Infrastructure Funding and Financing Bill

I move, That the Infrastructure Funding and Financing Bill be now read a third time.

It’s with pleasure I rise for the third reading of this bill. It’s a bill that has achieved cross-party support in this House, and I want to acknowledge the efforts of all parties in ensuring that this piece of legislation has reached its final reading today. I want to conclude the Parliament’s consideration of the bill by talking about one of the most pressing public policy failures in our national life and how this bill supports the efforts to address that public policy failure.

The housing crisis has many interrelated causes. However, it’s our Government’s view that one of those causes is the failure to ground land-use planning in economics. Over the last two decades, our housing market has experienced an accumulation of demand pressures—mainly population growth but compounded by tax settings and lower-cost mortgage credit—that have together encouraged a generation of investors to see rental properties as a uniquely desirable asset class. Now, if our land and housing markets were elastic, as they would ideally be, and able to respond to demand when it occurs, we might’ve seen the supply of new housing ramp up. Unfortunately, those markets have not responded to demand.

Now, for our cities to grow, there needs to be land that is ready to be developed in order to build houses on it. We need to remove restrictive planning rules that stop our city expanding on the fringes, which creates an artificial scarcity of land and drives house prices up, and remove height and density rules that stop the city growing up, which, effectively, rations floor space. Local authorities need to plan ahead and make room for growth.

This newly zoned land needs to be serviced by core infrastructure such as three waters, roading, and infrastructure for environmental resilience, and yet the provision of infrastructure by local government in New Zealand has been heavily constrained, particularly in our high-growth areas such as Auckland, Hamilton, Tauranga, and Queenstown. Hamstrung by financing constraints, local councils’ inability to zone sufficient land and invest in infrastructure to meet housing demand is driving up the price of urban land and compromising housing affordability. These financing constraints are exacerbated by community opposition to borrowing for growth and mandated debt covenants. High-growth councils are, in large part, already up against their debt ceilings, and that stymies the efforts of our cities to keep up with the population growth that they’re experiencing.

What this means is that our cities are not building the houses that we need. That’s why, fundamentally, we have a shortfall of 70,000 homes in New Zealand right now, and over the last decade we’ve seen a housing cycle that has seen housing prices in a number of our communities double in the last decade. Last year, PricewaterhouseCoopers released a report on cities that showed that Auckland was the only city in Australasia to have experienced a significant drop in discretionary income at the household level over the last decade—an average drop of some $5,000 per household per year—at a time of sustained economic growth, and that is largely because of increasing housing and transport costs. The upshot is that it leads to increasing homelessness and rising rents, and it pushes the dream of homeownership further and further out of reach. It all is driven by a failure to let the market respond to growth.

This bill is part of our Government’s policy response to that public policy failure. It’s one step towards fixing a broken funding and financing system to support more and better urban development. It’s complemented by the National Policy Statement on Urban Development gazetted this week, joint spatial planning work with local government in our six high-growth metro cities, and the Hon David Parker’s review of the Resource Management Act.

Now, to make progress on housing, we need to give councils and developers a range of tools to support them to efficiently deliver the infrastructure that is so desperately needed in our high-growth cities. This bill is another tool in the tool kit for funding and financing urban growth. The flexible and permissive nature of the legislation allows its use to evolve over time. It provides a framework that can coordinate multiple landowners and developers, along with the local councils, to deliver the infrastructure their communities need.

Allowing for a third party other than a council to finance the construction of infrastructure will overcome the constraints of debt limits and high upfront infrastructure costs. Instead, under this law, a special purpose vehicle, or an SPV, will be responsible for raising the necessary finance and building the infrastructure. Once constructed, the infrastructure, whether it’s community facilities, whether it’s three waters or roads, will be transferred to the council, who will then be responsible for its operations and maintenance.

The raising of finance will be possible because of a long-term levy paid by beneficiaries of the infrastructure to the special purpose vehicle over the life of the asset, which is very similar to a targeted rate. Flexibility of beneficiary identification and the levy liability within the bill means that the costs of each project are allocated on a case by case basis, with options to ramp up or vary the levy over time, depending on the extent to which a homeowner is affected by the development project. These levying powers are not provided lightly, and I want to reinforce the extensive monitoring, reporting, and disclosure regimes within the bill which will ensure that the SPV’s use of these powers is appropriate and is monitored.

