Overseas Investment (Build-to-rent and Similar Rental Developments) Amendment Bill

I present a legislative statement on the Overseas Investment (Build-to-rent and Similar Rental Developments) Amendment Bill.

ASSISTANT SPEAKER (Maureen Pugh): That legislative statement is published under the authority of the House and can be found on the Parliament website.

Hon CHRIS BISHOP: I move, That the Overseas Investment (Build-to-rent and Similar Rental Developments) Amendment Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill. At the appropriate time, I intend to move that the bill be reported to the House by 1 November 2024.

The bill amends the Overseas Investment Act to create a streamlined pathway for build-to-rent developers. It responds to concerns raised by stakeholders that the Overseas Investment Act presents undue barriers to selling established build-to-rent assets to overseas investors. This uncertainty over the ability to onsell assets is creating liquidity concerns for developers and disincentivising housing development and supply. So the changes in this bill seek to boost housing supply by providing clarity and certainty to investors that they will be allowed to build and, when required, sell build-to-rent and similar large-scale rental assets.

I think it’s well known amongst the House that New Zealand needs more houses. That is an understatement. We have a chronic housing shortage affecting almost every metric in society we care about, and build-to-rent can make a contribution towards the solution. It’s not a silver bullet—I’m not pretending for one second it will be the solution to our housing crisis—but it is a useful and important step forward.

Build-to-rent provides the opportunities to increase supply and diversity, in particular of secure, quality rental developments at scale; exactly the sort of housing we need. People out there listening—if they are on Wednesday night at five past nine in the middle of winter—might wonder what build-to-rent is. Purpose-built, medium- to large-scale rental properties, often within walking distance of key transport links. The key difference is that they’re often funded by institutional investors. They tend to be professionally managed, good amenities, and offer residents a variety of lifestyle options.

In fact, just the other day, the Prime Minister and I opened Resido at Sylvia Park in Auckland, which is a Kiwi Property development—it’s a New Zealand company. Those are quite upscaled apartments: a lot of them, all in the same place, next to Sylvia Park, right next to the train station; concierge down the bottom; they’ve got a gym; I think they’ve got a co-working space. It’s quite an upscale development, and that’s an option for people, and, clearly, Kiwi Property think they can make a quid out of it and it’s an option for people to choose.

That’s what we need in New Zealand. We need housing choice. The small apartment in the Auckland CBD will be right for some people—a more upscale apartment at Sylvia Park will be good for some families. We need terraced houses, we need duplexes, we need apartments, we need suburban homes, we need houses on the city fringe, we need houses on the CBD. We just need a lot more of everything, and build-to-rent’s part of that.

We know from overseas it’s made a contribution to housing markets: 100,000 homes in the UK; Australia has seen quite a lot of growth. We’re at an earlier stage, but we do have a sector with potential for growth. There’s currently 23 developments, I’m advised, under way across Auckland, Christchurch, and Wellington. What they need—the developers of these products—is access to domestic and foreign capital to help get the sector off the ground. So you’re talking significant upfront investment—upwards of $200 million—and, given our limited domestic savings and limited experience with build-to-rent, we are going to need overseas investment to support projects at this scale.

Again, if you look overseas, institutional investors such as pension funds are making quite big contributions to build-to-rent, but our overseas investment laws—as I think many people in the House know—are very complex and they’re creating uncertainty around investing here. So, again, as the House knows, since 2018, the Overseas Investment Act has generally—not always, but generally—prohibited foreigners from purchasing residential land in New Zealand, except in limited circumstances.

Under the current rules, overseas investors have a streamlined pathway to develop new housing, but they can only purchase established housing developments if they meet the onerous “benefit to New Zealand” test. As a result, developers report they are not confident that overseas investors will be able to purchase build-to-rent assets after they are built. So this doesn’t give enough certainty that they’ll be able to sell their assets when it comes time to exit or if they face fiscal distress—ultimately disincentivising new housing from being built.

So what the bill does is create a new pathway under the Act—a streamlined pathway—which enables investors to purchase established large-scale rental developments if they intend to continue to operate them. The new pathway is primarily designed for build-to-rent, but it will also enable investment in similar large-scale rental developments which may face liquidity issues, such as key worker accommodation, affordable housing delivered by community housing providers.

