New Zealand needs to become far more innovative in the way we pay for and deliver infrastructure if we want to address problems like housing affordability.
As published in the NZ Herald, 5 April 2021
Enabling more private development is critical to solving our housing shortage and igniting our economic recovery from Covid-19. Photo: Bevan Conley, NZ Herald
The Government’s announcement last week of a potential $3.8 billion fund to help councils fund things like pipes and roads for new housing developments was a pretty clear signal they feel the same way. But the lack of supporting information to explain how this fund will be divided up across the country and how we will know it is being spent on the right things suggests the Government also hasn’t thought it through very far yet.
Governments have a range of levers they can pull to address housing issues, with infrastructure being one of the biggest. Where the money comes from for this infrastructure, and how it is delivered, is an important debate worth having.
I’m a big believer that enabling more private development is critical to solving our housing shortage and igniting our economic recovery from Covid-19. New Zealand is a highly developed country with a great way of life, but we have roughly the same population as Sydney. Asking only five million people to cover the multibillion-dollar cost of pipes and roads for an entire country through taxes and rates alone isn’t going to deliver the scale of infrastructure we need at the pace we need it.
This is where the Government’s focus needs to shift. One card it could be playing to solve the housing shortage, but isn’t, is the creation of an infrastructure bank.
An infrastructure bank would essentially bridge the gap between government sector objectives and private investment by providing an avenue for institutional investors like the ACC, NZ Super Fund, iwi, KiwiSaver providers and Australian pension funds to take on investment risk in New Zealand infrastructure assets.
This bank would provide funding and advice to central and local government on infrastructure projects, providing peace-of-mind that they are being adequately financed and managed, as well as delivering value for money.
The real appeal of an infrastructure bank – more than just finding the cash – is that it would also bring professional due diligence of loans and financing to the table, avoiding the problems we’ve seen recently with the Provincial Growth Fund.
The United Kingdom recently took a step in this direction by announcing it will form its own infrastructure bank, which has an added focus on funding initiatives that address climate change. This sort of innovation would fit New Zealand perfectly, and should be welcomed here.
From upgrading our transport, wastewater and electricity networks to building new schools, hospitals and public facilities - more infrastructure will be critical if we are to build our way back to housing affordability and productivity.
Better infrastructure is the key to unlocking a brighter economic future for all New Zealanders.
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