Bill English wasn't interested in helping with infrastructure a few weeks ago, now National is riding to the rescue. It's a good move, but another sign of a panicked government

Underneath Auckland's housing crisis, both literally and metaphorically, lies infrastructure. One of the reasons for the lack of houses in Auckland is that the city doesn't have enough of it, and you can't build a house if you don't have the roads, pipes and power. So today's announcement from government addresses a fundamental problem.

John Key has said today that he'll offer fast-growing councils access to a $1 billion fund; they can borrow and spend and then pay the money back when houses are built and the residents are paying rates. It'd be nice if it was interest-free (I haven't seen, but I'm guessing not).

It's one of the many things people like me have been crying out for the government to do for some time. Auckland Council has been crying for it too; they're up against their debt ceiling and can't borrow more without seeing the city's credit rating fall. So this is a practical way for the stuff to get built and then paid back over time. Central government is really the only organisation that can carry this on its balance sheet. And my guess is that this $1 billion will only be the start (unless of course National caps it due to its obsession with surplus).

Labour has suggested similar things recently, such as allowing councils to issue bonds. One way or another, the money's been needed to get infrastructure built.

So good on them. But it's curious, given that just three weeks ago on The Nation, we asked Finance Minister Bill English about just this issue. This is how the conversation went:

Lisa Owen: The thing is you point the finger at the council there, but the council has been very clear about the fact it needs help with infrastructure. it says it needs 3 billion in the next 10 years for infrastructure. Where do you think that money's coming from? Because the council's nudging its debt ceiling. It can't rate people off their properties. So where is the money coming from?

Bill English: Well, fundamentally, that's Auckland's issue to deal with. We are certainly contributing. I mean, right now we're in intensive negotiation for a contribution of over $1 billion from the taxpayer to an Auckland City Council transport project called the Central Rail Link. Now, in the normal course of events, they would pay for that. We're negotiating where taxpayers will pay for that. That's a significant reduction in the burden on the council, and it allows them to pay for other infrastructure.

Minister, isn't it central government's responsibility to assist with that infrastructure?

No, fundamentally it isn't. It is the council's responsibility. That's the deal. They get to decide on how their city is planned, and they get to pay for the development. And for a lot of the people living outside Auckland and inside Auckland, there are real benefits from growth. And part of the puzzle here is that as more people turn up in Auckland and as incomes rise, growth is good. The council benefits from that, and so do ratepayers. And so they've just got to work out a better alignment between the funding and the growth.

So back then English was bullish, arguing that the government was already paying for a big chunk of the rail link and Auckland could blimmin' well just pay for it's own blimmin' infrastructure.

"It's the council's responsibility," he said, rather tersely. No help coming from him.

Well, that's changed rather rapidly. Which is good for the city, but also a sign that National really is responding to Auckland's housing pressure on the hoof.

Yesterday, as revealed on The Nation, suddenly prefab houses had become an option as well. How long before the government realises it needs to require more affordable houses on released Crown land and do something about land banking?

But hey, it's not a crisis, so no worries, right?

Comments (12)

by Rex Ahdar on July 03, 2016
Rex Ahdar

As I have written already, the concentration and growth in Auckland is bad for NZ as a whole. Pumping more money into a bloated and crippled metropolis is only going to exacerbate the problem. The population needs to be more even spread around NZ. 

by Graham Adams on July 03, 2016
Graham Adams

Another supply-side solution to a demand-driven problem through excessive immigration. Constructing new housing will never keep up with the number of people being shoehorned into Auckland. 

by Andrew Geddis on July 04, 2016
Andrew Geddis

John Key has said today that he'll offer fast-growing councils access to a $1 billion fund; they can borrow and spend and then pay the money back when houses are built and the residents are paying rates. It'd be nice if it was interest-free (I haven't seen, but I'm guessing not).

Three points.

The loan will be interest free.

The Government's cost of borrowing is at 2% (that's what 10 year Government Bonds are paying). So the $1 billion figure really means $20 million a year in interest payments. The headline here really should be "Govt to put $20 million a year into extra infrastructure for Auckland (and maybe some other places, so it doesn't look like the country is having to subsidise JAFA's)."

Last, you skip over Nick Smith's threat to seize land in Special Housing Areas if developers won't get building on it. The National Party trampling over private property rights! Good thing there isn't really a housing crisis, or goodness knows what we might see happening!!

by Andrew Geddis on July 04, 2016
Andrew Geddis

Oh - one other thing! As you point out, English said:

 It is the council's responsibility. That's the deal. They get to decide on how their city is planned, and they get to pay for the development.

Given that this $1 billion is touted as being for new infrastructure (i.e. stuff not presently planned), you could see it as the Government trying to do an end run around Auckland Council's present plans ... there will be cash available, but only for spreading the city further outwards (which is what the Government really has favoured all along).

by Simon Connell on July 04, 2016
Simon Connell

re: the plan to seize land ...
Indeed, one day, the government could wind up owning literally everything. And you know what that's called, don't you?

