TL;DR: The key news in Aotearoa’s political economy today includes:
Non-profit Kiwisaver fund Simplicity is launching a fund to snare up to 5% of the $235 billion market for household savings in banks to raise the $12 billion needed to build up to 25,000 affordable homes in build-to-rent projects and via community housing providers (Hear my interview above with Simplicity CEO Sam Stubbs and Community Finance CEO James Palmer);
Decades of under-funding and staff losses to Australia mean half of heart surgeries are now overdue, with 69% overdue in the Waikato regions and specialists considering asking Te Whatu Ora to pay to fly patients to Australia;
Over 150 multi-bedroom homes around Martinborough are now offered for up to $2,000 a night via Airbnb, prompting a proposal for a local bed tax on Airbnb properties to put those homes back into the long-term rental market;
Dozens of homes in Lower Hutt slated for re-development are lying unoccupied for years because of Healthy Homes rules, a property manager says;
The cost of building Christchurch’s 50 metre-long swimming pool has blown out to $696 million or $14 million per metre, leading to the contractor CPG demanding the Government pay it up to $453 million to deliver it four years late and 12 years after the project was originally agreed; and,
Climate change and hotter sea temperatures caused a small storm to escalate unexpectedly into Hurricane Otis, which generated 265km-per-hour winds that destroyed Acapulco last Wednesday at a cost of 27 lives and US$15 billion.
Paying subscribers can see more detail below the paywall fold and hear more of my analysis in the podcast above.
Simplicity takes on banks to build 25k homes
There’s a common set of assumptions in Aotearoa’s political economy that there isn’t enough money around to solve our housing supply shortage. That’s because people believe there’s both not enough local savings, and our housebuilders don’t have the scale or the efficient systems to build tens of thousands of homes affordably.
It’s worth challenging those assumptions, particularly in the light of today’s announcement by Kiwisaver provider and build-to-rent builder and manager Simplicity.
Firstly, the assumption about a domestic funding ‘shortage’ should be challenged, thanks to the growth of both household term deposits in banks in recent years, and the growth of Kiwisaver and other pension funds. Households now have $236 billion in deposit accounts in banks, up from $47.6 billion in September 2003. Non-financial local companies also have a further $111.05 billion in bank deposit accounts, up from $75.8 billion in December 2016, according to the latest RBNZ figures (C50).
There are also $267 billion of funds under management in New Zealand as of the end of June, RBNZ figures (T40, T43)). That total includes $100b of KiwiSaver funds, of which $57 billion is invested overseas, and is up from $57.6 billion 20 years ago. There is a savings pool of $584 billion controlled by domestic households and non-bank managers that could be invested in house-building. Most of that ($346 billion in mortgages) is currently lent on by banks to owner-occupiers and landlords and is mortgaged against land worth over $1 trillion. That helps generates over $6 billion a year in bank profits, most of which is repatriated over time to the owners of the big four Australian-owned banks.
The view that private housebuilders build too few homes and the wrong type of homes is also being changed by the growth of Build-To-Rent operators such as Simplicity. It has developed a model for building medium-density homes for about half the cost per square metre of Kāinga Ora and other developers by using standardised techniques designed for maximum productivity. It then rents them out at market rents to make a long-run bond-like return.
Until now, the major constraint was funding to pump into the system, largely because bank lending and Government borrowing was not available to the likes of Simplicity and other Build-To-Rent operators.
Simplicity announced today that it had opened a Homes and Income Investment Fund to accept investments of over $1,000 to lend on to community housing providers and first home buyers to build 25,000 affordable homes over time. It will offer a margin above current bank term deposit rates and retain 40% in cash to ensure savers can withdraw their money at any time.
Simplicity CEO Sam Stubbs estimates that the fund could finance the building of 10,000 homes through build-to-rent projects managed by Simplicity Living, 10,000 low-cost homes for its members through mortgages and 5,000 homes through Community Housing Providers (CHPs). He estimates it would need about 5% of the current base of household term deposits of $236 billion to build the homes, suggesting a total funding requirement of $12 billion, for a cost of about $480,000 per home.
Hear a full interview above with Stubbs and Community Finance CEO James Palmer. The transcript is available above too. Here are other reports on the announcement, which are paywalled. The Post-$$$ Rob Stock NZ Herald-$$$ Anne Gibson
Links to news, views, papers, reports, data et al elsewhere
Top scoops & deep dives in Aotearoa’s political economy & globally
Late breaking news: Online grocery business Supie has gone out of business after being placed in voluntary administration. RNZ
What an underfunded and under-staffed health system looks like: Half of heart surgery patients are overdue their cardiac surgery, with delays at Auckland, Waikato, Wellington, Christchurch, Dunedin hospitals. At Waikato Hospital, 69 per cent of patients were overdue their surgery. NZ Herald-$$$ Nicholas Jones
The cyclist-hating Lord of Ngātīmoti: What happens when a mega-wealthy celebrity buys large chunks of a small community and starts throwing his weight around? Stuff’s Tony Wall and Amy Ridout reported over the weekend about how British reality TV star Noel Edmonds is not making friends and influencing many people in a small town near Nelson after buying $30 million of property.
