lack of demand. The houses are too expensive for most people. Second is a concern about houses being built in the wrong parts of the country” – see: Is KiwiBuild broken beyond repair?

The Otago Daily Times also seems to think that the building programme needs more than a recalibration. In a recent editorial it says that recent developments in KiwiBuild suggest it “has already lost the hearts and minds of those it was earmarked to help”, and it “appears to be in tatters” – see: Is it time of a KiwiBuild switch?

The newspaper believes that something can be salvaged from the wreckage, and the best possibility is that the Government turns it into a way of getting prefabricated construction going on a large scale instead: “Perhaps, then, it is time KiwiBuild’s champions accept defeat, drop the last of their targets and instead embrace pragmatism – by focusing the Government’s heft, with guarantees of funding and demand, solely on ensuring a powerful factory-built housing industry grows in New Zealand. It is not too late for a KiwiBuild shift away from its initial promises towards a market-led, Government-backed solution. Forget the targets, build the factories.”

So will the Minister be sacked? There are increasing calls for him to go, as well as forecasts that he will lose his job in the upcoming Cabinet reshuffle after the Budget. Certainly, there have been plenty of harsh criticisms of his performance. For example, in her assessment of all Cabinet Ministers, Audrey Young awarded Phil Twyford the lowest evaluation of four out of ten, saying this: “Made the classic Opposition mistake of over-simplifying the housing supply problem, then over-promising and under-delivering the solution, KiwiBuild” – see: Who rates highly in our Cabinet report card – and who disappoints? (paywalled).

Others are also suggesting he’s got problems. RNZ’s political editor Jane Patterson outlines some of the challenges in her report, Housing Minister Phil Twyford refuses calls for resignation over KiwiBuild.

She also quotes economist Shamubeel Eaqub saying the programme needed major change if it was to survive: “I’m not optimistic that we will see a big reset but I think we need a fundamental repositioning of KiwiBuild if it is to succeed. In its current form it is doomed to fail”.

Jane Patterson also deals well with the latest bureaucratic problems in the scheme, especially controversy over how officials are determining which property developers to provide financial backing to in underwriting their house construction – see: Phil Twyford’s credibility questioned over changing answers on KiwiBuild.

Here’s the key point about this “additionality test”: “Twyford is under fire for a series of statements he and his ministry have made about the oversight of the Crown underwrite – hundreds of millions of taxpayer dollars committed to shift the risk from property developers to the Crown by promising a guaranteed price.”

The underwriting of private developers’ KiwiBuild constructions has become an issue, given that Twyford has redirected the scheme to incorporate houses that were already planned or being constructed in the private market. And last month it was revealed that most of the new “KiwiBuild homes” had not started out as such – see Jason Walls’ Half of all KiwiBuild homes already under construction before being brought into the programme. In this article, National’s housing spokeperson, Judith Collins, comments that this change means that “KiwiBuild is just a welfare scheme for property developers”.

On this point, Gareth Kiernan, chief forecaster at Infometrics, has also been cutting: “If the aim is to increase the supply of housing because we’re not building fast enough and that’s contributing to the affordability programme, then Phil Twyford’s modus operandi to date of walking down the street, finding a house that’s already being built, and slapping a KiwiBuild sticker on is patently stupid and nothing more than window dressing” – see Susan Edmunds’ Huapai KiwiBuild homes had already been tried for sale on open market.

Kiernan has more to say: “However, if the aim of the programme is to effectively provide a taxpayer subsidy to help a select and lucky few people into their first home, then selling at a discounted rate to first-home buyers fits the objective. Because, as I’ve previously argued, the Government doesn’t really know what it wants to achieve with the policy beyond virtue signalling, KiwiBuild is fast slipping towards the lesser latter aim than the more admirable and fundamentally more important goal of genuinely trying to fix the housing affordability crisis.”

For more arguments about the major changes needed to make KiwiBuild work, see Susan Edmunds’ KiwiBuild ‘almost no chance of success’ in current form.

Finally, for more comment on the KiwiBuild scheme, see my updated blog post, Cartoons about Labour’s KiwiBuild and the housing crisis.