Government ideology gets in the way
Yesterday at the National Party Conference in Christchurch the Prime Minister delivered a speech that the members were both non receptive to while it is not even showing up prominently on the Herald online today. That speech was on this $1 billion contestable infrastructure loan that Councils could use (and then pay back with 10 years) to build new roads or water/wastewater infrastructure in Greenfield developments. Note that the $1b is a loan and the Government continues to do nothing in contributing to infrastructure to solve the Auckland housing situation.
From Transport Blog (given even the Herald has given up covering the story (the links are small and buried down the bottom of the news section)):
Govt Offers a $1b Infrastructure Loan
Yesterday the Government announced its latest policy on addressing the housing crisis in Auckland and increasingly in other centres, a $1 billion infrastructure fund to pay for the bulk infrastructure needed to support *some* of the new houses needed in greenfield areas.
The Prime Minister today announced a new $1 billion Housing Infrastructure Fund to accelerate the supply of new housing where it’s needed most, Finance Minister Bill English and Building and Housing Minister Dr Nick Smith say.
The contestable fund will be open to applications from councils in the highest growth areas – currently Christchurch, Queenstown, Tauranga, Hamilton and Auckland.
Mr English says the Housing Infrastructure Fund will help bring forward the new roads and water infrastructure needed for new housing where financing is a constraint.
“The Government will invest up front to ensure the infrastructure is in place. But councils will have to repay the investment or buy back the assets once houses have been built and development contributions paid.”
As we know Auckland is growing at rate faster than any other region in the country – there are a few districts growing faster, such as Selwyn following the Earthquakes but they are also off a much lower base. The Q&A suggests that the high growth areas are defined as the areas expected to see a 10% growth in the 10 years to 2023. In that time frame, Stats NZ predictions suggest that Auckland will see 58% of the country’s population growth. That figure is even higher if just comparing the five areas listed with Auckland taking around 70% of that growth. As such we can expect the lion’s share of that $1 billion to be used in Auckland. Auckland’s growth over the following years doesn’t slow down either and in the 30 years to 2043 over 60% of all growth in NZ is expected in Auckland.
One big issue right from the start is that for those other cities, a share of $1 billion would go a long way. But in Auckland with its infrastructure needs on another scale, it would be gulped down so fast it would barely touch the sides. The recent work that AT and the NZTA have been doing on Transport for Future Urban Growth suggests that over 30 years around $10 billion is needed in the greenfield just for transport infrastructure. On top of more funding is needed for other physical and social infrastructure that will be required to ensure these new developments have the level of amenity that will be expected/required such as parks, community facilities and much more.
There is of course a lot more infrastructure that’s needed in Auckland but seems that only the greenfield stuff counts for this funding.
Dr Smith says the fund will be available only for substantial new infrastructure investments that support more new housing, not to replace existing infrastructure.
“To access the fund, local councils must outline how many new houses will be built, where they will be built and when they will be available. Ideally, they will have agreements with developers on these issues.
“Funding may also have other conditions attached, such as faster processing of resource consents. All of this will require close collaboration between central and local government.”
Mr English says infrastructure, and its financing in particular, is one of the three key constraints to building more houses – alongside land supply and consenting requirements.
“Councils have strict debt limits which means some lack the headroom to invest in infrastructure now and then wait for future development contributions to recover the costs. The fund will help provide more infrastructure sooner by aligning the cost to councils with the timing of revenue from development contributions.”
Depending on the number and timing of applications, it will require the Government to temporarily borrow up to $1 billion, which will increase net debt until it is repaid.
Only funding new infrastructure is kind of understandable but it does raise some questions, such as just what constitutes new infrastructure. In many cases building new roads or pipes also requires upgrading existing infrastructure to cope with the demands of new areas. We know we can’t just build tens of thousands of dwellings on the edge of town and expect the motorways to work. We also know that there are plenty of areas within the existing urban area for which replacing existing infrastructure is likely to be needed to enable new development. One such example would be the NW Busway which enables growth in existing urban areas such as Te Atatu but also will be critical in enabling growth in the entire North West.
Full article: http://transportblog.co.nz/2016/07/04/govt-offers-a-1b-infrastructure-loan/
Transport blog bring up issues that would muddy the loan scheme. The North West Busway is one, the Southern and Central Interceptors (sewer trunk lines to the Mangere Sewer Plant) which are also needed for similar reasons is another.
The Central Interceptor is a $900m-$1.2b scheme by Watercare to run a new main wastewater trunk through Isthmus Auckland to the Mangere sewer plant in South Auckland. The interceptor would add capacity to the network and better mitigate against overflows from storm water entering the Waitemata Harbour as happens currently after each storm The Central Interceptor is needed to allow intensification to happen on the Isthmus where the highest housing demand is in Auckland as well as help cater for Greenfield growth out in the north-west areas like Westgate.
The Southern Interceptor is a $700m proposed project (also by Watercare) to replace the ageing and at capacity sewer trunk line that runs along the western flanks of South Auckland (it can be seen in the Wiri and Puhinui reserve areas) and connects also to the Mangere plant. The Southern Interceptor is a point on consternation between Auckland Council and developers wanting to develop land north-west of Wiri from rural to industrial land (as the interceptor does not have the capacity to handle that growth). The Southern Interceptor will also need to be replaced to cater for both intensification in existing South Auckland (Manukau area) and Greenfield areas like Addison, east Papakura, Karaka and Drury South (until they get a new wastewater plant).
So to replace both interceptors needed for housing growth over a large area of Auckland the price tag already sits at a conservative estimate of $1.9 billion. And we even haven’t come to transport yet especially in South Auckland.
$230m to upgrade the Southern Motorway between Papakura and Drury, $70m to place the Third Main on the Southern Line between Wiri and Papakura so freight trains do not clash with passenger trains, $118m for Pukekohe electrification and two new stations (three are proposed) on the Southern Line, $400m for even the scaled back Mill Road corridor project (both northern and southern sections), $100m would easily be sunk upgrading SH22 from Pukekohe to the Southern Motorway at Drury, and the list goes on. That price tag for transport in Southern Auckland is $918 million ALONE and I have not even gotten to Westgate or Silverdale further north yet.
Total price tag is: $2,818,000,000 and I am still not even listing things like wastewater plants in Drury.
The ultimate point being is that National’s $1 billion contestable loan spread across Auckland, Hamilton, Tauranga, Christchurch and Queenstown would not even make a dent in the $17 billion infrastructure requirement Auckland has again ALONE. As someone said:
Or rather National is trying to piss on a Californian type wildfire that is Auckland’s housing mess in an attempt to bring it under control.
Again the Government is doing the absolute minimum in an attempt to do something it has so famously done since 2008. I seriously do not think people nor even the Council’s are going to by this not even a band-aid measure from a Government that seems still firmly in denial we have a housing situation in Auckland that is fuelling that situations in other areas in New Zealand.
Let’s see what Labour and the Greens have to answer this.