Bill the Builder - can he fix it? Let's hope he can!

Bill English has stepped outside his comfort zone in announcing that he intends to fix our broken property market. Can he get builders to build more 'Toyota Corolla' homes? Or will he end up looking like King Canute before the rising tide of house prices?

Having just re-read the transcript of Bill English's interview on housing affordability this morning, I think it's hard to understate the size of the problem National is biting into. And I think the Finance Minister realises this. It's third rail stuff.

Here's the synopsis: Not enough houses are being built in New Zealand and those that are being built are too expensive. That means ever-rising houses prices, which the minister quite strikingly said this morning is "dangerous" for New Zealand. Those under 40 -- and a fair few older than that -- are giving up on the dream of home ownership, and in some cases heading offshore.

Just why we have this supply-side problem in the housing market is heavily debated. The Productivity Commission back in April stressed heavily, as ACT has for some time, that there's not enough greenfield land being opend up for development. Let cities grow outward and that's half the problem fixed as more supply lowers costs.

Hang on, replied Auckland Council. We have 18,000 sites in the city's existing boundaries ready go to, but only 4,000 houses going up each year. Land availability's not the real problem.

Stop right there, said the Greens. You're talking about urban sprawl, which just isn't sustainable, grows greenhouse emissions and undermines public transport.

The real problem, says Labour is that there just aren't enough homes available for low income folk to buy and no way into the market for first home-buyers without immense debt. Greenfields won't create that 'missing first rung' on the property ladder.

Now, at last, National has stepped into this debate. Tentatively, but you've got to say, with some pretty strong language. More specifics will come out on Monday, after Cabinet. What we know at this stage is that it won't be a matter of either/or when it comes to building inside or on the outskirts of our major cities. The government wants both.

Second, the RMA will be trimmed (which we knew) and councils will be urged -- or forced -- to speed up their processes. Let's just hope we've learnt the lesson of leaky homes when it comes to asking councils to encourage building no matter what.

Somehow, National wants more cheap, quality houses built. And urgently.

But the real news today is not the specifics of policy, but the dire language our Finance Minister used to describe the New Zealand property market. It should make anyone looking to buy property, especially in Auckland, pause for thought. Listen to this:

"People just seemed to assume [prior to the Productivity Commission's report] that no matter what happens, house prices are going to go up. That has turned out to be quite dangerous for New Zealand. So we don’t accept that house prices automatically have to rise.”

Or this:

“If the wider community decides that they want to lock up the housing market to drive up the value of the existing houses and keep other people out, then we won’t get there. But, look, I think most people understand that the fact that they’ve achieved the dream is a good thing, and they’d like others to be able to achieve it.”

That sounds like a shot over the bows of the babyboomers. If you own a house, he's saying, perhaps you're going to have to sacrifice something if you want your neighbours to share the Kiwi dream of home ownership.

And he's right. People are spending more and more of their income on housing. Add on student loans and the debt picture for those under 40 is a mess. Even a starter home in central Auckland is around $400,000, which is beyind the reach of at least a third of the population.

As a developer said to me this past week, we build some of the largest homes in the world, because for builders that's where the margins are. But there aren't any companies building lots and lots of simple, quality cheaper homes. We need scale.

What we're getting is a sprinkling of new 'Ford Falcon homes' when what we need is heaps of 'Toyota Corolla homes'.

And that's why English, in dramatic words for a Tory minister and ex-Treasury boffin, said this past week that the property market "isn't working properly". The indication today is that he's willing to intervene to keep prices low and, in particular, help first home-buyers into a home.We can assume he won't take Mana's advice and get the government building those Corolla homes - 20,000 to start with. But it seems he's realised it makes economic sense to incentivise someone to build them, given that the government already pays $2 billion a year in accommodation supplements helping pay the rents of people who'd rather own -- and that bill is set to rise by a whopping $200m a year. He reckons:

“[Tax-funded rental] subsidies are growing quite fast, so the government has a direct interest in enabling those people into the market”.

Like Paula Bennett and Judith Collins before him, English seems to have realised that the government has to start intervening more in markets (and people's lives) to build the kind of society we want. Quite how far he's prepared to go we're yet to see, but his words today are far from those he would have used 20 years ago.

But here's the rub: Start using such words and you pretty soon you have to start delivering aresults. Hence my point that he's grasping a third rail - start talking about a broken property market and the dangers of rising house prices and people pretty soon start expecting you to do something about it. And blame you for it if nothing changes.

English now risks looking like King Canute if the "action programme" he's about to announce doesn't actually make houses more affordable for more people. Those who dream of owning could turn on him.

And on the other hand, saying house prices might not keep rising and that existing home owners might have to pay a price to let new home owners into the market could rattle the cages of baby boomer home-owners. They're counting on capital gain for their retirement. They're used to rising house prices and they like it. Do anything to stop that and they could turn on you pretty quick.

National will have calculated that opposition parties are already promising a capital gains tax and the like to make housing more affordable, so they're not going out on their own. Still, the political risk of tampering with middle class voters' biggest asset should not be downplayed.

Politics aside, however, hats off to English for being willing to grapple with one of the biggest problems of the day. It shows leadership and a willingness to get his hands dirty. Now let's see if the deeds match the words.