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Getting serious about creating affordable homes

By Ali Frederickson

Ever considered what portion of the cost of a brand-new so-called ‘affordable home’ lines the pockets of the Government and your local council? Let’s say an affordable home is set at around $650,000 (KiwiBuild Auckland three-bedroom). The Government’s take from GST clipped from all the goods and services involved in the construction of the new affordable home is approximately $97,500. Council fees will often account for about $70-80,000 of the final price.

Together the Government and the councils are contributing to making first-home ownership unaffordable. They need to review their philosophies.

Without the GST, the cost of an affordable new home would be around $552,500. Let’s round it off at $550,000. This could be more achievable for young people, right?

What is the Government doing with the almost $100,000 it collects from each new affordable home build? Imagine if there was no GST to inflate the cost of a first home – an affordable home. If this Government is genuine about helping first-home buyers to get a foot in the door of home ownership, why doesn’t it give all of the GST component back to the first-home buyer? Or even return 50 per cent? Or instead the Government could make interest on the mortgage tax deductible for the first three to five years for a first-home buyer.

And continuing with this theme. What if the councils were to take their red pens to the hefty fees they charge for new homes and deduct say 25 per cent on any new home purchased by first-home buyers? There’s a saving of around $19,000 for a new home. This sum might be the equivalent of a couple saving their damnedest for a year, maybe more. What exactly are the councils doing to justify the fees they charge? In Auckland, it’s pretty clear that council inefficiency and incompetency in its consenting department is slowing down house building.

I realise it’s traditionally regarded as a bad idea to pick and choose with GST exemptions. I know that economists say that for GST to be truly effective it has to be applied across the board. That’s why GST is still being applied to basic food and vegetables and kids’ clothing, for example.

The management costs of applying exceptions or returns are of course a consideration. There would need to be a way of managing the returned amount of GST to benefit the first-home owner of a new house that is cost-effective.

However, if we’re serious about making houses more affordable to young people, I really do believe that returning all or part of the GST the Government has received from the construction of a new house on a one-off basis to first-home buyers is something that is worth seriously considering.

Getting 100,000 KiwiBuild houses constructed within ten years is already proving to be a massive challenge. A chronic shortage of qualified tradespeople and quality materials isn’t helping. And the first indications of progress aren’t exactly encouraging. But getting the price down for an affordable new home is another matter – and it’s an important starting point.

How well does our Minister of Housing understand development or building? Did he consult with community developers? Yes, the Minister has dreamed a dream – an amazing dream. I only wish KiwiBuild had a hope in hell of realising the dream. He needs to know why builders can’t build quality houses faster or more economically.

The Resource Management Act (RMA) needs to be reformed ASAP. I’ve often wondered if Auckland Council’s consent staff fully understand the RMA, because why else would we see different interpretations applied? The RMA is too complicated. It needs to be radically simplified to be more efficient.

What size will these new affordable houses be? The Unitary Planning Act means there’ll be more of us living in smaller spaces in the future, because intensification often means cramming. Developers are being forced by the Government to create the slums of tomorrow. Chicken coops, bird cages, call them what you will. Just look at Hobsonville Point. Narrow streets, inadequate parking. Small living spaces. Where are visitors and tradies to park? Where is the infrastructure? The storage facilities?

Haven’t we learned anything from the crime-ridden housing estates in the UK? From what happened in Porirua? Mangere? Northcote?

Australian banks still won’t lend to the majority of New Zealand developers. So it’s time the Government supported the re-emergence of small developers. They’re the people who built New Zealand in the past. But they’ll need a means of financing their projects.

In the meantime, how about the Government doing more to give our young people a bigger hand into their first home. Lose the GST.

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