The pathway has been designed to maximise certainty for investors, so it removes the need to demonstrate a benefit to New Zealand to obtain consent for these purchases. The pathway operates similarly to, and in conjunction with, other streamlined pathways within the Act—such as the “increased housing test”, which people will be already familiar with.

I want to be clear: the bill retains the foreign buyers ban. We recognise that owning residential land in New Zealand is a privilege. So this bill does not affect existing restrictions which prevent foreign investors from purchasing homes to live in, becoming small-scale landlords in New Zealand, or holding empty homes for speculation. The new pathway is limited to investors who seek to purchase existing large-scale developments which have 20 or more units that can be made available for rent. Investors will be required to lease units under a residential tenancy and meet any other conditions of their consent. As with other consents under the Act, the conditions will be actively monitored and enforced by Land Information New Zealand.

So it’s a relatively simple bill within a very complicated legislative schema. I think we should be clear about that. The Act is complicated, but this is a relatively small change. I’m not pretending for a moment it’s the solution to our housing crisis, but it is, of course, one useful thing we can do. Ultimately, the solutions are around land, infrastructure, funding and financing, and incentives for councils—and that is what the Government is working at pace on. But this was part of the 100-day programme the Government said we would take policy decisions on. We did that within our first 100 days—introduced to the House a few weeks ago. I’m looking forward to it being considered by the Finance and Expenditure Committee—I know that committee will do a good job. I hope that we will be able to legislate it before the end of the year.

As I say, I’m not pretending for a moment that this is a silver bullet—there is none—but it is a useful contribution. I commend the bill to the House.

The question is that the motion be agreed to.

I’m happy to rise to take a call on this—thank you, Madam Speaker—and indicate Labour will be supporting this bill to the select committee. This is, of course, a category of work, build-to-rent, that I think we’ve seen is an evolving category in New Zealand over the last few years. Indeed, our Government brought legislation to the House in 2023, just over a year ago, where we really started to define the category of what build-to-rent was. We did that by using a lever to encourage more build-to-rent, and I think we share that with the Government—the desire to see an increased build-to-rent. The lever that we used back in March 2023 was, of course, applying in perpetuity interest deductibility to newly built build-to-rent developments.

But there was a quid pro quo for that. As we were giving a privileged position to build-to-rent, we were in the process of defining a category. In that category, there had to be some benefits that accrued not only to the owners of these assets, which are an important part of how we solve our housing crisis by increasing supply, but it offered a different way of renting; that these are dwellings that are built with the idea that we start to develop a rental market, such as we see in overseas jurisdictions, where people enter into far longer-term leases and make their lives in a rental home. Some people—and many of these that we’re already seeing being built quite upscale homes—are seeing making their home in a rental property as a permanent way of life; it’s not a stage of life that they pass through.

One of the things that we did is we put a definition around what build-to-rent was. We said there had to be 20 or more dwellings in a single development on a single block or adjacent blocks, held in one or more titles. So it is about getting scale, and that was a critical component of what we wanted to do. They needed to be owned by the same person, and that person included a legal entity, like a company. Each dwelling had to be prepared for use, available or occupied under the Residential Tenancy Act. But the difference from the standard provisions of the Residential Tenancy Act was there was an option of a 10-year term for tenants, with the ability for the tenant to give 56 days’ notice of termination. What we were doing was creating a far longer-term framework for tenants who were entering into these arrangements.

We also said that every tenant agreement included a personalisation policy—that these were people that were entering into long-term rentals. They may want to paint a room a particular colour; they might want to make some changes. These are people making their lives in these dwellings, and the legislative framework that provided for that needed to reflect that. So when this bill comes to select committee—my reading of the legislation is it’s a very small piece of legislation that we have before us; it only makes a very particular change. But one of the things that we will be ensuring at select committee, and asking questions about, is that those different provisions for tenants are perpetuated with any changes that are made through the legislation that will be going.

One of the other changes that we will be wanting to look at is the onsell. This is about liquidity in this market. I accept that. While we received advice while in Government that the Overseas Investment Act was sufficient and there didn’t need to be more, we always said we were open to changes to the legislation if it was required. But one of the things that I will be wanting to seek assurance of at select committee is around the provision that at least 20 of the dwellings will be made available for lease to occupiers within a satisfactory time frame. I’m perplexed as to why 20. We have some developments that are as large as 295 individual dwellings in a build-to-rent development. This is fewer than 10 percent at that level. Why 20? I don’t know that 20 in a development as large a scale as 295 is sufficient to say that we are onselling the same asset class.