The success of this programme won’t be seen tomorrow or the next day—success will take time. By overcoming technical financing constraints and speeding up the provision of housing-related infrastructure, we’re tackling one of the fundamental problems that have been driving up house prices: a lack of serviced urban land. Increased land and development capacity available for housing will support a more competitive urban land market, ultimately bringing down the cost of urban land. The bipartisan support in the House on this bill’s introduction and the general support from submitters and local government sends a strong signal that resolving local government funding and financing challenges are a priority of this Parliament, and that is something we can be proud of.

Ultimately, this bill will support a system where the viability of a project is a key determinant of whether it proceeds—that is, is it commercially viable and is it environmentally sustainable, and not whether or not the council’s balance sheet can sustain it. That will be the key determinant. It’s part of a suite of reforms which are, in my view, the most substantive changes to land-use planning in a generation.

I would like to make several acknowledgments with respect to the development of this bill and its progression through the House. First, I want to thank the Transport and Infrastructure Committee for its work on the bill, and those individuals and organisations who provided submissions. It was fantastic to see support from all sides of the House during the bill’s first and second readings, and the bill is stronger because of the work that was done by the select committee.

I also would like to acknowledge the efforts of the local government and the wider infrastructure sector in developing this legislation, especially Crown Infrastructure Partners, whose work with Fulton Hogan at Milldale, north of Auckland, along with the efforts of Auckland Council, was the proof of concept for this reform. That experience was invaluable in developing the policy and this bill. The high-growth councils—Auckland, Hamilton, Tauranga, Wellington, Christchurch, and Queenstown—have partnered with agencies to help develop and test this legislation to ensure that it is fit for purpose.

All in all, the Infrastructure Funding and Financing Bill represents a first for New Zealand. It will provide increased certainty to councils and developers about their ability to provide the infrastructure needed to support growing communities. It will be instrumental in the improvement and functioning of urban land markets, with a long-term view to bringing down the cost of serviced urban land in high-growth cities. This will deliver homes and communities sooner than would’ve otherwise happened and will give New Zealanders greater opportunities to be decently and affordably housed, and that is something I know that all sides of this House strive for. I commend this bill to the House.

Thank you, Madam Speaker. Look, this Infrastructure Funding and Financing Bill, here we are, third reading—well done, we’re all in agreement. But I wanted to touch on a couple of points, I suppose, and this bill really is providing that platform now and I’d like to acknowledge what the Minister said there. There is a real need for this sort of vehicle, and, actually, under the last Government as well, we had the Crown Infrastructure Partners, the special purpose vehicle, and also the Housing Infrastructure Fund really trying to develop more of a pipeline. I think that pipeline is something that is critical for giving a bit more certainty to industry, and to the construction sector as well, when they’re looking to get on board and do some of these projects, and to the local territorial authorities—I mean, they’re trying to plan the path of investment over the next 10, 20, 30 years, and when we look at that, I think we can all accept we haven’t got that balance right in the past.

Just last week, or I think it was only a week ago as it goes so fast here at the moment, Judith Collins announced a massive infrastructure plan for the National Party of $31 billion over the next 10 years. That sort of vision is exactly where we need to be—

💬 Hon Phil Twyford: Relevance.

—in giving a bit more confidence to the sector. The relevance—the Minister’s not quite sure about the relevance of investment in infrastructure. But I can absolutely assure him that there is huge relevance. Giving that confidence to the sector is a critical part of that, and this bill helps with that. So I do commend him on the work he’s done in this space, as well.

There is a massive need, particularly now, particularly in the situation we find ourselves in—this is not where we thought we would be as a country only six months ago, yet here we are. We have a massive economic challenge ahead of us, and infrastructure will be a part of the solution to that: investing in infrastructure, creating jobs, and stimulating local communities as a result of that infrastructure investment as well. We’re well aware of that on this side of the House—the party of infrastructure—and always have been. It’s great to see the Government now trying to claim that mantle as well. It’s quite cute—good on them—but the reality is it sits strongly here with the National Party.

