The much-vaunted Kiwibuild programme isn’t going to come close to reaching the initial house building targets. So what has gone wrong? And can it be salvaged? AUT expert Professor John Tookey answered some of our questions.

The numbers on Kiwibuild are bleak. Thirty three houses built to date. A target of 1000 for the first year being revised down to more like 300. And somehow, it’s meant to reach 100,000 in ten years. For Phil Twyford, the minister overseeing the programme, it’s a disaster.

Putting aside the politics of what has gone wrong, what does it tell us about the construction industry? And are there solutions that would allow the Kiwibuild programme to be salvaged? We put the following questions to AUT professor John Tookey, an expert in construction industry procurement and productivity.

The Spinoff: What has gone wrong here? Is it the structure of how Kiwibuild has been designed, or is it to do with the personalities tasked with delivering it? 

John Tookey: I’m not going to critique personalities, it’s just not worth it. But the reality is when you’re dealing with an industry this diverse and massive, messing around looking for the perfect solution is never going to cut it. You go with a workable plan, executed with ferocity, rather than a perfect plan. Basically the government and various different ministers were more in the first instance concerned with reorienting the departments involved with housing, and playing those internal games, rather than actually getting runs on the board. It was always going to be a hostage to fortune, but the reality is they needed to put in a lot of energy up front. Assuming something can still come from Kiwibuild, we’re going to be so far into the election cycle that politically the government is going to get hammered for it.

I think they might already be getting hammered, really.

Even more hammered, then.

In your view, is the Kiwibuild programme as it currently exists salvageable at all? 

It depends on what your definition of success is. If it’s to create more housing affordability, if you look at the way house prices have flatlined as more supply has come online, actually housing affordability on a day to day basis is improving. Which is a good thing, at the same time that it starts to erode the value of people’s primary asset. But is that the definition of success as far as Kiwibuild is concerned? The programme was not really predicated on building capacity. If it was, you’d get the upfront investment of industry, who were looking at government and expecting them to start throwing largesse around, and big contracts happening quickly.

The housing sector is not monetised in quite the same way that you’d think it is. Consequently, building companies have to wait for the order to come in before scaling up. So this is the paradox – just saying there’s money available isn’t the same as money coming in. Builders live not exactly hand to mouth, but not far off it. Their strategic depth is minuscule.

So there hasn’t been any sense for builders that Kiwibuild could give them constant cashflow? 

Absolutely, and you can’t take on board additional technology or people to build capacity, just in case the government pulls finger. It was always going to be a very turgid process with a long lag time. When comments were made last year with regard to new housing on the former Unitec property about how soon we’d be turning the first key, they were just setting themselves up for failure.

You made some comments on Radio NZ about how Kiwibuild so far has basically been fighting over scraps, rather than huge developments like the thousands of properties planned for Unitec. Should any of those smaller developments have been bothered with at all?

It’s very hard to criticise attempts to make things happen. Back in the day, Napoleon Bonaparte said “lead, follow, or get out of the way.” You’ve actually got to do something, you’ve got to get some runs on the board. And if you’re just sitting around, by the time you’ve decided everything is happening, you press the button and you’re stunned that nothing is going to happen for months. The building industry is not sitting around, shovels poised, waiting for you to decide that something is going to happen, it just doesn’t work that way.

Well the building industry itself seems to have just been getting on with building – according to Judith Collins the private sector has managed more than 30,000 builds over the same period. How?

The market has reacted, as the market will react. If you’re a builder, are you going to target marginal stuff down to a budget, or are you going to target high margin stuff, where you can sell a lot of additional services related to that job? That’s what the market has been doing. The bulk of the work goes to companies like the group builders, who have large bespoke housing, they have guaranteed finance from people with pre-approval, and they can press the button and go. Those people who have guaranteed finance and the ability to repay are low-risk for a builder. We shouldn’t be surprised by this.

Okay, if the government wants to come out of Kiwibuild with some success, what are a few things they could do from here?

They’ll have to go multi-modal, and expand the programme to cover a whole range of different initiatives. The obvious examples would be the likes of The Housing Foundation, who in effect front-end load developments, part-own properties, do a bit of wheeling and dealing on the side to generate revenue, and it’s a non-profit making entity. They do a tremendous job of producing high quality homes at affordable rates, with long term commercial relationships with the builders they have on their jobs. And they have to compete with the commercial market for land from (Auckland Council’s urban development agency) Panuku, for example – they have to pay market rates, which changes the mix of solutions they can produce. So if I was in government I’d want to give special dispensation to not-for-profit entities building mixed developments.

I’d also look at freeing up planning consents, so that if you build a standard size house with a standard design, consents are free, or very cheap. I’d also put the onus on very large houses to fund the fast tracking of cheaper houses, which would put the finger on the scale somewhat.

And in the background you need to run programmes up-skilling and expanding the number of tradies. At the moment building is perceived to be risky, cold, wet and miserable. Why are we not rebranding the industry so that people feel they can have meaningful careers? I’d throw serious coin at the BCITO – the Building and Construction Industry Training Organisations – to upscale what they’re doing and getting them into schools.

And finally, one of the big problems with the building industry is that every house is an individual project, set up from scratch and built to the specification of the client. Which means that there’s no economies of scale, or strength in depth. If you go to a major development site, there’s loads of small builders, each one with their own vehicles and tradies, organised according to need on a daily basis. So we need to get to a situation where there can be economies of scale brought to bear.

