Author: Leonie Freeman

Auckland Housing Summit – 1 August

 

 

Auckland Housing Summit

The Auckland Housing Summit is the initiative of a voluntary group of concerned Aucklanders.

We don’t want to finger point, blame the other guy, or talk about the problems.  We know what the problems are, we know a lot of the solutions – what we need is action.

There is no single organisation, idea or person, no matter how innovative or powerful, that can solve Auckland’s housing crisis.  Together, we need to step up and be part of the solution.  We need to ask ourselves:  what will we do to solve the Auckland housing crisis?  It requires connecting minds in a common direction with common objectives.  It needs real leadership, long term focus and commitment.

The Auckland Housing Summit will draw together a cross section of industry leaders to create a platform for direct action through the discipline of collective impact.  It will deliver a collective plan of action, with accountabilities, responsibilities, and timeframes that can be shared with Aucklanders.

State Housing – To sell or not to sell – that is (NOT) the question!

Can we get there? Yes we can!

It may not add up to a ‘housing accord’ exactly – but there’s a surprising degree of common purpose between National and Labour in terms of what they want to achieve in housing. Both parties are pledging to build more affordable homes, expand the social housing stock and shelter more homeless people.

We all know that these are outcomes we have to achieve if we are ever to drag ourselves out of our debilitating, shameful and seemingly intractable housing crisis.

But while National and Labour have broadly similar overarching goals, the debate hots up around what politicians identify as the most effective approaches for reaching their goals. Some of the hottest debate, in the media and on the streets, is around the clearly emotive issue of whether or not we should be selling our state houses.

National plans to reduce the role of Government and, as part of the Social Housing Reform Programme, wants to offload thousands of state houses to charities, churches and iwi. Labour, on the other hand, says it would end the state house “sell-off”.

So, it’s presented as a case of to sell or not to sell. And, as with so many pieces in the great housing jigsaw, arriving at the right answer and doing the right thing aren’t as simple as they might seem on the surface.

Let’s look at some of the scenarios that confront you when you are responsible for looking after a mammoth, – 60,000+ unit housing portfolio – some of the headline choices and decisions you will routinely be faced with.

• What should happen with state houses in areas of the country where there is limited demand for them?

Currently in areas of the country where there is an over-supply of state houses, some of the surplus houses are sold to first home buyers. The opposite of this would be that they remain empty. In terms of simple logic (some would call it ‘common sense’), the right thing to do in this instance would seem to be to sell – particularly if, at the same time, you are enabling first home buyers.

• What should happen with state houses when we have an oversupply of one type – eg three bedroom houses – and not enough of other sizes?

The traditional three bedroom state house of the past served a great purpose. But in our communities today we have a much greater mix of family sizes and make-up. Our urgent need now is for many more one and two bedroom properties, and four bedroom plus.

This highlights the major challenge facing any large property portfolio owner, which is to ensure you have the right mix of properties to meet demand. So, depending on the location, it makes sense to sell or redevelop some of these excess three bedroom houses and use the proceeds to buy or develop housing that more effectively matches current demand.

• What should happen with state houses which are past their “used by” date i.e too old and not fit for purpose?

Once again, a sustainable property strategy is driven by demand. If they are in areas where there is demand for state housing, they could be renovated or demolished and new, more fit-for-purpose housing built. If there is no demand in the area, they could be sold and the funds reinvested in those parts of the country where there is high demand.

• What should happen in state houses in areas of high value?

This is another hot potato. Do we continue to hold one house – say, in the range of $2m – which holds just one family in a conspicuously expensive area when, if we were to sell it, we could build three or four in a less expensive area and house three or four times as many families? Your call!

• Should we sell portfolios of housing to support the growth of the Community Housing sector?

This comes back to a fundamental question about whether the government should be the main provider of social housing. That is an issue that goes both to practicalities and ideologies. Or do we follow the trend in some parts of the world, where growth is being stimulated through the community housing sector. These are predominantly church and charity based groups providing a range of specialist support services to people in need – and these days the definition of ’need’ definitely includes housing.