But with this particular model, there were some concerns raised around whether it was going to end up with projects popping up ad hoc without the planning or support of those local authorities. But with the mechanisms in place for the different levels of process or structure that an applicant has to go through to be able to proceed under this bill, I think it puts the right measures in place to limit that, so you’re not going to end up with someone raising a private group to go and build a particular project, whether it’s water storage or a rail or a road project, or any other community infrastructure or environmental infrastructure. Those will be more closely aligned, obviously, with what the territorial authorities expect.

The other aspect of concern alongside that was around, well, these special purpose vehicles—if they’re having to do their own thing, they’re borrowing at a slightly higher cost because of an increased risk profile. They don’t have the same ability to achieve funding that local government and central government does, and therefore the overall cost of that infrastructure goes up as a result. Yep, I understand that argument. Fortunately, we’re in a situation now where interest rates are at historically low levels, and so that margin is much lower than it might have been previously. That is a consideration. But I think, on the balance of it, the ability to get these projects up and running to actually get them across the line outweighs what may be a relatively minor cost increase in the scheme of the overall value that a project like that would provide.

There were just a couple of key changes that were made through the select committee process as well that I thought were worth mentioning. One of those was around the eligibility of infrastructure, including the land purchase price for whatever particular project it is, and that’s often a major part of a purchase, depending on the type of project, but a roading project, for example, would require a significant amount of land purchased through that corridor. So it’s good to have that now included under the eligible costs, and also to have it tidied up—or tightened up, I suppose—around what happens with surplus levy and the excess levy as we progress through.

So the intent of this vehicle, really, is to get some new infrastructure happening. Once it’s done, we’d shut that special purpose vehicle down, and invest that infrastructure in whichever is the appropriate authority to have it. So it’s a case of tightening up those surplus and excess levy requirements in regards to investing them back to council if there’s a surplus or a requirement to actually chase up some that haven’t been paid yet, and then the local authority, or whoever it is vested in, can pick up that mantle.

So, overall, I think we’re in a good place. I agree with the Minister that there is a need to give some clear indication around infrastructure investment. I think this bill does it. It certainly shows there is a strong intent to see more investment in infrastructure, and just signalling that alone, I think, is a great move. We need to be giving those sorts of indications to industries so they can get on and start gearing up with their workforce and their equipment to provide some of these projects, so that the local authorities can plan alongside that, and—just coming back to that huge suite of projects that Judith Collins announced—that sort of vision then enables others to start looking at, again, “Well, how do we fit in with that? What sorts of models or vehicles or infrastructure might we need to piece in to work with a longer-term vision like that?” So I’m delighted we’ve got that plan in place, and this mechanism will enable others to support that investment as well. Thank you.

Thank you, Madam Speaker. The member Tim van de Molen, who just resumed his seat, spoke of a visionary infrastructure plan that is being touted by the Opposition. It’s a pity that that plan is completely uncosted, largely revolves around building houses to ease congestion—which has never worked before—and won’t even be started for the next 10 to 15 years. That, to me, is more of a pipedream than a vision, and that’s largely why we are where we are today, which is a housing crisis that we’ve experienced for many years—for way too long—and there are, of course, different interrelated causes for that.

One of the most fundamental reasons that we are experiencing a housing crisis is, as the Minister mentioned, that we are short of about 70,000 houses across the country. One of the fundamental reasons for that is that supply of housing just hasn’t kept up with demand. One of the factors that compounds this, though, is that our current infrastructure funding and financing scheme presents a range of constraints that actually make it difficult for the market, local government, and central government to come together to plan and to meet this demand.

Now, this is where this bill comes in. It creates a new tool to fund and finance infrastructure without being hindered by a council’s financing constraints—some are at their borrowing limit and some can’t increase rates because ratepayers are against investing in infrastructure there—and it also mitigates that issue of high upfront infrastructure costs.

