New fund to support housing and construction sector
A $350 million Residential Development Response Fund is being established to support the residential construction sector and to minimise the economic impact from COVID-19, the Housing Minister Dr Megan Woods has announced.
“The Residential Development Response Fund will help to progress stalled or at-risk developments that support our broader housing objectives such as ensuring the supply of affordable housing and providing jobs,” Megan Woods said.
Projects will be supported through the sharing of some of the increased COVID-19 related risks, with the fund backing developments through Government underwrites.
“As we saw following the Global Financial Crisis when house building halved between 2008 and 2011, credit can be harder to access in uncertain economic times. We know from talking to the building sector there is a relatively solid pipeline of construction activity until the end the year, but the outlook beyond that is unclear.
“Providing assurance through the fund will ensure developers can keep building homes, and workers employed. It’s estimated the fund will maintain around 15,000 jobs and the building of around 4,000 new homes, that otherwise might not be built because of barriers to developers securing finance.
“The post-GFC economic recovery was slow and difficult, so we are determined to do things differently. The measures I’m announcing today will help avoid a repeat of the worst impacts that the GFC had on jobs and housing. The Infrastructure Reference Group warned in their report of the potential for the fall out from COVID-19 to drag down the rate of new residential construction, particularly due to the reluctance of banks to provide finance over the next year.
The Fund comprises $100 million from the COVID-19 Response and Recovery Fund (CRRF) and $250 million of redirected funding from the KiwiBuild appropriation following last year’s reset. The majority of the funding will be recycled and returned to the Crown over time.
“This new Fund will sit alongside our KiwiBuild programme which is continuing to prioritise a pathway to home ownership for first home buyers. Following engagement with the sector on what’s needed to ensure we continue to deliver affordable housing, we are making further refinements to the KiwiBuild settings. We simply must not lose sight of the importance of opening up home ownership as we recover from COVID-19.
The settings will have more flexibility so that where an eligible buyer has not been found, the programme will allow:
- KiwiBuild homes to be sold to progressive home ownership providers, community housing providers, and if the home is suitable, to Kāinga Ora for public housing.
- Up to 25 per cent (from 15 per cent) of KiwiBuild homes in an underwritten development may be sold on the open market to further incentivise lenders and developers to keep delivering new housing.
In addition, the Government’s Land for Housing programme will be able to further support the development of affordable homes, with a $250 million dollar fiscally-neutral allocation.
The Minister expressed her thanks to sector leaders who have engaged through the Construction Sector Accord with officials and Ministers. Minister Woods said that direct feedback has been critical to shaping the government’s response.
“A productive residential construction sector is critical to New Zealand, and to achieving the Government’s overall wellbeing objectives. The sector is a significant generator of employment and economic activity in its own right. It is also an essential to ensuring all New Zealanders can live in affordable, warm, dry homes within thriving communities,” Megan Woods said.
- The funding for the Residential Development Response Fund will comprise:
- $100 million from the COVID-19 Response and Recovery Fund
- $250 million of redirected KiwiBuild funding following last year’s reset
- The Fund will primarily use underwriting to support the sale of a range of housing types and price points to meet financiers’ presale requirements and support thriving, mixed communities. However, the Fund may also be used to support more direct investment in residential development where appropriate.
- Through Budget 2020, the Government committed to delivering an extra 8,000 new public and transitional homes. This will stimulate the residential construction sector, create jobs and reduce the housing shortage. This brings to over 18,000 the number of public homes the Government is delivering by the end of 2024.
- Investment in infrastructure such as roading and ‘three waters’ to allow further housing development to take place, is also being made through the Infrastructure Reference Group ‘shovel ready’ process.
- KiwiBuild involves the Crown underwriting new homes off the plans in developments led by the private construction sector. The underwrite gives developers the certainty and backing they need to deliver developments that may not otherwise proceed, or at a greater pace than initially planned. In return, an agreed number of underwritten homes are sold to eligible KiwiBuild buyers at more affordable price points.
- The Land for Housing Programme involves Crown or private land being acquired for housing and sold to developers, including iwi, on a deferred payment basis in exchange for the delivery of affordable homes and public housing.
- Up to date data on the Government’s build programme is available here.