#dancingcossacks2016

by Andrew Geddis on July 04, 2016
Andrew Geddis

Indeed, one day, the government could wind up owning literally everything.

I dissent! The Government will never own everything!!

 

by Simon Connell on July 04, 2016
Simon Connell

@Andrew - totally thought that link was going to be to John Key re: no one owns water.

by Moz on July 04, 2016
Moz

this $1 billion is touted as being for new infrastructure... for spreading the city further outwards.

Am I naive to have read this as more "you can build new infrastructure anywhere, including brownfield development". To me taking a chunk of land inside the city and turning it into housing requires new infrastructure, and I would have assumed Brownlee or Key would be just as happy to turn up to the grand opening of a new railway station or motorway exit in the middle of the city as on the outskirts.

The advantage of greenfield is you can say "this used to be where Auckland grew its vegetables, and now it's public housing, hooray!" because it's obviously new ("rural atmosphere", especially when the farmer next door is spreading chicken manure). But inside the city it's closer to the airport so the fly-in-fly-out visit is easier. You don't want That Nice My Key having to use his Toorak Tractor in some dirty paddock like a peasant now, do you?

by Moz on July 04, 2016
Moz

Also:

The National Party trampling over private property rights!

You may have missed the reign of Rob Muldoon, famed protector of property rights and a major figure in National Party history. I read it as more "whatever it takes, scruples are an excuse for the weak when they fail"... look at Thatcher. Also, don't look at Turnbull, who is well on his way to being seen as a weak, helpless leftie too soft-hearted to give Australia the solid rogering that it desperately needed.

It'd be much more useful if the Nationals decided to just tax land based on current value, possibly offset against improved value. That would catch all the upzoned land, albeit at the cost of catching those who owned it before the rezoning and don't want to sell. Offsetting would allow existing developments to count rates against the tax so the great majority of property owners wouldn't notice the change (especially those who own multiple properties, ahem). But given Key's willingness to dole out the hard talk to poor poverty-stricken grannies already, I can't see "but my land tax has gone up, dearie, I'm being forced to sell" cutting much ice.

by Andrew Geddis on July 04, 2016
Andrew Geddis

So, I speculated:

Given that this $1 billion is touted as being for new infrastructure (i.e. stuff not presently planned), you could see it as the Government trying to do an end run around Auckland Council's present plans ... there will be cash available, but only for spreading the city further outwards (which is what the Government really has favoured all along).

And now Nick Smith is saying:

Building and Housing Minister Nick Smith said he accepted the loans might mean things would not happen in the order the Auckland Council wanted.

"That may mean that there may be some leapfrogging of development, that is, new residential development that is not right adjacent to the current urban-rural perimeter."

by Murray Grimwood on July 07, 2016
Murray Grimwood

The 1 billion doesn't exist.

It's debt - which is an expectation that tomorrow can underwrite it. Whichj is an expectation that there'll be energy availble (see Tim? It's always the prerequisite). That infrastructure is also physically (bitumen, plastic piping) from the same finite feed-stock as the only energy game in...... town.  :).

Infrastructure also ages - there comes a point where it is so unmaintainable that it won't be (think Cuba). You can fake it, but less and less over time. There is not the fossil fuel (energy and feedstock) left to do more than replicate - once - what has been built already. Minus maintenance. And the global attempt is to grow infrastructure at an exponentially growing rate.

So we have to factor-in that this is the last 'doubling-time' of them all. (Actually, given that it's from 50%-gone to all-gone, I'd argue it's not really a doubling but an equalling-of-all-that's-gone-before). We  chewed through the first half since the Wright Bros and Henrys' 'T', so the second half should take, oh, 20 years or so. 20 years of less-every-year.

So we should actually be discussing triage - not just of the hypothetical new infrastructure, but the never-bigger never-averagely-older present collection of it.

As someone said up-thread, a good place to start would be limiting immigration. Followed by limiting reproduction. Just because we won't go there doesn't mean it isn't the right move.

by Murray Grimwood on July 09, 2016
Murray Grimwood

The above has to be seen as an unresearched opinion-piece, not as journalism, in my humble opinion.

The writer asserts that infrastructure is 'good'.

No appraisal of what it is, what it's made of, how long that supply lasts (depletion-rates, quality-reduction, increased contention).. No acknowledgement of the fact that the infrastructure is to service something - presumably acreages of tract, car-dependent housing - equally reliant on the same resource. No questioning whether there is a better use of the remaining resource - getting ready for the (factually inevitable) end of its availability.

No questioning 'what then?' and 'what then?' and 'what then?', if we just continue this blind 'it's good' approach. (You can't grow anything physically forever, so when's the best time to stop?).

I challenge the writer to do a serious piece about infrastructure, and the future. That, after all, is the only way to justify the use of the word 'good'.

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