Twyford PhilINFRASTRUCTURE FUNDING AND FINANCING BILLFirst ReadingHon PHIL TWYFORD (Minister for Urban Development): I move That the Infrastructure Funding and Financing Bill be now read a first time. I nominate the Transport and Infrastructure Committee to consider the bill.I want to start my contribution on this bill by talking about how it fits into the broader agenda of our Government to fix a broken housing system. Much of what I will talk about today enjoys I think a high measure of bipartisan support across the House. I think we all share the analysis that we have an unresponsive housing market constrained by regulatory failure and missing the tools to enable sustainable urban growth. And with that in mind I want to acknowledge the Hon Paul Goldsmith and the Hon Judith Collins of National the Hon Shane Jones as Minister for Infrastructure and New Zealand First member and the Hon James Shaw and the Hon Julie Anne Genter from the Green Party. It's rare for such a substantive bill to achieve the level of cross-party support that this has. But we have achieved this and I look forward to jointly shepherding this bill through Parliament with those members.There is a startling array of indicators that in housing and urban development are telling us that we have a major problem: severe housing unaffordability falling homeownership increased hardship and homelessness ballooning household debt and increased intergenerational inequality. And as you'd expect our Government is committed to directly intervening to provide support to those who need it to build more public housing and affordable housing and to rein in excess demand by changing the tax settings to discourage property speculation. The Environment Committee right now is considering the Urban Development Bill which is designed to cut through the red tape and lead large-scale urban development projects that would otherwise be too complex risky or uncertain for the private sector to undertake alone.But where I want to focus today is this bill which is one of the strands of our urban growth agenda. The agenda rests on the idea that sustained progress will rely on getting our urban land and housing markets to work better to be more competitive and in our view there are three big challenges that need to be addressed. The first is a planning system that has been based on the idea of urban containment; second the failure of governments until now both local and central to actively work with the private sector to enable urban growth and expansion; and third a broken system for financing new infrastructure to support urban development.Underpinning the first two is a planning system that stops our cities and towns from growing up and out. And this isn't just the Resource Management Act (RMA) but it's also how we plan three waters and transport infrastructure. The Government has a number of work streams under way to address these challenges. We've got a national policy statement on urban development that will set clear parameters for council plan-making and incentivise quality intensification and ensure that councils zone more land for housing and urban growth. There's the RMA reform process led by David Parker which will consider our legislative arrangements in this area. We've got central government local government iwi and the private sector collaborating on planning for growth regional spatial planning exercises in six of the country's fastest-growing towns and cities and Minister Nanaia Mahuta is leading a wide-ranging reform programme on the three waters.But our infrastructure financing system is broken and that's where this bill comes in. The Infrastructure Funding and Financing Bill is part of the solution to fixing our broken system. Our cities and towns cannot grow without a ready source of investment to finance and fund infrastructure both roads and the three waters yet our current system puts in place a range of constraints that make it very difficult for the market and for local government particularly to plan for and meet the demand for infrastructure. Several of our high-growth councils have tapped out their balance sheets. They cannot finance the infrastructure that's necessary for urban growth and too often they end up in a position of using the RMA planning powers to protect their balance sheet and stop residential expansion.Auckland our largest city grew by more than 156 people in the five years to 2018. That's the equivalent of adding a whole new city the size of Hamilton. Providing infrastructure for that growth means that Auckland will use 98 percent of its debt capacity over the next decade. It's not just Auckland; for example Hamilton has also seen very high levels of growth and will use 86 percent of its debt capacity in the next 10 years. The inability of local government to invest in the infrastructure to stop urban growth is one of the main problems we have in our housing markets. When a city cannot grow in response to demand you get a pressure cooker effect which is precisely what has given Auckland some of the most expensive land and housing in the world relative to local incomes. And it is a big contributor to why this Government inherited a deficit of 71000 homes when we took office. This bill establishes a new way of funding and financing bulk housing infrastructure. It sets up a flexible legislative framework that will enable councils and developers to overcome one of the key constraints they face and provides them with a new tool to fund and finance infrastructure without being hindered by councils financing constraints or high upfront infrastructure costs and it does this by allowing a third party other than a council to finance the construction of infrastructure. A special purpose vehicle (SPV) will be set up for each project. The SPV will be responsible for raising the necessary finance and in most cases constructing the infrastructure too. It's essentially a project finance model where the debt associated with the project is ring-fenced from the council. Where the infrastructure is not privately owned once built the infrastructure will be transferred to the council which will then be responsible for running and maintaining it.The bill puts in place a new system of funding and financing the infrastructure for urban growth that will turn on the tap for a virtually limitless pool of investment capital. The intention is that we create a system where the viability of the project is the determinant of whether to proceed or not and whether private capital can be accessed and utilised. But financing of course needs funding. So while financing is currently the main bottleneck to infrastructure provision there also needs to be funding or a revenue stream to pay back the costs of the project. So at the core of this model is a long-term infrastructure payment which is paid by the beneficiaries of the infrastructure to the special purpose vehicle over the life of the infrastructure often collected by the local authority as a separate line item on the rates bill.This bill is flexible. It will enable the facilitator—one of the roles that's established under the legislation—to allocate the cost to beneficiaries on a differentiated basis either by phasing a larger payment up front and smaller payments in the out years excluding or varying the charge by the extent to which a homeowner benefits from development projects.In developing this bill we drew on our experience at Milldale north of Auckland where through a partnership between Crown Infrastructure Partners and Auckland Council an alternative financing model enabled the delivery of infrastructure to support the building of 9000 homes. In that case the infrastructure payment is secured by an encumbrance on the title of each section and is paid by section owners—in this case $650 a year for an apartment and $1000 for a stand-alone home per annum. Because of this Auckland Council was able to bring forward its investment in the project and the upshot is 9000 more homes built and 9000 families housed.Moving to a model where infrastructure is financed and delivered by a special purpose vehicle means that we need legislation to provide powers to the SPVs to receive the levy and construct the infrastructure. These powers are not provided lightly. The bill has extensive monitoring reporting and disclosure regimes to ensure the SPVs' use of these powers is appropriate and monitored. My officials have developed this model and enabling legislation in close consultation with the high-growth councils to ensure that it is fit for purpose. All in all what we have here is a first for New Zealand: a piece of legislation that can give more certainty to councils and developers about their ability to provide the infrastructure needed to support growing communities.I'd like to thank the officers of the high-growth councils who have supported the development of this model and the legislation. I want to thank the officials at the Department of Internal Affairs Treasury and the Ministry of Housing and Urban Development who have done so much work to bring the legislation to this stage. I also want to acknowledge the efforts of the Opposition particularly the Hon Steven Joyce in the former Government and the Hon Anne Tolley who began this journey first by establishing the Housing Infrastructure Fund and then by repurposing Crown Fibre Holdings to Crown Infrastructure Partners who facilitated the Milldale pilot. I commend this bill to the House.