There is no one blanket policy that is going to cut it in such a large property portfolio. A black and white ‘sell or not sell?’ turns out not to shine a lot of light on things! And the problem of turning it into a political football, as attractive as that may be, is that it will almost certainly enhance the risk of not making the most of the large property portfolio the taxpayer owns.

What we need is a clear and transparent master plan so that the individual decisions become much easier.

Rather than contorting ourselves around one or other of the poles – ‘sell’ or ‘don’t sell’ – let’s try to manage our property portfolio in a manner that is both socially aware and business-like. And, since you asked, this is not a case of sitting on the fence. It’s about making sure we get the damn fence built! So:

a. Let’s provide houses that are right for what tenants require.
b. Let’s make sensible decisions for each property – whether it be selling and re-investing funds, renovating, or redeveloping.
c. Let’s have a clear set of objectives about “what success looks like”.
d. If we are selling assets – let’s be clear about our reasons for doing it, when we will do it, and whether we sell at market price or discount the price to achieve a desirable social objective.

So, to sell or not to sell? Well, it depends …

Example of a Parallel Journey: RealENZ – From Internet Disrupter to Giant of the Industry

Here’s an interesting article from the Real Estate Institute magazine dated December 2016 about the initiative to set up New Zealand’s real estate industry owned website – now known as realestate.co.nz.

Advertising New Zealand’s property on the Internet over 20 years ago was a big, hairy and audacious goal. It started with a Vision and a practical down-to-earth view of what we could achieve.

Not to different from my Auckland Housing Initiative, with a vision and a commitment to fix the crisis – and a practical down-to-earth sense of what is achieveable.

Click here to read

RealENZ article

Silence from Government and Council on comprehensive solution to Auckland’s Housing Crisis

Media release
Wednesday 7th December 2016 at 9am (NZST)

A philanthropic venture aimed at solving Auckland’s Housing Crisis has failed to gain commitment from Council or Government, despite a feasible plan from one of New Zealand’s foremost housing strategists.

In October this year, Leonie Freeman launched thehomepage.nz which, for the first time, provided a comprehensive picture of Auckland’s housing crisis together with a detailed solution.

Ms Freeman says “while many groups and individuals have indicated their willingness to put their shoulders to this wheel alongside mine, there is not a sufficient level of support to progress the project further.”

“In particular, Auckland Council has not formally responded to my proposal. But I have been informed indirectly that the Council, reflecting the position of the Mayor, has decided not to support the initiative.
In spite of the inquiries I have made, I see nothing from the Council to suggest that it has a better idea to present.”

“Similarly, the Government has not yet responded formally to the initiative. I understand indirectly that the Government believes there is already sufficient channels for participation and co-ordination of the housing crisis and their current focus is on land supply and infrastructure provision.”

“I must assume that at both levels, there is an unwillingness to support any proposal for tackling and fixing the housing crisis that doesn’t emanate from within its own policy-making apparatus. However, the progress we haven’t been making to date on Auckland’s housing crisis reinforces a conviction that the answer doesn’t lie within local or central Government either.”

Ms Freeman, is the pioneer who created and built the ground-breaking concept that now goes under the name realestate.co.nz. Over the past six months, she has been a tireless crusader, funding and committing her own resources to a venture that seeks to solve Auckland’s Housing Crisis. “It’s my contribution to Auckland and to trying to solve what many of us see as the biggest issue facing our city.”

The proposal recognises that while there is a dire and escalating problem in Auckland, what’s been missing so far is a visible, cohesive solution with clear targets. “We’ve reached a point where the need is so broad and deep that no single idea, organisation or person can possibly deal to it.”

Ms Freemans’s solution lies in the Collective Impact approach that has proven to be successful on a global scale. It involves bringing all of the key players in the housing space together to set up a new, not-for-profit organisation, which would sit at the centre of the initiative and drive delivery of the plan.

A key milestone was to build 125,000 new homes by 2025 (420,000 by 2045). Of these, 50% would be ‘affordable’. The plan also aimed to raise home ownership levels to 65% by 2025, including for Maori and Pasifika people. Within the same time frame, a goal would be set to improving the quality of existing homes so that 95% are classified as ‘warm, dry and safe’.

