People sometimes ask me how a think tank measures success. It is a fair question. We do not win elections and we have nothing to sell. All we produce are ideas.
And the surest sign of a successful idea is that people stop remembering where it came from.
By that measure, this report continues one of the great success stories of The New Zealand Initiative.
In 2013, the Initiative was a little more than a year old. That year, we published two reports asking why some countries build more houses than others. In Different Places, Different Means, Michael Bassett and Luke Malpass found part of the answer in an unexpected place: Texas.
There, new suburbs are financed by Municipal Utility Districts. A district borrows the money for the pipes and roads a development needs. The debt sits with neither the council nor the government. Instead, the families who later move in repay it over decades through a charge on their properties.
Two months later, joined by Jason Krupp, Bassett and Malpass turned diagnosis into prescription. Free to Build proposed adapting the Texan model for New Zealand.
To New Zealand ears in 2013, this sounded exotic. Here, councils borrowed for infrastructure themselves, and that was that. When they reached their debt limits, growth stopped. Councils then used their planning rules to hold back development they could not afford to service.
The suggestion that developers and communities might raise their own finance instead was, to put it mildly, not mainstream thinking. For a young think tank still introducing itself to Wellington, it was a bold proposition.
But ideas, once published, develop a life of their own.
The Productivity Commission engaged with the model in its 2015 inquiry into land for housing. Economists at The Treasury, asking why land prices kept rising, reached similar conclusions. Phil Twyford took these insights into government in 2017 and made infrastructure finance a pillar of his Urban Growth Agenda. Our Chief Economist, Dr Eric Crampton, served on the advisory group that helped shape that agenda.
Then the idea became real. In 2018, the Milldale development north of Auckland was financed in just this way. Investors paid for the infrastructure upfront, and homeowners now repay them through annual payments on their rates bills. It was the structure we had sketched five years earlier.
In 2020, the Infrastructure Funding and Financing Act wrote the model into law. In 2024, the Government established a new Crown company, National Infrastructure Funding and Financing Ltd, to carry it further.
Three successive governments, led by different parties, have kept the idea alive and extended it. That is rare in New Zealand politics.
A lesser organisation might declare victory and move on. But as Dr Benno Blaschke shows in this report, the job is only half done. Six years after the Act was passed, just three projects have used it. The machinery exists, yet finance does not flow at anything like the scale New Zealand needs.
An amendment bill now before Parliament will improve matters. Benno supports it, but he also shows it does not go nearly far enough.
Benno knows this territory from the inside. Before joining the Initiative, he worked at The Treasury, the Ministry of Housing and Urban Development and Local Government New Zealand. Few people understand better why a system designed to say yes keeps saying no.
He also reminds us of something we have forgotten. For most of the twentieth century, New Zealand communities could vote to tax themselves, borrow independently and build the harbours and power networks they needed. We dismantled that system between 1989 and 1996. What Benno proposes is not so much a Texan import as a homecoming.
Thirteen years have passed between Free to Build and this report. If that sounds slow, it is roughly how long good ideas take to travel from the fringes of debate to the statute books. Benno maps the next stage of the journey.
I commend this report to anyone who wants to understand how New Zealand can finally build the homes and infrastructure it needs.
And I commend it, too, to anyone who wonders whether think tanks make a difference. This is what it looks like when they do.