So this is actually a bill that I’m incredibly excited about, because this is an issue that we’ve been wanting to fix for such a long time, and it fundamentally speaks to the fact that we, on this side of the House, believe that everyone deserves a warm, dry home that they can call their own and has the right to live with dignity. Thank you, Madam Speaker.

Thank you very much, Madam Speaker. Look, the excitement was palpable from the other side from that speaker Priyanca Radhakrishnan, who has resumed her seat—slightly facetious, of course, because she knows that this is a Phil Twyford bill and she knows that there has been a failure of delivery, unfortunately. It doesn’t matter if it’s been KiwiBuild, in housing in general, and now around transport and infrastructure, there is a nervousness—I can feel it. It’s palpable from this side. There’s a nervousness.

However, I’m here to be nice to the Minister. He knows that National is supporting this bill and is acknowledging the work that he has done, but part of the reason we’re supporting this bill is, of course, it’s a National Party idea. We just didn’t have quite the opportunity. Through a series of confusions, I think, in 2017, we didn’t have the opportunity to implement it.

💬 Hon Phil Twyford: The electorate are so unfair, aren’t they?

But this is a positive—yeah, that’s true. Elections are unfair, but, you know, there’s always the chance every three years to try and right a wrong, if the Minister would like to help me with that.

However, we do think the overall intents of this bill are very, very positive. Setting up these special vehicles of funding, trying to provide more flexibilities to councils—that’s a good thing. The only element I would note—and it’s an encouragement around some current funding—is for Government to give certainty to the councils around what funding is available for them. There’s been a lot of discussion around the infrastructure and the shovel-ready products. There’s no point in putting forward an infrastructure funding and financing bill if the Government doesn’t use it quickly and appropriately.

I know in recent weeks the likes of Auckland Council and others have been crying out for some certainty to understand how much of the billions of dollars that central government intends to spend they will have—

💬 Hon Phil Twyford: They’re getting $500 million in Auckland.

$500 million?

💬 Hon Phil Twyford: In Auckland, yep.

Five hundred million dollars—only $500 million. OK, before the Speaker tells me off that I’m deviating, actually, it’s a start—it’s a start. But the encouragement is to provide that certainty and, certainly when it comes to Auckland, to provide a little bit more. With that encouragement, I do commend this bill to the House.

Thank you, Madam Speaker. I just would like to take a very brief call in support of this legislation, the Infrastructure Funding and Financing Bill. New Zealand First does support this bill. It’s very sensible to make sure that we can build the infrastructure that we need, not just now, but yesterday we needed it. In fact, we needed it many years ago, so thank you to this Government for ensuring that we build on the work so that we can then get homes built and people living in the homes that they need for now and tomorrow.

Elections, as the former—the member who just resumed his seat—

💬 Simon O’Connor: “Former member”—what just happened?

Sorry, the former speaker who has just resumed his—my goodness, was that prophetic? We only have a few more weeks to go. But the member who’s just resumed his seat, Simon O’Connor, the former speaker to myself—elections are wrong, the member said. No, in the election in 2017, the people were not wrong. They made their choice, and here we are today. Thank you very much to this Government for moving this bill forward.

The Infrastructure Funding and Financing Bill establishes a new way of funding and financing housing infrastructure. This makes sense to enable councils and developers to overcome those council debt limits so that we can just get on with the job of building. It makes sense, and I’ll take up no more time of the House. I commend this bill to the House.

It’s a pleasure to rise and speak on this, actually, very good bill, Minister Twyford. I can say that because, fundamentally, it’s legislating the same idea that National took into the 2017 election, and he knows it—he knows it. It makes good sense—it makes good sense. Our councils are under enormous pressure on their balance sheets, their debt limits are pressing hard up against them, and there is an absolute certainty. They say there are only two certain things in life: death and taxes. So when we’re saying that there is a future revenue stream through rates, and, in this case, a special rate levy as well, that ensures that revenue stream to allow them to borrow now to get infrastructure in place so that we can continue to build as we need to for now and in the coming years, it makes completely good sense.

