Govt should not underwrite commercial housing developments

The Government announced:

The Government has announced a new support programme for the residential construction market while the economy recovers, Housing Minister Chris Bishop and Building and Construction Minister Chris Penk say.

“We know the residential development sector is vulnerable to economic downturns. The lead time for building houses is typically 18 months or more, so it takes at least that long for the residential development sector to gear back up as market conditions improve,” Minister Bishop says.

“In times of expensive borrowing, underwrites are an effective tool for supporting housing supply. This is because underwrites increase developers’ access to finance where they otherwise wouldn’t have been able to get it, and therefore wouldn’t have been able to deliver the houses.

Of course underwrites increase access to finance. That is because the risk of insufficient demand is transferred from the private developers to taxpayers.

This seems like Kiwibuild without the price caps and buyer restrictions..

Well intentioned, but risky.