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Matthew Horncastle: The government shouldn't be using taxpayer money to pay for private projects · The SME Stream

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  Speaker 1: The government has announced that they will temporarily underwrite private
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  Speaker 1: housing developers. Developments or developers should, I say, to support
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  Speaker 1: developers who are struggling to pre sell and to basically
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  Speaker 1: finance said of their developments and get enough dwellings pre
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  Speaker 1: sold to get developments off the ground. The developments must
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  Speaker 1: have a minimum of thirty houses and the developer must
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  Speaker 1: own or have legal use of the land. And to
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  Speaker 1: discuss that, CEO of Williams Corporation, Matthew Horncastle is with
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  Speaker 1: us now. Matthew, good afternoon, Hello Tim, Thank you very
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  Speaker 1: much for having me. So what's your reaction to this
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  Speaker 1: announcement or did you sort of have wind of it
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  Speaker 1: in advance over the last few weeks or so.
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  Speaker 2: Yeah, we sort of saw it coming. We were involved
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  Speaker 2: in discussions and we sort of hear things before they happen,
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  Speaker 2: because you hear the ideas being bounced around, and just
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  Speaker 2: before I give my opinion, I want to preface it worth.
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  Speaker 2: I'm actually really happy with this government. I think they've
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  Speaker 2: done a great job in a lot of areas, but
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  Speaker 2: I am critical of this policy. Like I don't think
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  Speaker 2: the government should be underwriting private projects. I don't think
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  Speaker 2: the government should be using taxpayers money to allow private
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  Speaker 2: developers to do private projects. I think this creates a
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  Speaker 2: whole lot of complexities for where where you can essentially
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  Speaker 2: have favoritism or just taxpayers money used in a manner
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  Speaker 2: that's not in the best interest of the taxpayer.
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  Speaker 1: Yeah.
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  Speaker 2: Like when I look at this, I think, what are
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  Speaker 2: we trying to achieve. We're trying to achieve affordable housing
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  Speaker 2: for the people of New Zealand, and it feels like
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  Speaker 2: they're treating the symptom not the cause. And if we
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  Speaker 2: want to create good quality, affordable housing for the people
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  Speaker 2: of New Zealand, in my opinion, the best way to
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  Speaker 2: do this is free market capitalism. Like we have to deregulate,
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  Speaker 2: we need to allow people to trade, we need to
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  Speaker 2: have more compared it is in the market and allow
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  Speaker 2: markets to trade freely. And I think some crony capitalist
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  Speaker 2: environment isn't going to be the best outcome for the
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  Speaker 2: people in New Zealand.
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  Speaker 1: Okay, So Williams Corporation, Actually, just for those who don't know,
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  Speaker 1: because you guys obviously are residential property builders, what sort
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  Speaker 1: of what's an example of a development? What sort of
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  Speaker 1: scale are you guys working out?
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  Speaker 2: So in the current market, we sell about twenty houses
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  Speaker 2: a month. We have development offices across christ Church, Wellington,
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  Speaker 2: Auckland and Totonger, so we officer we trade in the
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  Speaker 2: major centers. Our key piece of business is infel residential,
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  Speaker 2: so we're going into existing suburbs, preferably city centers, and
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  Speaker 2: we're buying land brownfield band so either bear sites or
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  Speaker 2: old housing and we're redeveloping that with infral resk. We
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  Speaker 2: do a little bit of apartments, We mostly do townhouses,
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  Speaker 2: We do some standalone dwellings. At the peak of the market,
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  Speaker 2: we were sort of doing peak of the market for
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  Speaker 2: those that don't know, was twenty twenty one. We were
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  Speaker 2: sort of having years where we were selling six hundred
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  Speaker 2: and fifty seven hundred homes and even months where would
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  Speaker 2: sell one hundred homes. But we've sort of settled into
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  Speaker 2: this current market, which is a lower volume market.
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  Speaker 1: So well, I mean, will you guys benefit from this
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  Speaker 1: policy if you have the right sort of development, I
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  Speaker 1: think you need a thirty is it a thirty house
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  Speaker 1: or thirty dwelling minimum?
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  Speaker 2: We would majority of our projects would comply with that. Look,
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  Speaker 2: I could absolutely benefit from this personally, but just as
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  Speaker 2: a taxpayer and as a member of this country, I
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  Speaker 2: don't think it's the right thing for the country. I
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  Speaker 2: have bought development land from the government where they've wanted
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  Speaker 2: certain outcomes from that land, and I've got that land
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  Speaker 2: at a reduced price to provide the outcomes that the
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  Speaker 2: government wanted. I've sold houses to houses in New Zealand.
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  Speaker 2: Like I've participated in these government programs, and also like
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  Speaker 2: I represent lots of stakeholders because William's Corporation obviously has
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  Speaker 2: external capital within the company and so we will apply
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  Speaker 2: for this and we will probably use it. But it
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  Speaker 2: doesn't mean that it's the right thing for the country.
