Thinking Bigger on State-led Urban Development

Thinking Bigger on State-led Urban Development

Kainga Ora is a state housing developer that now won’t build much state housing, so it should do something even better: refocus on building transit-oriented, high-density urban developments. This model, inspired by successes in Hong Kong and Singapore, would see KO build mixed-use developments in underused spaces by transit hubs—train stations, bus rapid transit lines, and, inshallah, future metro routes.


KO can already deliver this - it retains a unit that, as the Hobsonville Land Company, built a thriving master-planned urban development. It's time to demerge and double-down on HLC (who, for the sake of confusion, I’ll call KO for the rest of this piece) as an urban developer. The capacity is there; the model is proven. Now, it’s time to scale it up, make some money, and build some baller buildings.


From Scaling Up to Scaling Back


KO’s recent history is one of scaling up (including expansion and experimentation) and now scaling back (being targeted for a review and rescoping, ending its expansion and drowning its experimentation). It secured billions in funding, acquired land (sometimes at a premium), and tried out new trends like Project Velocity and modular construction. It also gained new powers under the Urban Development Act to masterplan or coordinate large-scale development. And it had both Large Scale Projects and the Land Programmes to run large developments itself.


But now, it’s been pulled back by the Coalition Government, after Bill English asked Chris Bishop to do a review of KO (with an investment banker colleague). According to English, NGOs and community groups can deliver good stuff closer to the ground. Shockingly, the guy who has always said that in the past—and wanted the job—came in and wrote a report saying exactly that. So, the Kainga Ora build program (and back office and half its other functions) are cut-back, to the bone.


This does not leave much space for urban development in the rescoped KO. For good measure, the only serious contenders for projects under the Urban Development Act were declined.


Below - basically everything you need to know about the review of KO from the Table of Contents


Kainga Ora's social housing management function is on the way out, and its social housing development function is barely hanging in there. English considered it was not cost effective to spend money to build and run social housing itself (more on its goldplating below).


But KO wasn't just formed just to do social housing. It has a more interesting history, and a bolder mission. It was meant to take the lead on housing (a mix of tenures, not just social) and urban development.


Remember Hobsonville? That worked


Kainga Ora's urban development subsidiary was previously called Homes, Lands, Community, a name that calls back to the Hobsonville Land Company in a peculiar level of acronymymystic continuity. And Hobsonville? It was a massive success. Such a success that Bill English felt the need to call it a crippling failure.


Hobsonville stands as a testament to what KO can achieve. Developed by KO’s predecessor, the Hobsonville Land Company, it’s a walkable, mid-density suburb centered around a transport link to Auckland’s CBD - a ferry link, of all things. While the ferry limits its scalability, Hobsonville demonstrates how coordinated, transit-oriented development can create thriving communities.


Hobsonville is quite lovely, even if it isn’t perfect. It is a low to medium density suburb based around a ferry, of all things. It is relatively walkable, full of nice, new brick buildings. It is the ideal of what a mid-lying Auckland suburb should be - 30 minutes on a pleasant public transport ride to the CBD for commuters, and pretty nice for a stroll around for people at home. While the ferry is its strength, it is also a weakness - it isn't on the way to anywhere else and ferries are only so capacious and cost-effective.


In contrast, Bill English’s favored Tamaki Regeneration Company has struggled to deliver. Hobsonville’s success underscores the value of KO’s development expertise—expertise that could be harnessed for larger, more impactful projects. My anti-TRC hate-rant is for another blog, or more likely a beer offline. But it is worth noting that Chris Bishop also agrees with me lol link.


If we have the choice between money-grubbing transit-oriented development with a government-aligned entity organizing, or a well-meaning social housing project like TRC with a range of goals but very few houses built, we should pick the former.


So, KO has the skills and capacity to deliver another Hobsonville and make it a success. Given the development limb is an extricable part, so why not extricate it and leave social housing to the orgs that the government trusts to do so, dirtily and cheaply? We should focus on this, given the reallocation of emphasis between Community Housing Providers and KO.


Finding a place for KO in a world of CHPs


Most readers will be aware that the big push in social housing, post the English review of KO, is for an expanded role of Community Housing Providers in basically all elements of social housing.


I’m not going to argue the merits of social housing provided by Community Housing Providers (CHPs) versus state entities like Kainga Ora and the last handful of council housing providers. CHPs seem to do a good job. But CHPs notoriously cherry-pick their tenants. If I was managing social housing, I'd pick the relatively easy tenants too. It seems like a hard job at the best of times.


KO handles the most challenging cases—those with complex needs and vulnerabilities. Concentrating high-needs tenants in KO developments can strain communities and undermine tenant outcomes.


A better approach? Let CHPs handle social housing while KO focuses on high-density, transit-oriented development. This wouldn’t solve the social housing crisis, but it would address New Zealand’s broader urban development challenges.


The Cost of KO: Gold-Plated Standards


Kainga Ora was spending quite a lot per dwelling, catering to a generally politically unpopular cohort, and obliged to goldplate certain specifications to placate a range of stakeholders. Even now, NZ First is outraged that wool carpets aren’t going to be standard on all new Kainga Ora housing (love wool carpet personally, it is great - but it is strictly inferior for durability and cost than wool). Between Homestar environmental standards, accessibility requirements, and the dictates of mid-to-long-term maintenance, the costs add up.


