Speaker 1: Called it, and welcome to this episode of Shared Lunch,
Speaker 1: where we're going to be looking at all things home
Speaker 1: ownership and housing and alt or. We're lucky enough to
Speaker 1: be joined by the Minister of Housing, Chris Bishop. Thanks
Speaker 1: so much for joining us.
Speaker 2: Chris, good to be here. Thanks having me.
Speaker 1: I mentioned to you just before we got started that
Speaker 1: huge number of the people investing on the shares his
Speaker 1: platform investing still for the purpose of home ownership, Like
Speaker 1: it's still a massive story of New Zealanders and it
Speaker 1: is starting to you know, we also know that it's
Speaker 1: feeling more and more out of reach for them. So
Speaker 1: there's lots on that, but we thought a great way
Speaker 1: to start the conversation would be just ask you how,
Speaker 1: you know, do you own a home and what your
Speaker 1: path to home ownership was.
Speaker 2: I do.
Speaker 3: I'm very lucky my wife and I own own a house,
Speaker 3: and you know, really conscious that that's not the experience
Speaker 3: for many people, you know, my age and but below
Speaker 3: just ten forty. So yeah, I mean, I like probably
Speaker 3: a lot of his Islanders, you know, I went to university,
Speaker 3: lived at home for a few years and then went flooding.
Speaker 3: Rented in both Wellington and Auckland for a number of years,
Speaker 3: brought an apartment that was my sort of entry point.
Speaker 3: House prices were a lot lower back in twenty twelve,
Speaker 3: so apartment was an affordable way to get on the
Speaker 3: housing Letterer and then yeah, then moved back to Wellington,
Speaker 3: ran for parliament and brought a house and now we
Speaker 3: run another one. So we've just owned one house, I
Speaker 3: should say, so like many people went from one house
Speaker 3: to another with a very very large mortgage.
Speaker 2: So yep, that's sort of my journey.
Speaker 3: But yeah, very conscious that that's not the experience for
Speaker 3: many people. And part of my big drive in housing
Speaker 3: as Minister of Housing is to make home ownership more
Speaker 3: affordable for people. My agent below and in fed all
Speaker 3: his illinders. So you know, I want many more people
Speaker 3: to have the opportunities that I and other people in
Speaker 3: my very fortunate position been able to enjoy. Yeah.
Speaker 2: Great.
Speaker 1: I also hit a very lucky point in the housing market. Well,
Speaker 1: I think I was about two thousand and fifteen or
Speaker 1: twenty sixteen think, which I think was the end of
Speaker 1: like a ten year flat. Yeah, part for the property market,
Speaker 1: but it still felt like I was.
Speaker 2: Bang.
Speaker 3: Mom and Dad helped, so you know, getting that deposit
Speaker 3: together for the apartment back in twenty twelve was you know,
Speaker 3: it was a real stretch and so you know, beg Mama,
Speaker 3: dad came to the party with a industry loan and
Speaker 3: you know, and that's that's the experience for a lot
Speaker 3: of young people. And we're going to try and change
Speaker 3: that because you know, people should see housing and something
Speaker 3: that they can get into and be able to pull
Speaker 3: together a deposit.
Speaker 1: Yeah, mine was a key re server, which was sort
Speaker 1: of the saving greast together.
Speaker 2: That was part of it as well.
Speaker 1: Yeah. Well, I mean you touched on the prices and
Speaker 1: the change and the affordability. But you're one of the few,
Speaker 1: if not the only, certainly in this position to say
Speaker 1: that house prices need to come down. And that's a
Speaker 1: big call, I think for any politician. But what what
Speaker 1: drove you to that point? And can you specify how
Speaker 1: much or do you have an idea on how much
Speaker 1: they should decrease?
Speaker 3: By Yeah, I mean people sort of quite whipped up saying,
Speaker 3: you know, the housing minister wants house process to fall.
Speaker 3: But it's the natural corollary of saying that housing's two
Speaker 3: is unaffordable, which it demonstrably is and objectively is the case.
