The Post: Government undermining house-building efforts of Labour regime

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It was, in the words of one visitor, “kind of secret squirrel”. Although the Christchurch office building belonged to the Homes and Communities Agency, Kāinga Ora, no external signage acknowledged this fact.

Inside, staff had to switch off phones and emails. “I felt like I was entering MI5 or something,” this visitor tells me. Instead they found a room stuffed with every kind of housing professional – from architects to resource-consent experts to engineers – all plotting the delivery of state housing projects. On the walls, a stream of Post-It notes, each one representing a different stage of house-building, moved from left to right, the whole process designed to create a seamless, delay-free flow of tasks.

This work, carried out under the sci-fi-esque title of Project Velocity, became the more soberly named Housing Delivery System (HDS). But the goal remained: slashing the time and cost taken to build homes for the country’s most vulnerable residents.

It seems to have worked, too. The pilots reportedly cut construction costs by 40-60%, thanks to getting everyone in the same room at the outset, minutely planning workflows and avoiding ordering the wrong materials.

The usual building-site inefficiencies – notably, waiting for the right tradies to turn up at the right time – diminished sharply. Kāinga Ora claims labour productivity “doubled”, and former board member Philippa Howden-Chapman says the time between design and consenting fell from 17 months to just six weeks.

All this matters intensely in a week when the government launched a “turnaround” plan for state housing that looked more like “Project Managed Decline”. After completing Labour’s project pipeline, the government will cap the number of Kāinga Ora homes at around 78,000.

As the population – and thus housing need – increases, the proportion of that need that Kāinga Ora meets will slowly fall. Meanwhile NGOs – the other main provider – have funding to build just 500 homes annually for the next three years. Contrast this with Labour’s six-year tenure, when nearly 18,000 houses were added at an ever-accelerating pace.

National’s attempt to undermine this success takes two forms. The first is to complain about Kāinga Ora’s debts. But as Howden-Chapman noted last year, “Has anyone ever bought a house or built a house without doing any borrowing?”

The increased debt largely represents increased ambitions. It guarantees that future generations will pay their share of the investment in ensuring vulnerable people are housed. (Which, incidentally, saves a fortune in health and other avoided costs.)

Some of the debt, of course, might have been incurred because Kāinga Ora was inefficient. Finance Minister Nicola Willis claimed as much last year, saying its build costs were 12% higher than in the private sector.

But even National’s anointed Kāinga Ora chair, Simon Moutter, noted that private developers can “pick and choose” their sites, while his agency must work with awkwardly situated land. It also builds many disability-friendly homes and has sought the highest environmental ratings.

On an apples-for-apples basis, Kāinga Ora’s costs may be roughly the same as those of private developers. Of course, given its economies of scale and opportunities for learning-by-doing, Willis is right to say the state agency’s costs should be far lower. But HDS was starting to address that, and Moutter has a target to cut costs another 20%.

We must also remember that Kāinga Ora had to start almost afresh. Under the previous National government, more state houses were sold than built; a deficit of about 14,000 homes – relative to population growth – accrued, deepening the catastrophic sales under Jim Bolger in the 1990s. John Key’s government also did “almost no” renewals of ageing stock, according to Kāinga Ora.

Labour, in short, inherited a massive maintenance backlog and a state agency that had lost all knowledge of how to build at scale. This is one reason why left-wing governments often look “inefficient”: they have to restore so much depleted capacity before anything else happens.

In growing Kāinga Ora’s capacity ten-fold, and at high speed, Labour may have made mistakes, setting its remit too broad and creating a behemoth often unloved by local communities and even the more socially minded developers. But the party was responding to an appalling deficit in social housing, which is still just 4% of our housing stock when the developed-country average is 7%.

We need over 40,000 more social homes simply to reverse the cuts of the last 30 years and to house the 112,000 people living on the streets, in temporary shelter and in overcrowded dwellings. Curbing Kāinga Ora does nothing to solve those problems.

Still, even National’s steady-state solution involves building 1500 homes a year (counterbalanced by sales and demolitions). Selected staff including Caroline McDowall, the head of housing delivery, have been retained.

The best-case scenario, in short, is that Kāinga Ora maintains – or even sharpens – its capacity for delivering high-quality housing efficiently. Then it won’t be so painful for the next Labour government to scale it up again.