Additionally, the plan would create 3000 more social housing dwellings by 2018, ensuring that by 2025, 20% of social housing is provided by the community housing sector and that the needs of the elderly are fully met. For renters (who make up more and more of Auckland households), there would have been a far better range of secure tenure options. “And our intention was to eliminate homelessness in Auckland by 2022,” says Ms Freeman.

Ms Freeman has spent the past three months talking to key stakeholders in the housing sector, urging them to engage. “At this stage, I’ve been asking them to commit no further than getting involved and helping fund the next step, which is a six-month, detailed feasibility study. The deadline to commit was 30th November.”

“Although I am not in a position to take the initiative forward, as I’d hoped, it’s good to have added to the discussion and debate. And I acknowledge all the positive feedback, support and the great work undertaken by so many different people over the past six months.”

To read Ms Freeman’s plan for solving Auckland’s Housing Crisis, visit thehomepage.nz. You can also show your support for the initiative via Twitter @thehomepagenz and on LinkedIn at thehomepage.nz.

[ENDS]

For more information, or to arrange an interview, please contact:
Serena Benson
Public Relations & Media Consultant
+64 (0)22 077 0767
serenes@fastmail.fm

Notes to the Editor:

About Leonie Freeman:

Leonie is a leader who commands an unusual breadth of insight into the New Zealand property sector, having held top positions on both sides of the private and public divide. In 1996, she created the concept of what is now realestate.co.nz. The venture was originally known as RealENZ.co.nz. It was one of the first major commercial websites launched in New Zealand.

Her next project involved the purchase of a small run-down residential property management business. Leonie totally transformed ‘Interactive’ before selling it nine years ago.

After a well-earned break, Leonie focused on a contribution in the public sector. Leonie was the strategic property advisor in the setup of the new Auckland Council and acted as project director for a complex Council development project.

An 18 month stint as the General Manager of Development for Housing New Zealand broadened her social housing experience and at the request of the Minister of Finance, she led a strategic review of the Social Housing Programme last Christmas.

In 2011, Leonie was appointed to the board of the listed company – Goodman Property Trust. Leonie is also a member of Global Women, a collaboration of New Zealand’s most influential leaders.

Why Aren’t More Developers Developing?

We all know that house prices are at an all-time high and demand far exceeds supply. Economics 101 says that when demand is greater than supply, it’s opportunity time for sellers to produce more of what people want. So why aren’t more developers undertaking housing developments?

It’s an important question because the debate about our critically inadequate housing supply has thrown up a lot of ‘siloed’ views. Some think it’s just about a policy decision, or it’s a lack of land supply. Or it’s land prices, it’s construction costs and on and on the litany goes…. But the single target view is invariably wrong. The crisis of supply isn’t about one cause. There are multiple causes and they are all related.

Let’s consider some common misconceptions about developers

Development is a path to easy riches – well, isn’t it?

No, actually! Development is risky and complex. Sure, property cycles can mean that one development with perfect timing makes significant profit but there are many other developments which barely break even and the media is replete with stories of failed developments and unlucky developers.

Developers only focus on profit and they put profit before people – well, don’t they?

Not so fast! Developers will only be able to make a profit from development if they build something that people are prepared to pay for today. It’s demand from purchasers that drives what is built. Get that wrong, no profit.

Making a profit in a housing development is a bad thing – surely?

Developers, just like any commercial business, set out to make a profit. They are after all putting their own time, money and skill into building something. The process they are involved in exposes them to significant risks – many outside of their control. In this context it seems reasonable that they get something in return, otherwise, why would they do it? Would you?

Development is just about just constructing houses – isn’t it that simple?

Not quite. It takes a lot of skill, and a wide range of factors come into play in producing a successful developer. The skills probably begin with the commercial smarts to visualise an opportunity where it doesn’t currently exist. Then, they include being able to bring everything together – understanding demand, developing a concept, leading a strong team of professional experts, ensuring that the financials work, masterplanning and consenting, funding deals and the marketing and sales strategy before you get to the construction phase.

So what are some of the challenges?

