KiwiBuild boom begins

This Issue This is a part of the Changes ahead feature

By - , Build 168

Kiwibuild aims to resurrect the dream of home ownership for many Kiwis, but how will it work?

IN PARTS of the country, demand for houses has pushed prices out of reach for many people. In the affordable housing bracket – those homes that a New Zealander on an average income buying their first home would consider – the situation is dire. Here, where demand is greatest, supply has fallen to a trickle.

The government estimates that, in 2018, only 5% of new builds will be priced in the lower quartile. In Auckland, that equates to just 500 affordable houses, which is bad news for a city that needs 13,000 new houses every year just to keep up with population growth.

Ambitious plans

KiwiBuild aims to stop this trend by providing 100,000 government-backed affordable houses over 10 years, with at least 50,000 of these houses earmarked for Auckland.

This presents the building industry with a unique opportunity to build quality homes at scale. It is also a step change in output, so the government proposes to ramp up production over 3 years – 1,000 homes in the year to June 2019, 5,000 the year after, 10,000 in the year to June 2020 and 12,000 every year after that to 2028.

The government has established four methods to meet KiwiBuild targets:

  • Making Crown land available and purchasing land from the private market, then selling it to developers who commit to KiwiBuild.
  • Purchasing or underwriting homes off the plan from developers in exchange for accelerated delivery of more affordable KiwiBuild homes.
  • Expanding existing government housing initiatives, such as those by Housing New Zealand.
  • Establishing an urban development authority to undertake major urban redevelopment projects in partnership with iwi, councils and the private sector.

Focus on affordability

KiwiBuild homes will be designed and built in a range of styles and sizes to accommodate the needs of different occupants. However, the government has set an upper threshold on the price of homes to ensure affordability.

KiwiBuild houses in Auckland and Queenstown Lakes District have a higher price cap reflecting the higher average property prices. There, 1-bedroom homes are capped at $500,000, 2-bedroom homes at $600,000, and 3-bedroom homes or larger at $650,000. The price cap in other regions is $500,000.

These are selling price caps, not target values. Stand-alone KiwiBuild homes in Auckland are expected to sell from $500,000–$600,000, and dwellings in medium-density apartments and terraces at under $500,000. Outside of Auckland and Queenstown Lakes District, prices are likely to range from $300,000 for a studio to $500,000, depending on the size and number of bedrooms.

KiwiBuild homes are not offered on an open market – they’ll be sold at a fixed price and at cost to registered buyers. Interested potential buyers must meet certain criteria and apply to enter a government-run ballot. If selected from the ballot, they are given the option to purchase a KiwiBuild home.

There is strong public interest in the scheme. The Ministry of Business, Innovation and Employment (MBIE) KiwiBuild Unit, which administers the scheme, received more than 35,000 registrations of interest in the first 2 weeks after registrations opened in mid-July. More than 22,000 of those applicants expressed interest in housing in Auckland.

The first 18 KiwiBuild homes were completed at South Auckland’s McLennan development in early September, with buyers expected to be in their new homes before Christmas.

Tackling funding issues

The government will fund construction of homes with an initial $2 billion capital injection. This will be recycled back into the scheme as houses are sold and money returned to the Crown at the end of the 10-year programme.

In mid-2018, in an effort to further increase the affordability, the government signalled its intent to investigate new options, such as shared equity or part ownership, in response to economists questioning the affordability of KiwiBuild housing.

As a government-backed scheme, KiwiBuild makes it easier for new home buyers to secure finance and take advantage of prefabrication and other off-site construction techniques. Without a house on site, banks have reportedly been reluctant to lend to first-home buyers.

Opportunity to build better

There’s little doubt that the scheme sets ambitious goals, yet many are optimistic about the industry’s ability to deliver on KiwiBuild’s promises. ‘Of course, KiwiBuild poses big challenges, but they are surmountable if the industry collaborates with central and local government to put solutions in place,’ says Steve McNeil, Senior Building Physicist and BRANZ Liaison to KiwiBuild.

Indeed, BRANZ is working with the KiwiBuild Unit providing data on best-practice building materials, design and systems to use when constructing KiwiBuild homes.

‘Research outputs from the BRANZ warmer, drier, healthier buildings programme are helping guide the specifications. We are also providing other information, beginning with research in engineered timber structures, fire design and resilience in medium-density homes,’ he says.

Echoing this, Phil Twyford, Minister of Housing and Urban Development, announced KiwiBuild will build beyond the requirements of the New Zealand Building Code.

‘We need to lock in exemplar performance, both for energy efficiency and residents’ health, for the long haul. To do that, it’s important we focus on insulation, thermal bridging, ventilation, weathertightness and other details that are difficult or expensive to change later,’ says Steve.

Demand for skills

Yet KiwiBuild may be asking more of a building industry already working beyond capacity. Last year, MBIE identified a national shortfall of 30,000 skilled building and construction workers, a figure that KiwiBuild is likely to push to 45,000 in less than 3 years if current conditions continue.

Overhauled apprenticeship schemes and alternative training pathways, which enable learners to upskill while being fully employed, are being considered to help address the shortfall.

Embracing technology, including prefab

KiwiBuild’s proponents also plan to address the labour shortfall through efficiency gains offered by newer technologies such as off-site construction, structural insulation panels, engineered timber, 3D modelling and integrated design.

‘These technologies are in their infancy in New Zealand,’ says Steve. ‘One barrier to scaling up such technologies is the lack of a pipeline of work to give manufacturers and developers the confidence to invest in plants and new tech. That’s where KiwiBuild comes in.’

Indeed, the government is reportedly considering contracts with New Zealand-based companies to enable them to invest in plant and machinery that can manufacture building components at a much larger scale.

And gains using these technologies do seem likely. In early 2018, PrefabNZ estimated at least 7,000 additional houses and apartments could be built using off-site construction by 2020.

‘That doesn’t mean imported products won’t play a part in KiwiBuild – they’ll be essential, at least initially. But we could see New Zealand build up knowledge, experience and capacity – and consumer expectation – to enable fully home-grown manufacturing capability,’ he says.

‘KiwiBuild’s goals are certainly aspirational, but it offers the chance to invest in New Zealand’s future and the building industry should make the most of it. It could be a game-changer.’

For more

Further information on KiwiBuild is available at www.kiwibuild.govt.nz.

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Articles are correct at the time of publication but may have since become outdated.

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