The ongoing ‘Gilets Jaunes’ protests in France should serve as a warning to NZ politicians, writes Jeanette Fitzsimons: fail to explain the benefit of carbon pricing (and where the money is going) and you’ll reap the consequences.

A price on carbon has been a key demand of serious climate action for three decades now, but efforts to impose such a price have largely failed.

Fossil fuels are cheap. It is cheaper (as well as faster) to fly or drive from Auckland to Wellington than to get the train. It is cheaper to get a house on the edge of the city and drive to work than to live closer and walk or cycle. It is cheaper to import goods from the other side of the world than to grow or make them locally. All of that burns more carbon; we need a price on carbon to change these incentives.

To be effective in changing behaviour the price needs to be high and steadily rising, but any government which places an effective price on carbon commits political suicide. Citizens don’t see that they get anything for what they have to pay and view it as just another tax grab.

The Labour government in 2002 developed quite a well designed carbon tax, but never addressed the question of where the money would go. Even the climate minister, Pete Hodgson, hadn’t considered it – just into the general government coffers, it seemed. This was a recipe for mass civil revolt. The animal methane levy was dubbed the “fart tax” and we had tractors driven up the steps of Parliament. The National Party saw it as a chance to score political points and destabilise the government, and behind the scenes business lobbied frantically to have the whole scheme dropped – which  it was, on the pretence that there was not enough support in Parliament to pass the necessary legislation.

A decade and a half later President Macron tried to position France as the leader of EU action on climate change by introducing taxes on transport fuel. Our media has tired of reporting the French riots that sprung up in response, but they are ongoing. Macron has cancelled his proposed carbon tax, but the French are not appeased and are burning cars and buildings; street battles with police and blockades of public buildings continue in Paris and towns across France, with more planned. The anger is now about deeper issues of economic austerity, the dignity of workers, and the withdrawal of state services in favour of a privatised economy.

Macron had earlier announced big tax cuts for people on high incomes, paid for by cutting services on which the poor relied. Fuel taxes were the last straw. Workers were reacting to worsening inequality and a general contempt for the poor and the working class by the elite.

The French are more volatile than Kiwis. We have nothing in our past that resembles the French Revolution, but unless Government communicates clearly with citizens and is seen to be fair, we will have resistance here too. Recent fuel taxes, especially with the extra in Auckland to fund public transport, provoked anger and coincided with higher international oil prices. PM Ardern tried to bring the price of fuel down by blaming the oil companies for profiteering. But as a few media commentators pointed out, you can’t both have high fuel prices to encourage low carbon behaviour and low fuel prices to help families make ends meet. How is this to be resolved?

The proposed changes to the ETS will see some carbon units auctioned. This is second best to a carbon charge, but will still produce some revenue. There has been no public discussion of where the revenue would go, but its acceptability to the public relies crucially on this decision.

Some say Government should use it to promote low carbon alternatives like energy efficiency and renewables. But a decent price on carbon will do this anyway. If coal becomes much more expensive Fonterra will finally get serious about converting its boilers to wood waste, for example. They don’t need subsidies as well. If petrol is more expensive then smaller cars, electric vehicles, cycling and public transport become relatively cheaper.

Some say use it to reduce GST. But the more you earn the more you spend, and the more you spend the more GST you pay, so that will mainly benefit people on higher incomes. And the reduction in prices from lower GST will soon be disguised by general price rises.

Some say give it to the poor as an increase in benefits or the minimum wage. That will cause resentment among those on middle incomes and those just above the cut off point for assistance. It will also amplify all the injustices of the current benefit system.

If a policy is to be durable and supported it has to create the conviction that we are all in this together – everyone pays; everyone benefits from the revenue created; and everyone has the opportunity to reduce their carbon burn by thinking smarter. What we need is a policy that delivers an equal monetary return to all citizens, bearing in mind that $20 to a beneficiary or low income worker is worth enormously more than $20 to a corporate chief. It needs to be communicated clearly that those paying the most in the carbon price will be those using more than their “share” of our carbon budget. Those getting the most benefit will be those who reduce their carbon burn.

There are two ways to do this. The simple way is to reduce tax on the bottom band of income – probably by making the first dollars earned tax free. The second is by paying a “citizen’s dividend” to every citizen, or resident, or other qualifying descriptor.

The problem with the first option is that other tax changes may mask the tax reduction and confuse the public who won’t see the benefits so clearly. The problem with the second is that it is administratively complex to set up and the total revenue to distribute may not be worth it. I prefer the second because it  can put in place a system for environmental charges generally which are recycled equally to everyone. It is important that it be called a charge or fee, not a tax, which is something governments keep and spend themselves with no transparency or accountability.

If these charges are to be effective they must keep rising. The only way to avoid a public backlash when this occurs is to point out that yes, your petrol price is increasing, but so is your citizen’s dividend. You can choose to spend that how you like – the wise choice is to use it to prepare for a low carbon future by insulating, solarising, establishing a garden, or long term put it towards a more efficient vehicle or an EV. In the meantime thinking about how to spend it will prompt ideas about how to reduce carbon use without spending money – like driving and flying less, or eating more local food.

So the lessons I would take from the gilets jaunes in France are:

• Effective action on climate change and environmental issues cannot be separated from social justice;
• Policy needs to be inclusive –  and needs to foster the sense that we are all in this together; and
• Governments should set the limits and allow citizens to make their own decisions within this.