A believer in “positive energy”, Edmonds set up a network of online community radio stations during the Covid crisis called Positivity Radio, including stations dedicated to wellness and calm as well as music designed to help plants grow.
Election data reveals that at the Ngātīmoti School polling booth this election, conspiracy theorist Liz Gunn’s NZ Loyal gained the highest party vote.
Most people Stuff spoke to wanted to remain anonymous because they still have to live alongside Edmonds.
“He’s got this attitude... about how he’s improved the place and made it amazing - it was already amazing,” one woman says.
“I just feel like he’s a coloniser and... he’s come in like the Lord of the Manor.”
Tony and Amy reported part two yesterday in an article titled: 'You're the enemy': Noel Edmonds' cycleway rant and a meeting of conspiracy theorists Stuff Tony Wall and Amy Ridout
Cycle trail manager Belinda Crisp explained the trust contracted to the council, to manage and develop the Great Taste Trail, an established cycleway and tourist attraction.
At mention of the council, Edmonds bristled.
“When he heard that, he said, ‘you’re the servant and I’m the ratepayer, so I’m the master’,” Crisp says.
The servant-master line is one Edmonds has trotted out several times before during disputes with councils and Government agencies here and in the UK. In a case known as Blobbygate, he won a $2m lawsuit against the Lancaster City Council over the failure of a Mr Blobby theme park.
But Crisp didn’t work for the council. She told Edmonds how proud she was of the project, and pointed out that it could bring thousands of cyclists to his business every year.
“He started saying how dangerous [the cycle trail] was, there had been no consultation with the community, the entire community was up in arms,” she says.
“He accused us of wasting ratepayer money when businesses in Motueka are going under. I tried to stop the conversation.
“I couldn’t believe what I was hearing. He stood up and pointed at us both, ‘you two need your heads cut off and your brains replaced’.”
The cafe was full of cyclists at the time, Crisp says, and they started leaving as the confrontation played out.
Stuff has obtained a phone recording of the end of the meeting, which captures part of Edmonds’ rant. He can be heard saying: “All hell’s gonna break loose, right. And while you, still, have this attitude you are not welcome here. Don't even think about having a coffee, having a slice… you are our enemies.”
He raised his voice: “You are our enemies. You have to be defeated otherwise you’re gonna bring down this wonderful country. Yes you are, because you’re so proud. Anyway, good luck with it. As we say in Britain, ‘on yer bike’.”
New Zealand’s dire need for more social housing: A shortage of social and affordable homes is at the heart of the country’s housing crisis, and more needs to be done to address the problem, experts say. The Post-$$$ Miriam Bell
Ockham Residential co-founder Mark Todd says kudos should be given to the outgoing government for recognising what the under-investment in social housing meant, and attempting to address it.
“So a bouquet for that, but a brick bat to them for setting up Kāinga Ora to do it. Despite the best intentions of many of its staff, it has been a failure in terms of delivery.
“The housing it has developed has been twice the cost of that built by the private sector, built twice as slowly, and executed poorly, due to lack of experience.”
Gilberd and Eaqub favour inclusionary zoning, although Todd is opposed to it as he sees it as a tax for developers.
Here’s how relentless lobbying delayed a major recycling policy BusinessDesk-$$$ Cecile Meier
Meng Foon's illegal seawall raises environmental concerns RNZ Matthew Rosenberg
In housing, transport, infrastructure and population
Empty houses: A Lower Hutt property manager says homes slated for re-development are being left empty for years because of the Healthy Homes rules The Post-$$$ Piers Fuller
Homes on sites slated for development are lying vacant or being demolished because it’s too expensive to get Healthy Homes certification in the mean time.
There are exemptions to allow new tenants to live in homes without certification for up to 12 months. However, development plans often take years, and people living in worse conditions such as emergency housing would instead happily put up with an uninsulated house, a Lower Hutt property manager argues.
More empty houses: A proposal to introduce a targeted charge for Airbnb operators in South Wairarapa is proving contentious for the region RNZ Sue Teodoro
Lisa Cornelissen co-owns the Martinborough Top 10 Holiday Park on land leased from the council. She told the hearings committee the facility had more than 40 sites for tents, vans and caravans, and 20 accommodation units.
She had searched on Airbnb for the Martinborough area and found 156 whole houses advertised within five kilometres of Martinborough, with 128 of those within two kilometres. The nightly fee ranged from $125 to $2,500 a night. The owners of many of these properties are seeking financial gain, she said.
"This is not sleepouts, this is whole houses. Of those houses, 99 of them have three bedrooms or more, 115 are advertised for $250 or more a night excluding servicing and cleaning fees, 40 are $400 or more a night," Cornelissen said.
"What these facts represent is not good old kiwi bach culture. This is not lending your holiday house to your friends and family for a nominal sum to cover co. Airbnb is without doubt the biggest visitor accommodation seller in Martinborough," she said.
"They are getting a premium by taking them out of the long-term rental market."
