Twyford Phil: Local Government Act 2002 Amendment Bill (No 3) — In CommitteeText is incorporated into the Bound VolumeTwyford Phil: Local Government Act 2002 Amendment Bill (No 3) — In Committee[Sitting date: 29 May 2014. Volume:699;Page:18494. Text is incorporated into the Bound Volume.]PHIL TWYFORD (Labour—TeAtatū): Talofa lava Mr Chairman. It is very good to have that renowned expert on housing affordability Peseta Sam Lotu-Iiga in the chair for this debate because he knows a great deal about housing affordability. I know this because he appeared on prime-time television last year onThe Vote programme on TV3.Su’a William Sio: What did he say?PHIL TWYFORD: He said to the public of New Zealand that there really was not a housing affordability problem in New Zealand and in fact in his electorate—is Carol Beaumont here by any chance? No. He said in his electorate there were plenty of affordable houses and that all any aspiring first-home buyer needed to do was just go on TradeMe where there were dozens and dozens of affordable houses. I think if I recall correctly about 80 percent of New Zealanders in an opinion poll a couple of days later disagreed strongly with the Minister. It is good and I hope the Minister will take a call and express similar such opinions about the state of housing affordability in Auckland in his electorate because I think we would all be interested to hear that.A prominent economist a few days ago referred to the Government’s housing policies as being itsy-bitsy. It calls to mind a line from a song I think from the 1960s: “itsy-bitsyteenie weenie”. It was a very good description I thought of the Government’s housing policies. The provisions in this bill the Local Government Act 2002 Amendment Bill (No 3) which purportedly are setting out to save money for first-home buyers and drive down the cost of new homes by reducing development contributions are I think another one of these itsy-bitsy policies that fit into a pattern that we see very clearly from this Government. It is about Nick Smith the Minister of Housing trying to look as if he is doing something about the housing crisis. What we will see as we look in more detail at the bill is that it is better than nothing but that is a very very low bar given the fact that homeownership rates in this country are the lowest they have been in 50 years—50 years. The average house price in Auckland is now more than $650000. First-home buyers have been shut out of the housing market because the Reserve Bank was forced into these loan-to-value ratio restrictions because the Government had utterly failed to get a grip on the housing crisis. A generation of New Zealanders now are consigned to renting because of the skyrocketing cost of houses in Auckland and Canterbury in particular.The spill-over effects of the Government’s failure in Auckland and Canterbury have meant that all over regional New Zealand first-home buyers have been afflicted by these loan-to-value ratio 20 percent minimum deposits and all over New Zealand homebuyers are having to cop thousands and thousands of dollars on their mortgage repayments because interest rates are going up because the Government has failed to deal with the Auckland housing crisis. It could hardly be worse. The poor old National Party members on that side of the Chamber had to put up with the indignity the humiliation of Nick Smith being forced to concede at question time that 1 year after he announced the Government’s flagship housing policy the Auckland Housing Accord not a single new house has been built in the special housing areas—not one; zero nada zilch. There is nothing to show for 12 months of Nick Smith wittering on about the Auckland Housing Accord and how this was going to solve the housing crisis. So what are we left with? We are left with rats and mice—rats and mice.In the Budget the great announcement was that the Government was going to lift anti-dumping duties from varnish nails andGib board. Hold the front page! The whole of New Zealand stopped in their tracks amazed at the boldness of this new initiative. I put this in a similar category to trying to drive down development contributionsbecause it is on a similar scale. The Government estimated with no calculations to back it up that lifting of the anti-dumping duties on varnish and nails might save $3500 off the cost of a new house with no assurance to the New Zealand public that that saving even if it did eventuate would be passed on to the homebuyer. In an overheated market what possible incentive is there for the developer or the builder to pass on that little saving to homebuyers? The same point applies to this.The other thing I want to say about this is that the Government’s main policy about the housing crisis has been to try to blame other people for it—a sort of blame-shifting policy. It blamed the banks for lending too much money to first-home buyers with too-small deposits. It blamed developers. It blamed the fifth Labour Government—we hear that every day. It blamed the building supply companies for being anti-competitive. It blamed the Reserve Bank for loan-to-value ratios because it is the Reserve Bank’s fault not the Government’s. But the organisations that have most come in for the blame for the housing crisis by this Government are councils. Bill English famously remarked that 20 town planners at Auckland Council were holding the macro-economy to ransom. Twenty town planners in cardigans and walk shorts with their tea trolleys of teacups full of tea were holding the macro-economy to ransom.Hon Jo Goodhew: That’s a bit cruel.PHIL TWYFORD: I say to Jo Goodhew that I am quoting directly from the Minister of Finance. This is the National Government’s policy—to blame everybody else.To be honest it has run out of scapegoats. It has run out of people to blame. The motivation behind this bill is to try to attach blame to councils for pushing up the cost of houses by charging development contributions to developers. That is the fundamental political driver behind this bill. What does the bill do? It inserts into the legislation an appeal process which will allow developers to challenge councils and challenge the actual levy of development contributions in case they can be argued to have contravened councils’ policies. Secondly it restricts the definition of community infrastructure and councils now will no longer be able to levy developers for a contribution to libraries swimming pools and community facilities like that. So it is going to make it harder for councils to build that kind of infrastructure in new residential developments.I would argue that in the context of the housing crisis it is perfectly legitimate for the Government to look at how it can reduce development levies. As Eugenie Sage pointed out on average from the Government’s own figures development contributions amount to about 4 percent of the cost of a new standard house. That may not seem like much—4 percent—but it is still significant. When you add development contributions to all of the other expenses in infrastructure and services that developers have to invest in a new development that can add anything up to $60000 $70000 or even $80000 to the cost of a new dwelling. The Government is doing the right thing to attempt to do this but I would argue that this is a wasted opportunity. It could have done so much more. This is a shallow limited tinkering approach that is likely to deliver at best a very small saving to the homebuyer who purchases a new home. Let us be clear that although development contributions are levied on developers virtually the entire cost of those levies is passed on to the homebuyer. That is the person in this equation whom we should be trying to help here.The effect of this is going to be extremely limited. If it saves $3000 as I think the Minister said—and I would invite him to take a call in this debate to share with the Committee the calculations and the rationale for those savings; I think we would be very interested to hear precisely how much money will be saved—that is the equivalent of 2 weeks’ house price inflation in Auckland. So by the time this bill is signed into lawthat saving even if it does eventuate will have been swallowed up at least in Auckland by the runaway house price inflation that is going on there. The downside of this very limited shallow approach to reforming development contributions is that communities will be built without the fundamental community infrastructure and social infrastructure like swimming pools and like libraries which those communities need. I say that this is consistent with Bill English’s and Nick Smith’s recent statements. They want to see more shoebox apartments built in Auckland. They believe that driving down quality is the way to save money.