So these are the kinds of questions that we will be asking at select committee, but Labour is more than happy to support it to select committee and have that conversation.

Tēnā koe, Madam Speaker. Affordable, secure housing is one of the single biggest investments that we could make—

Hon Shane Jones: What did the Greens do?

Hon JULIE ANNE GENTER: —in Aotearoa New Zealand. Madam Speaker, I’ll just wait for Matua Jones there to calm down before I continue with my speech.

Affordable, stable, healthy housing is one of the single biggest investments we can make in our society that will address so many other problems. There’s been research, even recently, undertaken in New Zealand in 2023 by Motu, which found, surprisingly, that tenants in public housing have higher levels of wellbeing than those in private rental housing. That’s despite New Zealand, over the last 20 to 30 years, having an inadequate, poorly managed public housing supply.

Michael Joseph Savage completely transformed Aotearoa New Zealand when he started the State house programme back in the 1940s. It made a huge positive difference until about the 1980s or 1990s when we stopped building public housing to keep up with our population growth. That has correlated with an increasing level of homelessness. Those who are concerned about crime should be much more interested in the amount that we invest in housing and public housing—affordable, safe housing for people—than what we put into prisons and the length of sentences we give people. That’s just evidence-based planning. Rather than short-term, populist, blaming the bad people, let’s focus on solutions that we can work on together. It is not possible to take seriously this Government’s commitment to increasing the—

Hon Member: It’s not possible to take seriously the Green Party.

Hon JULIE ANNE GENTER: —supply of—I’ll wait. Madam Speaker, can I speak?

ASSISTANT SPEAKER (Maureen Pugh): You haven’t been stopped.

Hon JULIE ANNE GENTER: The way to get affordable, stable housing in New Zealand is by enabling more State housing, more public housing—that is the way to do it—and to improve our tenancy laws. At the very same time that this Government is saying that they supposedly want to make it more affordable for people to rent, and more secure, they’re going to change the tenancy laws to make it possible for people to get evicted for no cause at all—no-cause evictions. It’s the exact opposite of what the evidence tells us we need. If we do want to enable more affordable, reliable, stable housing, the way to do it is through the programme that Kāinga Ora was building up, under which now 3,000 homes have been paused—hundreds of tradie jobs lost thanks to National and their coalition partners stopping a build of housing that was actually going to increase the supply of homes. Then they say that the problem—

ASSISTANT SPEAKER (Maureen Pugh): Can I interrupt the member and ask her to come back to this bill.

Hon JULIE ANNE GENTER: Madam Speaker, the bill is the Overseas Investment (Build-to-rent and Similar Rental Developments) Amendment Bill, and the Minister spoke at length about how it’s not the silver bullet but there are many issues affecting housing. The Minister spoke to those, not just this bill, and I will too because the argument for this bill is that supposedly we need overseas investors to own more large-scale build-to-rent things, when the Minister is cancelling the 3,000 homes that were going to be delivered under Kāinga Ora.

We have the ability, as a country, to invest in public housing and build-to-rent. We don’t need to open it up to overseas owners. What this Government’s real agenda is is making it possible for the overseas capitalists to profit off housing in New Zealand—

Hon Member: Yeah, foreign landlords.

Hon JULIE ANNE GENTER: —foreign landlords—while they’re changing the tenancy laws to take away rights from renters, and they cancelled the one thing that we know is the baseline that we need more than anything else, which is public housing, because we know it’s directly related to levels of homelessness. The Green Party will not support this foreign-ownership bill.

Thank you, Madam Speaker. It’s so disappointing to hear the Green Party are opposed to building homes for people who might want to rent. Now, it wasn’t that long ago—in fact, a couple of times in the past 10 years—that I’ve been one of those people queueing up to view a home, hoping that I could convince the agent to let me rent it. There were lots of people in the queue—lots of professional people, maybe people with a dog. It turned out there were not enough rental homes available for the number of people who want to rent, but that doesn’t seem to matter to the Green Party. They don’t care about renters—that’s what we’ve heard tonight.

