KiwiBuild

01 Jun 2018

KiwiBuild

Information for suppliers and developers

KiwiBuild is a huge undertaking that will deliver better outcomes for Kiwi families.

We’ll need your help to achieve this.

The Invitation to Participate in the KiwiBuild: ‘Buying off the Plans’ initiative is now open.

The Buying off the Plans initiative involves the Government underwriting or purchasing new homes off the plans that the private sector or others are leading, in exchange for accelerating a greater number of affordable, KiwiBuild dwellings.

We are targeting developers that have development-ready land and who are willing to adapt an existing development to include affordable KiwiBuild dwellings. This may involve amending the scale and pace of the development, changing the range of types of dwellings in a development and/or being willing to trial innovation.

Interested developers are invited to respond via the Government Electronic Tenders Service. The application process closes on 8 June 2018.

For this initial approach to market, priority will be given to developments that are able to commence within the 2018/19 and 2019/20 years. The opportunity will be re-opened later in 2018 for further developments commencing in 2020/21 onwards.

The Buying off the Plans initiative is one of four key channels for delivering KiwiBuild homes. The others are: undertaking major urban redevelopment projects (such as Unitec Land for Housing ), converting existing Crown land and purchasing additional land from the private market, and procuring KiwiBuild dwellings through existing Government-led housing initiatives.

Buying off the Plans

Questions & answers

1. What is the Buying off the Plans initiative?

The ‘Buying off the Plans’ initiative involves the Government underwriting or purchasing new homes off the plans that the private sector or others are leading, in exchange for accelerating a greater number of affordable, KiwiBuild dwellings.

A common challenge faced by developers is the need to sell a significant proportion of dwellings off the plans in order to secure funding for construction, which means that developments can sometimes stall or be put on hold.

The Buying off the Plans initiative involves the Government giving developers the certainty and backing they need to deliver suitable developments that would not otherwise proceed or to deliver developments at a greater pace than initially planned, in exchange for accelerating a greater number of affordable, KiwiBuild dwellings.

The ‘Buying off the Plans’ initiative is one of four key channels for delivering KiwiBuild dwellings. The others are: undertaking major urban redevelopment projects, converting existing Crown land and purchasing additional land from the private market, and procuring KiwiBuild dwellings through existing Government-led housing initiatives.

2. How will it work?

Underwriting or pre-purchase of dwellings could be delivered in several ways. The initiative is designed to be flexible, to accommodate a range of development proposals, individual development economics and local housing markets.

The approach will be considered on a case-by-case basis depending on the economics of a proposed development. However it is likely to involve either:

· Backstop purchase of unsold KiwiBuild dwellings. The Government enters into an open agreement with the developer to purchase unsold KiwiBuild dwellings (or to pay the difference between an eventual sale price and pre-agreed amount) after a defined marketing period and/or unsuccessful sales process (i.e. when an eligible KiwiBuild purchaser withdraws from a sales agreement).
· Outright purchase of KiwiBuild dwellings on completion. The Government enters into a sale and purchase agreement with the developer to purchase the KiwiBuild dwellings on delivery at an agreed-in advance underwrite price (as if it were a private purchaser) and subsequently on-sells these to eligible KiwiBuild purchasers.

3. What is the target market?

We are targeting developers that have development-ready land and who are willing to adapt an existing development to include KiwiBuild dwellings, in return for de-risking a development. This may involve amending the scale and pace of the development, changing the range of typologies in a development or being willing to trial innovation.

Proposals are specifically being sought for developments in Auckland, Wellington, Hamilton, Napier- Hastings, Queenstown-Lakes District, Tauranga, Whangarei District and Nelson-Tasman. However, responses for other areas will also be considered. For this initial approach to market, priority will be given to developments that are able to commence within the 2018/19 and 2019/20 years. The opportunity will be re-opened later in 2018 for developments commencing in 2020/21 onwards.

4. What is the process?

Interested developers are invited to respond to the Invitation to Participate via the Government Electronic Tenders Service (www.gets.govt.nz). The application process closes on 8 June 2018.

Following an initial assessment, shortlisting of respondents, any necessary refinement of solutions and an evaluation process, financial due diligence and negotiations will take place with successful respondents. The Crown will then enter into a Sale and Purchase agreement with the developer. Each relationship agreement could differ, depending on the type and nature of any development.

5. What are the criteria for assessing proposals?

The following areas will be considered: developer track record, capability and capacity to deliver in the required timeframe, alignment of the proposed development with the KiwiBuild objectives, risk share proposed, site assessment, delivery of significant benefits in terms of scale, pace or innovation, end- to-end delivery model and construction methodology.

6. Why is this intervention needed?

There is a huge unmet need for affordable homes for first home buyers which the market hasn’t been delivering. There’s also a need to encourage innovation and productivity in the sector. The Buying off the Plans initiative aims to shift development economics to encourage more affordable dwellings to be built.

7. What are the benefits of this approach?

This initiative enables us to get the ball rolling – and start delivering the houses that New Zealand so desperately needs, now – while we get some of the longer term system-wide changes underway. Specifically, key benefits are:

· Developments are able to draw down on private finance sooner and can therefore start sooner and deliver dwellings faster and at scale
· The Government is able to influence the market to provide a greater proportion of affordable dwellings
· First home buyers will have access to new homes through our KiwiBuild programme
· Innovation will be supported and encouraged.