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  Speaker 2: It doesn't mean that my opinion is to support it.
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  Speaker 2: So I get a little bit of a dichotomy there, No, No, I.
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  Speaker 1: Just think, no, a dichotomy between your honest opinion and
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  Speaker 1: the fact that if the law is the law, of
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  Speaker 1: course you're going to utilize whatever is available. What need
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  Speaker 1: is the government responding to then.
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  Speaker 2: Well, I think I think the government's looking at immigration
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  Speaker 2: and population growth. So approximately New Zealand's population growth about
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  Speaker 2: one hundred and fifty thousand people, and that comes with
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  Speaker 2: a natural burst over deaths of twenty thousand and a
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  Speaker 2: net positive immigration of one hundred and thirty thousand, now
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  Speaker 2: one hundred and fifty thousand people. We've got a population
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  Speaker 2: of five million people, so our population is growing at
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  Speaker 2: three percent. Now that is absolutebolutely huge. There would be
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  Speaker 2: almost no first world countries growing at that rate. So
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  Speaker 2: what's happening is we've got a weak economy and we've
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  Speaker 2: got very little construction happening, but a huge amount of immigration.
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  Speaker 2: And so any analyst can look at the market twelve
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  Speaker 2: months from now, twenty four months from now and see
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  Speaker 2: us going back into our housing crisis where houses start
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  Speaker 2: increasing at rapid rates and it puts strain on the economy.
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  Speaker 2: And so I can see and sympathize with what the
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  Speaker 2: government's trying to achieve. And again that's why I wanted
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  Speaker 2: to start the conversation by being complementary to the government,
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  Speaker 2: because I can see what they're trying to do. But
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  Speaker 2: in my opinion, the way for us to get there
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  Speaker 2: is actually deregulation, Like we need to reduce some of
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  Speaker 2: the council and government controls. We need to allow free
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  Speaker 2: markets to trade, and we need to allow computer it
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  Speaker 2: is to come in different suppliers of materials. People need
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  Speaker 2: to be able to utilize the lands they own more
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  Speaker 2: effectively putting what they want to put on their land.
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  Speaker 2: And that's how we're going to create more affordable housing.
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  Speaker 2: Like you just need to read any of the classic
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  Speaker 2: economics books like go read Wealth of Nations or any
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  Speaker 2: of these great books, and we know that the way
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  Speaker 2: for wealth and prosperity and affordable goods and services is
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  Speaker 2: free people participating in a free market.
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  Speaker 1: The answer, yeah, I think there'd be those who be
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  Speaker 1: listening when they hear a sort of deregulation thing that
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  Speaker 1: obviously there is a place for regulation, and when you know,
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  Speaker 1: because you don't want slum dwellings and you know, the
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  Speaker 1: worst sort of things to happen as a result of that.
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  Speaker 1: I mean, how do you where do you draw them?
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  Speaker 1: You know, because there's always some.
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  Speaker 2: Very very good comment, very very good comment. You're a
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  Speaker 2: one hundred percent right, there's dichotomy. New Zealand's not absolutely
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  Speaker 2: New Zealand. New Zealand couldn't trade in a completely free
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  Speaker 2: market because we used to a regulated environment. And for
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  Speaker 2: the purpose of this discussion, I'm not discussing engineering codes.
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  Speaker 2: I'm not discussing fire codes, I'm not discussing things that
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  Speaker 2: fundamentally put at risk human health and safety. What I'm
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  Speaker 2: probably talking about is things like council development contributions. Like
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  Speaker 2: let's say you would go build a house in Lower Hut.
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  Speaker 2: Two years ago, it would have cost you thirty five
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  Speaker 2: thousand dollars to create your lot. That's just your base
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  Speaker 2: fees to create a lot of council before you have
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  Speaker 2: your utilities. Today it's sixty five thousand, So that's gone
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  Speaker 2: up and so essentially, and then what happens is we
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  Speaker 2: have these planning and zoning and urban design requirements that
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  Speaker 2: make it very slow, very restrictive, very time consuming, and
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  Speaker 2: the only person that pays for that is the end customer.
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  Speaker 2: We're obviously in a quite a taxed environment. Everyone's paying
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  Speaker 2: a fifteen percent sales tax on the house. Not if
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  Speaker 2: you're buying a million dollar home, you're approximately paying one
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  Speaker 2: hundred and fifty thousand dollars a t UST to the government. Yeah,
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  Speaker 2: these are these are large restricting factors.
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  Speaker 1: Is the is the reason that they've gone for this then,
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  Speaker 1: is because it's something they can sort of attap, they
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  Speaker 1: can instantly turn on. So there'll be developers who might
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  Speaker 1: be feeling a little bit shy about in particular because
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  Speaker 1: they're struggling to get the right level of buy in
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  Speaker 1: at the markets. You know, the cost of materials and things.