I’d like to commend to the Minister, and I have asked my question or two in the committee of the whole House stage, to have a chat to the Minister of Finance, because I actually agree with him—as I just have—that this idea of borrowing against those future rates and rates levies to build the infrastructure now, including local roads, is a very good idea. It seems the Minister of Finance doesn’t quite appreciate that when National released its first of the transport packages last week, we said that, well, we’re going to pay for a lot of this by allowing the New Zealand Transport Agency to borrow more against the future revenues of the fuel excise tax—which makes complete sense—and, in fact, the Minister here is doing exactly that same principle in terms of helping councils to build infrastructure today and tomorrow for the houses that we will need against the revenues that will come in over many years. So—fantastic—he agrees with it. If only the Minister of Finance could see sense, we might have a road to Damascus moment there as well.

This is a good idea. It was National’s idea, and it’s pleasing to see that this Government actually hasn’t thrown all of them out. It threw out too many of our very good roading ideas only then to reintroduce them, but it’s very good it didn’t throw this idea out.

We do support this measure. I commend this bill to the House.

Thank you, Madam Speaker. It is a pleasure to rise in support of this bill and to take a short call, as others have. Effectively, infrastructure is expensive and funding it has been obstructed by lack of this streamlining, and this bill introduces that. We want to support councils and we want to support our communities to get going.

Just to bring it back to what infrastructure really is, because it isn’t just roads, it is transport but it’s also community facilities, water services, and environmental resilience infrastructure, as well—that come under this bill—and, of course, housing. We know that we did inherit a housing crisis of some magnitude and we are getting on to solving that, and this is just one piece of that puzzle.

It is good to see the country is moving forward in this positive way to build infrastructure where and when it is needed, effectively and efficiently. So I do commend the bill to the House.

Thank you very much for the opportunity to speak on the Infrastructure Funding and Financing Bill at its third reading. This is an important bill. Of course we are very committed to investing into infrastructure in our country—it’s so critical. It is the foundation of economic activity and, of course, the Kiwi way of life. So these are very important.

We believe in transport infrastructure, of course. There are all the issues around the pressures, particularly that local government is facing in terms of water supply and reticulation. In order to support all of that, this bill was presenting some mechanisms such as a special purpose vehicle, which is going to assist local government to be able to address some of those very long-term challenges that have been before our country and that have been across successive Governments, and, of course, this is probably one of the biggest challenges that local government faces. Certainly, it’s good to see that we have a mechanism in place that is going to support infrastructure in the water space.

Of course, transport and associated infrastructure in local roads, State highways, and public transport—all of these are incredibly important, and we must not ever lose sight of the fact that our economy strongly depends on having a significant infrastructure base in our country. It’s a little bit like the skeletal system that a human body has—you know, without that skeletal system, it’s so difficult.

We have been committed to infrastructure in the past in previous Governments. The ultra-fast broadband roll-out that the previous John Key - led Government established in the country has been so important for us to engage in in the 21st century economy, not just here but right across the world. We all know that during the times when economies are locked down because of concerns around pandemics, etc., that infrastructure has been absolutely critical to maintain communications and viability for so many businesses that rely upon that, but when it comes to issues such as electricity networks, we have got some great challenges in front of us. We’re a country that is reasonably lowly populated compared to other countries. We’re long and skinny, and our roading network, our electricity network, and our gas network—all of these come at a very high price per capita.

So we are having the New Zealand Infrastructure Commission—which was in legislation that was passed through this House prior to this—and we are having a funding and financing mechanism to enable these pipeline projects to be able to actually be built, and I doubt whether we’re going to see anything happen in the next six months. We absolutely know that the challenges around this in terms of consenting and the preparation of the workforce—all of these particular areas are very challenging.

💬 Hon Phil Twyford: We’ve got all that.

Yeah, but we’re not seeing anything. We might see a shovel in the ground, but we’re not seeing dirt being dug, and I doubt whether we’re going to see any of that, Minister, before 19 September—much to your disappointment.

But, anyway, Madam Speaker, thank you very much for the opportunity to support this bill here in its third reading. Thank you.

Bill read a third time.