Speaker 3: So if, as some politicians say, you think housings unaffordable,
Speaker 3: but you don't want prices to fall, well they're sort
Speaker 3: of hollow words, right, because if something's.
Speaker 2: Unaffordable, you want to be more affordable, and more affordable.
Speaker 3: Means you've got to have you know, house process, we've
Speaker 3: got to have got to come down, and there's a
Speaker 3: you know, there's obviously two ways to make housing more affordable.
Speaker 3: One as price declines and then income growth. And the
Speaker 3: truth is we need both. So we need a much
Speaker 3: more productive economy with rising wages that were wages rise
Speaker 3: faster than inflation and were wages rise faster than house.
Speaker 2: Price growth, so that people can catch up.
Speaker 3: But also you know, at the at the house price level,
Speaker 3: you need them to come down, and over time we
Speaker 3: want to. That's the driving force of the government is
Speaker 3: to make housing more affordable. So to answer question around
Speaker 3: around what and where, you know, a good measure of
Speaker 3: an affordable housing market is where house prices are between
Speaker 3: three and five times average household income.
Speaker 2: That's not the case at the moment.
Speaker 3: You know, Queenstown is an outlier example, but you know
Speaker 3: it's eleven to one Auckland is about nine to one.
Speaker 3: Average is about seven seven and a half eight to
Speaker 3: one In New Zealand. The numbers bounce around a bit
Speaker 3: and depending on what measure you use, but you know,
Speaker 3: by any objective measure, New Zealand house prices are severely
Speaker 3: unaffordable and over the last twenty years we have had
Speaker 3: the fastest house price growth in the OECD in the
Speaker 3: Western world. And you just look at New Zealand and
Speaker 3: you say, we're five million people, not that many. We're
Speaker 3: going to land master size of the United Kingdom, so
Speaker 3: pretty big country actually relative to our population. But we
Speaker 3: have designed a planning system and a funding system for
Speaker 3: infrastructure that makes house prices out of control and it's nuts.
Speaker 3: And that's the driving force of our housing policy is
Speaker 3: rather than tinker around the edges with you know, things
Speaker 3: that kind of feel good but don't actually do a lot,
Speaker 3: the driving force of our housing policies to get to
Speaker 3: grips with the underlying fundamentals, which is about land supply,
Speaker 3: infrastructure funding and incentives on councils to make sure that
Speaker 3: they see housing as a benefit rather than a burden,
Speaker 3: which is what they do too much.
Speaker 2: So at the moment.
Speaker 1: Yeah, so many questions out of what you've just said there,
Speaker 1: but just interested out of that what your thoughts are
Speaker 1: on home ownership in New Zealand You've already touched on.
Speaker 1: You believe people should be able to own their own home,
Speaker 1: So maybe more about as an investment vehicle verse productive
Speaker 1: assets that are more likely to grow incomes and things.
Speaker 3: Yeah, I mean home ownership in Zealand's down to sixty
Speaker 3: three percent so is a record low.
Speaker 2: So we want to improve that.
Speaker 3: You know, we want Zilin to be a property owning
Speaker 3: democracy where people can get a foot on the ladder.
Speaker 3: It's an issue of intergenerational equity. You know, people my
Speaker 3: age and younger. I used to be a young I
Speaker 3: think forty. I'm no longer a young MP of a
Speaker 3: middle asied as an MP. But you know, peat people
Speaker 3: my age and below. You know, they look at a
Speaker 3: housing market and it's unaffordable, as you know and as
Speaker 3: many of the listeners will know.
Speaker 2: So we want to change that.
Speaker 3: And there are lots of reasons for that. There's an
Speaker 3: equity issue around it, particularly a generational issue. There's also
Speaker 3: a ginormous fiscal cost to government out of the housing market.
Speaker 3: So we spend as a government five billion dollars a
Speaker 3: year on housing subsidies across accommodation supplement, income related rents,
Speaker 3: emergency housing, the whole range of other housing products. It's
Speaker 3: a ginormous fiscal cost for government. And of course all
Speaker 3: of that money is money that we can't spend on
Speaker 3: the police, on the health system, on the education system,
Speaker 3: things like that, because the housing market dysfunctional. So government
Speaker 3: money just ends up chasing the housing market and filling
Speaker 3: in the blanks and trying to fix up regulatory errors
Speaker 3: that have been made through the planning system and the
Speaker 3: infrastructure funding system. So it's a ginormous cative effect for government.