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  Speaker 1: I don't know. I'm not a developer. I don't understand
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  Speaker 1: at all, But yeah, you know, we know that. I
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  Speaker 1: do know that developers are finding it increasingly tough to
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  Speaker 1: get developments off the ground. So is the reason they're
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  Speaker 1: doing is because basically they can flick a switch and
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  Speaker 1: it might enable a whole lot of building to get
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  Speaker 1: underway that was going to struggle.
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  Speaker 2: But where do you where do you draw the line?
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  Speaker 2: Do you now? Should this be offered to individuals building
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  Speaker 2: their personal home? Should it be offered to only big
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  Speaker 2: corporates doing big developments? What about a small builder can
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  Speaker 2: only build five houses? He now doesn't get a government
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  Speaker 2: under right, But me, as a large company that can
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  Speaker 2: build blocks of thirty houses? Does does my company get supported?
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  Speaker 2: What about the other companies my size? You see, you
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  Speaker 2: start creating all of these complexities and unfair factors that
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  Speaker 2: I think the government can be criticized on. Let's say
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  Speaker 2: you have a project and the builder can't sell the
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  Speaker 2: last teen units. The government now owns those ten units.
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  Speaker 2: The government's now owning vacant new housing. They can then
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  Speaker 2: sell that to Kaying Aura, or they're selling it to
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  Speaker 2: whoever they wish. There's just they've just opened a whole
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  Speaker 2: level of work and complexity and nuance and attack factor
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  Speaker 2: that I see as completely unnecessary. Where that same resource
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  Speaker 2: time energy could just go through and say, right, big wins,
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  Speaker 2: Where can we rezone land, Where can we make planning
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  Speaker 2: rules easier? Where can we remove nuance, time and cost.
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  Speaker 1: Which it looks like they're trying to do. I mean
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  Speaker 1: that is something they look like they're trying to do
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  Speaker 1: as well, isn't it.
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  Speaker 2: Yes, Yes, I don't disagree, and I agree with you
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  Speaker 2: that just because you do one thing doesn't mean you
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  Speaker 2: can't do another. Probably the main area where it concerns
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  Speaker 2: me is you're taking taxpayers money because everything's paid for
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  Speaker 2: by the taxpayer, and then you're using this to financially
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  Speaker 2: underwrite large private companies projects.
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  Speaker 1: To me, it just doesn't I think you've made I agree.
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  Speaker 1: I think you made the case very well. Can I
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  Speaker 1: just ask one other thing? Is there also a complication
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  Speaker 1: that when it comes to assessing which developments you're going
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  Speaker 1: and they're talking about established developers with a good track
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  Speaker 1: record and all that, But is there still the danger
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  Speaker 1: that you're putting due diligence? I guess because it's going
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  Speaker 1: to be up to government officials to assess whether a
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  Speaker 1: development is worth backing. So you don't end up buying
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  Speaker 1: into a dog, so to speak.
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  Speaker 2: You hit the nail right on the head. And also
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  Speaker 2: what's interesting about free markets. I can launch two projects.
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  Speaker 2: I could swear that I'm going to sell one in
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  Speaker 2: a day and it's the greatest thing. Ever that project
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  Speaker 2: doesn't sell and I have to change it, and another
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  Speaker 2: project that I was less certain of sells ballistically. So
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  Speaker 2: markets have complexities, and this is actually where pre sales
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  Speaker 2: are very very important, because what you do is you
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  Speaker 2: learn what the market wants, not what the market tells
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  Speaker 2: you they want, what the market will physically part with
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  Speaker 2: the money in their pocket for. There's a fantastic book
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  Speaker 2: written about this principle called the Lean Startup, and they
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  Speaker 2: just discuss the difference between what people say they want
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  Speaker 2: to buy and what people physically part with their money for.
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  Speaker 2: And now all of a sudden, you have a government
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  Speaker 2: official deciding based on their understanding and their merits using
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  Speaker 2: the tax past money, so money that's not the is
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  Speaker 2: to decide what course to back. And that's where the
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  Speaker 2: current free market system works so well. I have to
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  Speaker 2: go to the market. I have to convince people that
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  Speaker 2: this is right for them. They part with their money
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  Speaker 2: in the form of pre sales. I then go to
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  Speaker 2: the funding institutions and show that there's proof of market
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  Speaker 2: demand and then the resources are allocated to build that project.
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  Speaker 2: It's a really good system that's good for the country.
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  Speaker 1: Okay, Hey, that absolutely illuminating. Matthew, thank you so much
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  Speaker 1: for your time. Really appreciate your candor on this.
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  Speaker 2: Thank you very much. You have a great day. I
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  Speaker 2: appreciate it.
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  Speaker 1: Thanks very much. That is a CEO Williams Corporation, Matthew Hawcastle.
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  Speaker 1: Hands up. Who is surprised at that interview. Here's a
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  Speaker 1: guy whose company stands to develop benefitrom this. He likes
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  Speaker 1: what the government are doing, except on this one. No