It is a long term play – particularly for the larger developments.
• Evan Davies of Todd Properties recently commented in an article that the 162 ha Long Bay development in Auckland is estimated to be complete in 2022. This was originally launched in 2001 by the previous landowner.
• Hobsonville Land Company – a subsidiary of Housing New Zealand – are responsible for the 4,500 home masterplanned community at Hobsonville. It estimates that it will be complete in a decade. The land for this project was purchased in 2002.

Funding can be a challenge for the more complex, long term, large scale housing projects.
• It can be a capital-intensive process and the challenge is to secure lines of credit over a long-term time frame.
• Where do you go for the funding? We saw the collapse of a number of finance companies after the Global Financial crisis. Finance companies were the main source of second-tier development funding. The banks even now aren’t totally filling that gap – which provides another stiff challenge in getting would-be development projects off the ground.

Then there’s the risk …
• Risk includes – construction cost increases, property cycle changes, funding exposure, potential for delays from everything from consenting and obtaining sufficient sales through to weather and confronting unexpected issues such as contamination. All of these factors have the ability to impact the potential feasibility of a development project.
• Putting development projects together are a little like a rubix cube. Everything needs to come into line. A change in one area of the development process can have an impact on many other parts.
• It is not surprising, therefore, that some companies are risk averse – reluctant to grow quickly and expose themselves, in the process, to plenty of risk.

So the 64 million dollar (more or less!) question is – how do we not only maintain the development momentum but actually increase it?

As I’ve mentioned, scale, the cost of borrowing, risk, and uncertainty are some of the reasons which impact on development projects.

We have to find answers for these complex problems. They are issues so big that focusing on them for long can make your brain hurt! Where we assuredly won’t find answers is by going looking for someone to blame – and, while we’re about it, let’s also ditch the fantasy that there is a simple silver bullet solution. This is a complex issue – and we need to solve it collectively, all the time focused on taking action and keeping momentum going.

It is about partnership – all the players – government, council, iwi, developers, the community housing sector and the finance community single-mindedly focused on how we get more homes built, and how we make more of them affordable.

I launched a comprehensive solution on my website thehomepage.nz in October 2016. It involved 4 key steps:
1) Defining the vision by identifying where Auckland wants to go and what success looks like.
2) Implementing an approach called Collective Impact to ensure the ideas can be implemented. This is a practice used globally and New Zealand to solve complex problems – ensuring that everyone is working together towards the same goals and measuring the same thing.
3) Creating a housing framework to make sense of the problem and where all the pieces of the housing jigsaw fit.
4) A resolute and unified action plan which ensures we are clear and transparent about where we are going and how we can get there together.

To ensure we can get more development happening by the development community there are many levers which need to be pulled. Some of these could include:

• Getting everyone involved in the housing sector focused on achieving the same goals and working together to remove current blockages.
• Assist all groups understanding not just their part of the jigsaw, but everyone else’s and where they fit in.
• Agreeing and implementing initiatives to assist in mitigating risk. This may include up-front pre-commitments from local or central government, obtaining payments for projects on local or central government land when houses are complete or an underwrite on some projects
• Develop clear robust partnership models between all the parties including – public, private and non-for profit sector so that there can be much improved efficiencies at putting development opportunities together
• Clarity and certainty on projects from the public sector – such as providing a five year pipeline coming through. This would assist in enabling development momentum to continue when the market turns.
• Working on how to increase the capacity and capability within the development and construction industries
• Considering alternative funding options to enable developments to get off the ground
• Ensuring there is much greater alignment between land supply, infrastructure provision and development opportunities
• Looking at ways to reduce the time involved for development projects including speeding up the consenting and development processes
• Ensure we take Aucklanders on the journey so that new housing supply is seen as a positive contribution and something that strengthens communities
• Work on home ownership and assisted ownership programs to ensure there is the ability for Aucklanders to purchase new housing stock off the plans.

This is about not just talking, though talking together in a focused way is going to be a good start. But it’s fundamentally about action and producing, collaboratively, a long term fix for Auckland’s housing crisis. Like it or not, we’re all in this one together. We either hang together or hang separately. I’m sure of my preference!