Speaker 3: And then and then there are just the productivity benefits
Speaker 3: of more housing. So what's really clear is cities, cities
Speaker 3: that grow are engines of productivity and engines of economic growth.
Speaker 3: And that's the big thing New Zealand needs. We need
Speaker 3: more productivity, we need economic growth. And one of the
Speaker 3: things I constantly say, and I'm on a bit of
Speaker 3: a persuasion campaign around, you know, in public life, is
Speaker 3: to persuade people one of the single best things we
Speaker 3: can do to get the economy going and get productivity
Speaker 3: up in New Zealand is to fix our housing market.
Speaker 3: And part of that goes to your point, which is
Speaker 3: making sure that people don't just see the housing market
Speaker 3: as this giant vehicle for capital gains where they can
Speaker 3: just shovel as much money into the housing market as
Speaker 3: possible into second properties and third properties and see massive
Speaker 3: capital gains and sit on those but you know, investing
Speaker 3: in productive New Zealand businesses, you know, in the real
Speaker 3: economy rather than the housing market economy. And so again,
Speaker 3: fixing the underlying fundamentals of the housing market will rebalance
Speaker 3: the economy. And so there's multiple reasons to solve housing
Speaker 3: and you know it's we're very fixated on it.
Speaker 1: Yeah, most where doesn't know the housing market with a
Speaker 1: bits tacked on.
Speaker 2: I think I might have been just INDERI said that.
Speaker 3: You would hear me say this very often, but you
Speaker 3: know it's not it's not. It's not the world's most
Speaker 3: unfair comedy, right.
Speaker 1: Yeah, I'm interested to see what this sort of market
Speaker 1: dynamic with interest rates changing very quickly in another direction
Speaker 1: after a very long bullish run, boyd by lots of
Speaker 1: reasons which could continue. But I still really really am
Speaker 1: passionate about people being able to invest in their own home, sorry,
Speaker 1: buy their own home. And I also think it's an
Speaker 1: amazing creator of wealth for people over time in a
Speaker 1: generational aspect for all sorts of communities, but probably more
Speaker 1: than anything for for for people who are making money
Speaker 1: out of housing. Is New Zealand has very default rates
Speaker 1: on mortgages and home loans, so it's just like this
Speaker 1: compulsory savings plan over and over again, which sort of
Speaker 1: leads me into my next question, which is thinking about
Speaker 1: how you sort of mentioned the economy around this, how
Speaker 1: it's gone. You know, it's gone decades as far as
Speaker 1: a problem the housing aspect of New Zealand. Do you
Speaker 1: think there's any way we could look at this in
Speaker 1: any sort of single mandate mindset where we can see
Speaker 1: continuation over a longer longer than a sort of parliamentary
Speaker 1: term type investments like the example of read by some commentators.
Speaker 1: Is the Reserve Bank coming into control inflation or is
Speaker 1: there any way that you can see us really working
Speaker 1: together in a Biparsson manna to achieve these outcomes?
Speaker 3: Yeah, I think the prospect of that is actually quite good.
Speaker 3: So the thrust of our housing policy picks up on
Speaker 3: the best of what labor did, so Phil Tweyford and
Speaker 3: the last government back in twenty nineteen twenty pass I
Speaker 3: think called the National Policy Statement on urven Development, which
Speaker 3: is the thing that allows for or essentially mandates councils
Speaker 3: to up zone around train stations and city centers so
Speaker 3: allow more apartments, you know, bigger buildings in city centers,
Speaker 3: metropolitan city centers and around train stations. That, by the way,
Speaker 3: has has had world acclaim and is in the process
Speaker 3: of being implemented in Cross CHURCHUALKND well into other cities.
