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A big step towards affordable housing

Published in Insights, The New Zealand Initiative’s newsletter, 28 July 2017

If you are a regular Insights reader, you will know that housing has been a key issue for the Initiative since we started in 2012.

In our reports, speeches and opinion pieces we have repeatedly made the case for reforms to planning, local government and infrastructure finance. In doing so, we convinced many commentators, officials and politicians.

Last Sunday, we finally saw the first of our big ideas implemented by Government.

Prime Minister Bill English and Minister of Finance Steven Joyce announced a new body, Crown Infrastructure Partners (CIP), to finance infrastructure needed for new residential housing.

CIP will deliver new trunk infrastructure through special purpose vehicles. In this way, infrastructure costs will be recovered from users through special rates over the lifecycle of the infrastructure assets. The total investment volume will be $600 million, and the private sector will over time play an important role in financing new infrastructure.

By using this model, new infrastructure will be taken off councils’ balance sheets. This will make it easier for councils to develop new land and deliver new housing. And crucially, it will make houses more affordable.

We first proposed such a scheme in our 2013 report Free to Build. It was inspired by a visit to Texas, where our researcher investigated their Municipal Utility Districts. This is very similar to the model now announced by the Government.

In the future, councils will be able to gain new ratepayers without having to provide infrastructure for them. This will allow councils to go for growth because they will benefit financially from it. It is an incentive scheme in all but name.

It is encouraging to see that there is broad political consensus behind this new policy. In fact, Labour had already proposed a similar scheme a couple of years ago.

We need more such cross-party thinking on housing because there is still a lot that needs to be done.

We hope that in the next Parliament, the Resource Management Act will be repealed and replaced with a better planning system. And, of course, we want to see a new local government finance system which directly allows councils to share in the proceeds of growth and development.

For now, however, we welcome this important step towards restoring housing affordability. It shows that big ideas can have big impacts.

And that is what The New Zealand Initiative is all about.

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