What this Government is doing by making these changes to the Overseas Investment Act 2005, no less—a piece of legislation which in 2005 probably seemed radical, allowing people to send their money to New Zealand to invest it. Through these build-to-rent, and similar, rental developments, we’re going to remove barriers to overseas investment in rental property. It’s going to allow medium- to large-scale developments—in fact, any development over 20 dwellings—to take advantage of this investment opportunity to build homes for Kiwis who want to rent.

When I look at some of the commentary from people involved in delivering rental apartments and complexes to their clients to people who want to rent, actually, it’s not just about the social housing element that the Green Party complained we weren’t doing enough of—well, we certainly are. Actually, there are a whole lot of people who come to New Zealand to work on major engineering projects and major corporates. They work in our businesses, and when they arrive in a place like Auckland or Wellington or Christchurch or even Napier, as I know somebody did just recently, or Tauranga, as I know an engineering company looking for staff, there was nowhere for the people to live. There was nowhere for them to rent. This Government is going to sort this out. I’m very proud to support this bill tonight. I commend it to the House.

A very short contribution in contrast to the blather that we heard from an earlier speaker. Naturally, New Zealand First will support the bill, and I want to acknowledge the wisdom rarely seen in the Hon Megan Woods’ agreeing to support this bill.

We all understand that the housing shortage is an issue. International capital can be deployed. Obviously, we need to look after key essential interests that are of value to the broad swathe of the Kiwi population. But we must overcome the inflation and the spectacular explosion of costs driven by Kāinga Ora, where it now costs for a bog-standard Kāinga Ora house $6,500, whilst $1 million a day is spent to keep people in motels—sadly, the majority are the tangata whenua. This will be a contribution to reverse the excesses and the egregious conduct of the last housing Minister. We support the bill.

Nonsense. Nonsense from that member in this House. Labour is supporting this bill because it is a smart step forward. It is one step forward, which is useful. But there are so many other measures which have delivered housing—particularly for vulnerable communities—like Māori housing, which has been cut by this Government. So we have a Minister who is aspirational for Māori housing come down to this House and deliver a speech where he says, “Look over here—look over here and don’t pay attention to my record of cutting those very initiatives which, when I was in Government, I was a champion of.” Nonsense.

This is a well-intentioned bill, and it will do some things which are useful. It will make sure that those providers of build-to-rent housing are ready to go when this Government enacts those changes which it proposes will make a difference to the housing supply in this country. And, though these aren’t the measures that we would have chosen to do, these are the measures which the Government believes in. So, yeah, let’s give it a go. Let’s see if this is something which will fundamentally increase the supply of housing and will help the demand for rentals in New Zealand. That is a useful measure, and it’s useful for this House to be able to be open-minded when it comes to these solutions which don’t fit with the values, necessarily, of the Labour Party. But, look, it’s a useful thing that we should try because we all agree, fundamentally, that we must build more houses in New Zealand. It is pretty well understood around the spectrum here that we do not have enough houses in New Zealand for not only our growing population here but also for the number of migrants coming into New Zealand.

In a place like Manurewa, which I represent and am very proud to call home, we have a situation where people are in overcrowded housing, where rentals are prohibitively expensive for people, and they’re, essentially, now based on not only the income of one family but of two, because that is the norm for many Manurewa families who live in, say, a three-bedroom house amongst two families, or intergenerational families who are choosing to live together but are also in very cramped conditions. So we need to make sure that we are making interventions in the housing market from both the supply side and the demand side. I heard the Minister of Housing stand earlier when he gave his contribution and talk about how this was an essential measure and, you know, it wasn’t the be-all and end-all. I think a number of those kinds of interventions are really good. But we also need to see proper investment in the demand side, because this Minister is too focused, in my view, on the supply side measures which he has signed up to ideologically.

The demand side of the equation is really important too. We need to make sure that the Government is putting aside allocation to make sure that the most vulnerable New Zealanders who have trouble getting into housing are supported to do so. One of those housing initiatives is He Kūkū Ki Te Kāinga, which is an initiative which has been cut by this Government for kaumātua housing. I raise that initiative particularly, because this kind of build-to-rent measure will not address those housing needs faced by these vulnerable people. They’re over 65 and they are Māori. They face intergenerational barriers to getting into housing, because not only did they not own a home but their parents did not own a home, and their parents before them did not own a home.