Speaker 3: So our housing policy picks up on that and doubles
Speaker 3: down on that in a way. So we've announced a
Speaker 3: package which we haven't implemented yet, but announced to package
Speaker 3: where we will go further, so more mixed use zoning
Speaker 3: for example, which is essentially a zoning term for more
Speaker 3: cafes and supermarkets and boutiques and bodegas and things like
Speaker 3: that in and around apartments and places where people want
Speaker 3: to live. So that the way planners view cities is
Speaker 3: you know, you live here, and you work over here
Speaker 3: in the commercial area, and then you know you've got
Speaker 3: industrial area over here, and then you go shopping on
Speaker 3: the weekend or at night over here, and you know,
Speaker 3: never the Twain shall meet.
Speaker 2: Actually, it's not the way people live their lives. It's
Speaker 2: not the way people want to live their lives.
Speaker 3: And so mixed use owning is about liberalizing our planning
Speaker 3: laws to allow people to do more with their own
Speaker 3: property and create more Liverpool cities. So we're going to
Speaker 3: make sure that we're going to mandate that in our
Speaker 3: major cities. We're going to get rid of minimum apartment
Speaker 3: sizes in our cities, which again is a liberalizing effect
Speaker 3: to mean that people who want to build departments of
Speaker 3: certain size can do. So we're going to get rid
Speaker 3: of minimum balcony requirements, for example, balcony requirements. There's a
Speaker 3: study out a few years ago. Balcony requirements add fifty
Speaker 3: to seventy thousand bucks to the cost of an apartment
Speaker 3: in Auckland, so it has you know, if you want
Speaker 3: to have it at a balcony, that's fine, but they shouldn't
Speaker 3: be mandatory.
Speaker 2: I've got a whole piece of work.
Speaker 3: I'm about to kick off around urban design, for example,
Speaker 3: because one of the issues is that councils impose largely
Speaker 3: subjective design requirements on housing, and they're not a week
Speaker 3: of the economic effects of doing those mandatory where they
Speaker 3: they're they're not mandatory, but they become mandatory because what
Speaker 3: happens is the council planner says, oh, be good if
Speaker 3: you could do this to the property, or good if
Speaker 3: you could do that, and the developer you know, or
Speaker 3: whoever's building the house essentially has to do it. Otherwise
Speaker 3: the resource concent doesn't happen, or it happens a lot
Speaker 3: more slowly. So give you an example, a classic example
Speaker 3: that I got told about a few weeks ago. There's
Speaker 3: a social housing developer in Napier who's building social housing
Speaker 3: so you know, not particularly ornate, just affordable housing for
Speaker 3: low income people. The council said, oh, we want you
Speaker 3: to put a Juliette balcony on all of the apartments. Well,
Speaker 3: Juliette balconies are those, you know, I think they're named
Speaker 3: after Romeo and Juliette, like, you know, small little balconies.
Speaker 2: Well, you know, look, do they look great? Yeah?
Speaker 3: Will probably they do. But you know, that's massively raised
Speaker 3: the cost of putting the apartments in, and it means
Speaker 3: the develop the social housing developer can do fewer apartments.
Speaker 2: So that's nuts. You know, you.
Speaker 3: Apartments in Napier don't need Juliet balconies and you shouldn't
Speaker 3: need it. You shouldn't have to put one in to
Speaker 3: get a resource consent. So this is the thing that
Speaker 3: I think, you know, we're trying to grapple with when
Speaker 3: it comes to councils is every time you impose a
Speaker 3: requirement to do a particular thing when it comes to
Speaker 3: a new house, that imposes cost. And we are not
Speaker 3: in a position in New Zealand where we can just
Speaker 3: impose unnecessary, needless.
Speaker 2: Costs on housing. So we're going to get to grips
Speaker 2: with all of that.
Speaker 3: So anyway to go back to where you started, which
Speaker 3: is bipartisanship, we've picked up what labor did and done further.
Speaker 3: We've also picked up on the major thrust of where
Speaker 3: Phil Tweyford was going around land use change generally. So
Speaker 3: I want the ability for cities to grow both up
Speaker 3: in city centers and major suburban hubs, but also out
Speaker 3: at the city fringe as well. And you know, again
Speaker 3: Phil Twyft had started a bit of that stuff, and
Speaker 3: you know, you've got replaced his housing minister and the
Speaker 3: kind of work cease. So we're picking that up again.
