In last week's Insights newsletter, I argued that the government should prioritize getting the rules around housing right. Kiwibuild will struggle if zoning and infrastructure aren't fixed first, and government trying to build a hundred thousand houses might be at the expense of getting those rules fixed.
Government has no particular advantage in building houses. Large-scale building projects are risky, even in a seller’s market. If costs overrun because of shortages of subcontractors, for example, costs will be higher than expected or projects will be delayed. And Kiwibuild will consume one of the scarcest of Wellington resources: the attention of competent people in the bureaucracy.
The housing shortage was never due to government building too few houses. The cause lies rather in zoning restrictions that prevented developers from building where people want to live: more downtown apartments, more terraced housing for inner-city suburbs, and more expansion at the city’s fringes. And those restrictions are themselves due to broken incentive structures for local government and infrastructure costs.
Minister Twyford understands the infrastructure financing constraints and local government incentives underlying the housing shortage. Fixing those problems has to be the most important task for this government. We should be prepared to give this government a pass for any missed deadlines on Kiwibuild, if it is focusing its attention on the barriers preventing either state or private housing from being built.
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