When we look at the history of Māori housing in Aotearoa, in the 1930s, homeownership for Māori was higher than other groups. But because of successive decisions made by Governments and because of the kind of economy that we have designed and the kind of economic development that we have pursued in New Zealand, we have seen that not only rural Māori have lost their connection to their whenua but also Māori in urban environments. So we have this structural problem where some of the most vulnerable New Zealanders and Māori are being locked out of the housing market, and measures like these don’t go far enough to address that, in my view.

But being able to provide a larger number of houses in the market and being able to provide for people who choose to rent or are renting because they are saving to afford a home is a really good idea. We need to make sure that we’re also doing everything we can to do that. We also need to make sure that community housing providers and those large institutional investors who are interested in building large numbers of homes are ready to go, too. So this kind of investment is a good mechanism to allow for that. I’m happy to be able to support this initiative. While it’s not what I would have chosen to have done, let’s give it a go. I commend this bill.

We have a crisis in housing in New Zealand, and our Government is using a suite of tools to tackle that crisis. There is no one silver bullet, as has been mentioned, but build-to-rent is part of the solution. I commend the bill to the House.

Minister Jones needs to hang his head in shame.

Hon Shane Jones: Ha, ha!

Hon WILLIE JACKSON: He can laugh all he likes—he can laugh all he likes. I thought Dan Bidois was bad, and the other Māori, but, actually, the worst one is Minister Jones, because he worked with us—he worked with us—at a time when his relations are struggling. They’re fighting to live at the moment in the North. It’s a kura there, it’s a kura, is it, Willow, up there in the North—Shane Jones’ relations?

ASSISTANT SPEAKER (Maureen Pugh): And this is going to circle back to the overseas investment—

Hon WILLIE JACKSON: Oh, yes, Madam Speaker—absolutely. It’s all about the Overseas Investment (Build-to-rent and Similar Rental Developments) Amendment Bill, which we are supporting, because we are a pragmatic party—very pragmatic—although we do have an element of distrust here, particularly with Minister Jones involved, who would sell off his relations in the North.

I’m saying that because what we’re seeing here with the Government is that, though this is a good idea—and I think Minister Bishop did express some reasonable views in his presentation tonight—what they’re giving with one hand, they’re taking away with the other, and that’s the problem. And, of course, we’ve had a magnificent Minister in Megan Woods, who built more houses—more houses—than any other housing Minister in the last 50 years. She’s done a fantastic job.

Cameron Luxton: Oh, she had a hammer, did she?

Hon WILLIE JACKSON: I’m glad that my ACT colleague over there agrees with me. At least, I think he agrees with me! Maybe I’m reading it wrong. We’ve got a former Minister here who said, “Yes, of course we’re interested in this. Of course, we’re going to be pragmatic.” We’ve got a housing crisis, but it’s a housing crisis that, I’m proud to say, we were starting to confront. And, actually, were we getting on top of it? Well, it might have taken us a few more years to break down the waiting list, but this is certainly some of the work that our Minister started. But she didn’t start it at the expense of Māori housing. She didn’t start it at the expense of community housing. And that’s the problem we’ve got here.

We’ve had a recent Budget—$40 million down in terms of the Māori housing area. Our Government had the best “by Māori, for Māori” partnerships going in terms of housing in this country. And Minister Jones knows this, because some of those relationships are with his relations, who have disowned him. They’ve disowned him because of his tr—well, I’d better not say that word, or I might get point of ordered. But they’ve decided—I mean, he knows what I’m talking about. We need partnerships with Māori.

This type of bill—and I want to say this to my Green friends over there, and I know where they’re coming from—will help Māori. There is just no doubt about it. I know what the ideal is—and I heard that from the Greens—but the reality is, when you have people struggling everywhere, we will make an attempt to correct things, and this bill does that. It’ll give our people an opportunity to get into homes. They are struggling at the moment. We’re seeing it on television—well, all the time—but I just can’t help thinking how much progress we made, particularly in the community housing area, particularly in the Māori housing area, particularly in the Kāinga Ora area, which is continually being run down.