Speaker 3: Whether or not labor, the current interation of the Labor Party,
Speaker 3: you know, kind of supports that is kind of over
Speaker 3: to the end. But certainly I think the direction of
Speaker 3: travel is clear, which is that deregulating the housing market
Speaker 3: and liberalizing planning restrictions and planning laws and sorting out
Speaker 3: the infrastructure system is the answer. And there's a study
Speaker 3: out by Ryan McGreevy in a University of Auckland that
Speaker 3: shows that the Auckland Unitry Plan, which has kind of
Speaker 3: started all of the stuff we've just been talking about
Speaker 3: back in twenty sixteen, rents in Auckland are appreciably lower
Speaker 3: as a result.
Speaker 2: Of the building boom caused by the Aukland Unitry Plan.
Speaker 3: So when you allow people to build and you actually
Speaker 3: give them the regulatory conditions where they can do it,
Speaker 3: they go and do it, and developers get involved, and
Speaker 3: you get a housing boom. But we need more of it,
Speaker 3: and we need year after year of sustained house building
Speaker 3: apartments and terraces and duplexes and covetable.
Speaker 1: About my next three questions serce, which is no, don't
Speaker 1: be sorry, that's fantastic. We are seeing a lot about
Speaker 1: the social housing and media and things, and obviously there's
Speaker 1: a real big need for that, but we're you know,
Speaker 1: the Shares's customer base tends to be more focused on
Speaker 1: the people are feeling locked out of the buying of
Speaker 1: the house and some of the comments coming through from
Speaker 1: them sort of those tools are disappearing for them, and like,
Speaker 1: how what would your sort of response be to that
Speaker 1: with regards to what's happening from government specifically into supporting
Speaker 1: people into.
Speaker 2: Yeah, so look, we got rid of the first time grant.
Speaker 2: So the first time Grant.
Speaker 3: Was actually introduced by the last National government and continued
Speaker 3: by Labor that provided for up to ten thousand dollars
Speaker 3: for the purchase of a new house. The average grant
Speaker 3: was five, but you could get up to ten. We
Speaker 3: got rid of it because it was a very expensive
Speaker 3: form of housing support and it didn't really make a difference.
Speaker 3: And there are probably people out there watching who say, well,
Speaker 3: you know, I'd like five grand or ten grand towards
Speaker 3: a deposit, and you know, I don't blame them who wouldn't,
Speaker 3: but you know, on average, it brought forward the purchase
Speaker 3: of a property by about six months, so it didn't
Speaker 3: actually make the difference between people buying a property or
Speaker 3: being able to afford a property or not. It's just
Speaker 3: a bit of free money to help along the way,
Speaker 3: and you know, we've got fiscally constrained times. It's a
Speaker 3: demand side measure as well, so it actually you know,
Speaker 3: on the margins economically, it pushes prices up, so it
Speaker 3: actually works counter to what you're trying to do, which
Speaker 3: has achieved greater supply to lower prices over time. So
Speaker 3: we got rid of that and we put it into
Speaker 3: social housing provision because our viewers, when the waitlist is
Speaker 3: twenty thousand strong for social housing and you've got people
Speaker 3: living in emergency housing, it's a better use of Crown
Speaker 3: resource to fund social housing.
Speaker 2: So we did that. There was quite a tough call.
Speaker 3: Not everyone agreed with it, and I can appreciate that
Speaker 3: people don't necessarily like that. You know that there's lots
Speaker 3: of things you can do and lots of different you know,
Speaker 3: sort of solutions, you know, potential solutions. I just come
Speaker 3: back to the fundamental point, which is driving down land price,
Speaker 3: driving down the cost to build, freeing up planning restrictions,
Speaker 3: making it easier to build over time will reduce the
Speaker 3: cost of housing. Orklamuencry Plan as an example where that
Speaker 3: is taking effect. But you know, over time, I'm really
Speaker 3: confident the economic evidence is on our side that we are.