The problem with big projects: The High Court has ordered Christchurch pool contractor CPB to keep building amidst ‘astronomical blow-out’ in costs from $217 million to $696 million, which is more than the Te Kaha stadium. CPB had just wanted to down tools on the fixed-price project. Rau Paenga, the Government’s new ‘Ministry of Works’ infrastructure contracting firm that morphed out of Otākāro, applied for the order. The Press-$$$ Liz McDonald and Martin van Beynen
CPB wants damages of $49 million for cost overruns, $139m for unpaid estimated liabilities to subcontractors to July 31, 2023 and further damages of $265m. It demands Rau Paenga agree to adjust the contract price, grant a time extension to May 26, 2025 and to withdraw a default notice issued on September 1.
Here come the foreign buyers: Trade Me Property has seen overseas interest ramping up since the election compared to the six weeks prior to the election. Sales director Gavin Lloyd said inquiries from buyers in the United States were up 10% and in Australia that figure rose by 4%. The percentage of listings on Trade Me over $2m had increased from 6.7% to 10.4%. The Post-$$$ Piers Fuller and Liz McDonald
Employers pull out the stops for migrants Stuff Amanda Cropp
There’s a new White House plan to create affordable housing: convert empty office buildings Bloomberg-$$$
Poverty, inequality, income, wealth, health, crime, justice & tax
What 30 years of poverty creation has created: ‘Not a ripple’: Questions mount as advocates ask, why are children still being killed? The Press-$$$ Piers Fuller
Lesley Max, founder and board chair of Great Potentials Foundation said cases like Ru’s were "New Zealand's shame".
"This is one in a succession of cases of tragic deaths of infants -- absolutely defenceless infants," Max said.
Thank you very much for your kind donation – but what’s your money doing? Adam Dudding has taken a deep dive via The Post-$$$ into Impact Labs, the social services data analysis startup set up by Bill English and Maria English.
What 30 years of Justice system stress has created: The Criminal Cases Review Commission has been flooded with applications for conviction reviews at almost double the forecast level and may be under-funded. The Post-$$$ Benn Bathgate
Climate, water and environment
What 30 years of council underfunding and heritage rules have created: It’s reported Wellington City Council’s finances face ‘Open heart surgery’ after Town Hall blow out, including possible cuts to cycleways and parks. The Post-$$$ Tom Hunt
PR more valuable than delivery: Wellington Water is advertising a communications role with a starting salary higher than a city council chairperson or a fourth-year doctor working a 60-hour week. The $122,000 to $172,000 communications and engagement team lead role was posted on Wednesday, a day after economic analysts warned the Wellington City Council could be looking at a $1 billion long-term budget blow out. The posting went live on the day the council voted on pushing the budget to quake-strengthen the town hall by another $147m to $329m. The Post-$$$ Tom Hunt
A long wait: Cyclone recovery cash deal signed, buyouts begin in Hawke's Bay RNZ Lauren Crimp
The $203.5 million in the agreement allocated to flood protection would focus on solutions for Category 2 properties, said Hawke's Bay Regional Council asset group manager Chris Dolley. But it could be a long wait.
"Although the co-sharing agreement is signed, we still need to develop delivery plans to be approved by the government to access the funds, and the process and timing for this is to be determined," he said.
"The funding will be primarily directed to flood mitigation solutions in Category 2 locations, upgrades to repaired stopbanks and replacement of three pump stations." RNZ Lauren Crimp
Kāinga Ora remains tight-lipped on fate of water-damaged properties as homeless tenants struggle without contents insuruance. RNZ Rayssa Almeida
15% of MPs from 6% of the economy: 18 out of 121 parliamentarians will have some kind of farming or agricultural background. 1News’ Q+A
For New Zealand’s Maori communities, climate change is already hurting. Washington Post-gift Rachel Pannett
Acapulco ravaged by looting after Hurricane Otis Reuters
Columns
Vernon Small: Luxon’s 100 days of action could turn into 100 days of frustration The Post-$$$
Hannah McQueen: Less than 30 minutes after Labour conceded, I started fielding messages from clients saying they were ready to focus on growing wealth, and in many instances, this meant buying an investment property. The Post-$$$
Solutions and hope
University student start-up to slash construction waste The Post-$$$ Miriam Bell
Plan for large South Otago wind farm RNZ
In geopolitics
Israel wages ground campaign in Gaza, communications blackout eases Reuters
US, China agree to work toward an expected Biden-Xi summit Reuters
Chinese party delegation visits Solomon Islands, Chinese state media reports Reuters
Philippines Drops China Railway Deals, Seeks Other Funders Bloomberg-$$$
Canada Plans College Crackdown Amid Foreign Student Troubles Bloomberg-$$$
Australia’s ACCC targets big tech’s AI power The Australian-gift Jared Lynch
In global and local markets, economics and business
Oil prices up 3% on worries about Middle East supplies Reuters
Leaked Jarden accounts shows Australian red ink swamping Kiwi biz AFR-$$$
Italy to raise taxes for flat owners doing multiple short-term rentals Reuters
Wars Push Up Demand for Weapons, Sparking Fears of Shortages WSJ-$$$
Cartoon of the day
Ka kite ano
Bernard
Monday’s Chorus: Inside Simplicity's 25k home building fund