The Government will need to clarify, though, what an expansion beyond the build-to-rent to include what the explanatory memorandum called “similar rental development” is. I think Megan Woods talked about that. We just need some clarity around some of the intricacies within this bill, because, whilst we support the intent, we support the principle, only a fool would not support an opportunity to give New Zealanders—not just Māori but Kiwis—an opportunity to get in homes. We have to be careful about this, because there is obviously a sensitivity in terms of overseas investors coming in. But I just want to say that this is something we’ll support and commend the bill to the House. Kia ora, Madam Speaker.

The basis is clear. We need to increase the supply of secure, affordable, and quality rental developments, of which there are very few. The bill will amend the Overseas Investment Act to incentivise, to allow a fast-track consenting process to incentivise and get overseas investors to come in and build these rental accommodations. I commend this bill to the House.

Thank you, Madam Speaker. It is a pleasure to take a short call on the—

Hon Shane Jones: Short.

Hon WILLOW-JEAN PRIME: —short as in five minutes, not 10—Overseas Investment (Build-to-rent and Similar Rental Developments) Amendment Bill.

Dan Bidois: Willow, Matariki!

Hon WILLOW-JEAN PRIME: Sorry, I’m not going to give you that Matariki gift tonight and keep it shorter than the five minutes that I’ve got.

But I want to support the contributions from my colleagues on this side of the House and the points that they have made about not only the work that Labour did while we were in Government to address the housing crisis that we have but also the disappointment that we have with some of the announcements and the things that we can see in the Budget. It would be remiss of me, as Labour’s spokesperson for youth, if I didn’t point out that I am disappointed in the $20 million cut to youth homelessness in this year’s Budget.

As you have heard this evening from my colleagues on this side of the House, we are supporting this bill and we are supporting it to select committee. There are some important things that do need to be teased out at select committee and understood by the select committee. I want to elaborate a little bit more on those. But if I can first say, for the benefit of the Hon Shane Jones—if I refer to a news story which quotes the Property Council of New Zealand’s chief executive, Leonie Freeman, who told Newsroom that this is a journey the sector has been going through in recent years. During the last Labour Government, housing Minister Phil Twyford and his successor Megan Woods publicly shared their support for build-to-rent developments. In fact, under Woods, the Government carved new build-to-rent projects out of its decision to end interest deductibility for investor rentals, and Land Information New Zealand issued a guidance note intended to make it clear that such developments were not subject to the Labour-led coalition’s foreign buyers ban.

I’m pleased to say that I can see, in a recent article, that the Property Council has launched a build-to-rent tracker in the last month or so, which has shown that more than 1,300 units had been completed, with at least 4,000 more under construction or in the pipeline. Is Shanan Halbert here? I understand he’s joining us shortly, yes? Over 95 percent of those are in Auckland, and as our spokesperson for Auckland, I’m sure he will be pleased to hear that.

Now, the one thing that I wanted to bring the House’s attention to and just raise in the debate this evening and leave it for the select committee, which I am not part of, to consider and to question officials and tease out a little bit more is the new section 11A, inserted by clause 6, how the large rental development test is met. So that is, in particular, 11A(1)(b). That one is that “at least 20 of the residential dwellings will be, or are likely to be, available for use, within a time frame that is satisfactory to the relevant Ministers, as a residential dwelling occupied under a residential tenancy to which the Residential Tenancies Act 1986 applies or would apply (the large rental development outcome)”.

The reason why I have some questions about that is because in order to be eligible it has to be 20 or more, and, of course, some can be and, hopefully, will be much larger than that. So what we want to know is how did the Minister determine that the number would be 20? Is this a percentage basis? Just the rationale behind that, but also a bit of a concern that this isn’t or couldn’t be used as a loophole to get around it. So that is something that I want to raise in this debate for those who are going to be on that select committee to consider, to probe officials on that, to understand that a bit more so that we can have confidence that it won’t be used or is a loophole. I look forward to the select committee reporting back and giving us more clarification and assurance around that. Thank you, Madam Speaker. I commend the bill to the House.

Let’s speak less and build more. I commend this bill to the House.

The question is,

Motion agreed to.

Bill referred to the Finance and Expenditure Committee.

Instruction to Finance and Expenditure Committee