Speaker 2: Doing the right thing. Social housing.
Speaker 3: You know, we've got a whole piece of work to
Speaker 3: get kind of oil, which is the government owned housing
Speaker 3: corporation focused on its costs.
Speaker 1: I mean, it makes complete sense right that if you
Speaker 1: can play a house for twenty or thirty thousand dollars
Speaker 1: less or more, it's better than receiving the grants. If
Speaker 1: that can be achieved, I think there will be a
Speaker 1: fantastic outcome.
Speaker 3: Yeah, there's a range of things we're looking at, like
Speaker 3: progressive home ownership and what's called shared equity. You know,
Speaker 3: the current government, the last government sorry set up set
Speaker 3: up a whole range of different programs there. We are
Speaker 3: we're having a good look at those. They are quite
Speaker 3: expensive and you know they don't they're not at scale,
Speaker 3: So we're having we're having a look at them and
Speaker 3: seeing what ones work and what ones don't. So not
Speaker 3: not closing the door on those kind of options. But yeah,
Speaker 3: the absolute fundamental thrust is to is to sort out
Speaker 3: the planning system.
Speaker 2: You know.
Speaker 1: On the other side, we've got key we save any
Speaker 1: thoughts on how that could be used in in any
Speaker 1: way with regards to exalerating that process to home.
Speaker 3: Yeah, so we preserved the ability to do that. We
Speaker 3: got rid of the first time grant, but preserved the
Speaker 3: ability for people to use keV sabers to withdraw and
Speaker 3: not intending to change that.
Speaker 2: I mean not.
Speaker 3: You know, I saved a bunch of money in my
Speaker 3: own KEP saver back in the day and withdrew it
Speaker 3: all of it basically and order to get into my
Speaker 3: first time So we're you know, we're of got an
Speaker 3: open mind and relation relation to that. Keep savers are
Speaker 3: really important savings vehicle for a lot of a lot
Speaker 3: of New Zealanders and really growing strongly. So don't have
Speaker 3: any fixed pole scene in relation to changes there, but
Speaker 3: an open mind as to what we can do.
Speaker 1: Final question, because we've got a bunch of vestors and
Speaker 1: whilst I've touched on before that I do not see
Speaker 1: myself as a retail investor into residential property going forward,
Speaker 1: like I do like the idea of investing into funds
Speaker 1: and that type of thing, and where I think all
Speaker 1: we have spoken before about the idea of an housing
Speaker 1: fund to help people into first homes and stuff from
Speaker 1: shares is, but the economics are hard to make that
Speaker 1: stack up. You sort of have this basically, where we
Speaker 1: find the gap is between the deposit need, which effectively
Speaker 1: most residential incomes cover your mortgage, which is normally sixty
Speaker 1: ish percent of whatever that residential property is. Hence the
Speaker 1: mass work as soon as you add that forty percent.
Speaker 1: So you've touched on the shared equat Sorry, yeah, the
Speaker 1: shared equity and those types of things going forward. But
Speaker 1: interested in how you see the likes of you know,
Speaker 1: retail investors or shareholders and stuff, and key we see
Speaker 1: for members their part play or any part in your
Speaker 1: plans going forward.
Speaker 3: Yeah, I mean we've sort of got an open mind
Speaker 3: and all that stuff, and you know, I'm interested in
Speaker 3: all any ideas to to do that. So we we've
Speaker 3: got a very open mind to some of these things.
Speaker 3: And once you sort of step back a bit and say,
Speaker 3: you know, we can we can create different vehicles or
Speaker 3: look at regulatory change in order to make those easier,
Speaker 3: you know, we're up for those discussions, very very keen
Speaker 3: to talk about it. You know, we've just got to
Speaker 3: get housing under control in New Zealand. It's very important
Speaker 3: for a whole generation or two of young New Zealanders
Speaker 3: and it's and it's very important for the wider economy,
Speaker 3: which would be my take home point.
Speaker 1: Nice Well, thanks so much for your time, Thank you
Speaker 1: work so Thanks so much again to the Minister for
Speaker 1: joining us, and thanks everyone for tuning in. You can
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