Why can generally small, generally zero-capital CHPs build cheaper? They’re just independent enough to avoid goldplating. They build stuff that is probably worse and definitely cheaper up front, without risking anything like economies of scale or experimentation.


But KO doesn't have to be high-spec for low-end housing and keep losing money: Kainga Ora could part-fund itself and build even more baller shit. Instead of doing probably the most loss-making business conceivable—building expensive housing for broke and desperate tenants—it could pivot to maybe the most lucrative business possible: using statutory powers to acquire land, upzone it, and develop high-density, transit-rich spaces that are not only nice in themselves but also extremely well-connected to other parts of the city.


KO can go high-spec, big-location, good design and placemaking - it just needs to do it as profit-seeking urban development to intensify well-connected locations. It should do this, because New Zealand cities need to look more like cities and less like pleasant provincial towns. And it can do this.


Learning from Hobsonville: Proof It Can Be Done


We know this is doable because we’ve seen it work before. Hobsonville is proof. There are literally people at KO who developed Hobsonville before, and can do it again. And versions of the model have worked overseas.






Hobsonville was a greenfield on an old airfield, connected by a ferry to the CBD and with pleasing mid-density brick streets and a gorgeous bay. HLC organised it, it went well, people made money and not too much litigation over development issues or defects turned up. Now quite a few people live in Hobsonville and it's seen as a nice place - not bad for a former airfield halfway between the West and the wrong side of the North Shore. Greenfield, low stakes, easy mode, but a success that can be replicated and built on.


The issue with Hobsonville is simply where it is -

If we are going to do it again, we need it somewhere that is between a couple of other places. That's how you locate places sensibly.


Shamelessly ripping off two exemplars: Hong Kong’s MTR and Singapore’s HDB


Two important exemplars show how this can work on a bigger scale: Hong Kong’s Mass Transit Railway (MTR) and Singapore’s Housing Development Board (HDB). Each approach is helpful and successful in its own right. Each can also be ripped off as the model for renewing city areas, by rebuilding them to be properly modern, dense, lucrative, and impressive. Now we're cooking with gas.


The MTR Model: Rail and Property


The MTR is a private, exchange-listed firm that makes 20 to 40% of its income from property. It’s a classic example of the rail-property business model: the MTR builds transit lines, acquires land around stations, and develops high-density, mixed-use spaces. The profits from property development fund the transit system, creating a self-sustaining cycle.

The HDB Model: State-Led Development


The HDB is Singapore’s public housing authority, but it’s also a master developer. It acquires land, plans entire towns, and builds housing, commercial spaces, and infrastructure. The HDB sells some market rate and some subsidized flats. As a matter of accounting, it relies on cross-subsidization from selling market rate units, as well as government grants. This shows how this new model could integrate with other housing policy goals.


New Zealand needs a massive number of new and nice apartments in good locations. Housing policy should focus, in the short to mid-term, on maxing out the number of market rate units. More redistributive policies and quibbling about affordability can wait until there are more units to redistribute and subsidize the purchase of. A state-backed urban developer can build large numbers of residential units in and around transport sites.

What, where, and why KO Should Build


The liveability of Hobsonville, connectedness of the Hong Kong approach, and the housing crisis-busting model of the Singapore model make me think the answer is:


Where - sites with land on or around a well-connected transit station or hub, serving a low-density area;


What - building some massive towers for housing and, depending on the area, upgrading or building new transit infrastructure if appropriate


Why - the art of transport and urban development is to put places between places. Make somewhere just viable in its own right, not just a depressing corridor, but also put housing in it by commuter transport so there are workers who can and will live there, and a link to a proper node, taking the lead some place-making around it to ensure it's nice, akin to the area around Britomart now.


This approach will ideally be lucrative, kickstart development in an area, make the most use of existing infrastructure and not crowd out private development. In appropriate cases, KO should do this in combination with developing its own transport lines - for example, a light metro line in Christchurch or Wellington, or by upgrading the Northern Expressway to rail or by building new BTR lines in Auckland. This would hew more closely to the HK model.


Ok but where first exactly?


Take Constellation Station, a Northern Expressway stop on the North Shore. It is, basically, a carpark that buses zoom through to Albany or the City every minute or ten (time of day dependent). It is also by Mairangi Bay, which is beautiful and where I have spent the most time on the North Shore, so I will vouch for it being pleasant. Not just pleasant, but a bit quiet. There is real potential for building a pretty big site with a metro supermarket, new flats for a couple of thousand people, and maybe a bar and cafe if demand is there. People can then roll down the hill to the beach in the evenings, after strolling a full 20 meters from the zoomiest bus stop in the country home from work.


Sunnynook is even more ridiculous. It is the smallest station and it is right next to not terribly new, nice, or noticeably larger than a common or garden shed. Fuck it, build up around it properly like around this MTR station

 The North Shore should be the Gold Caost of New Zealand - Takapuna as the dense downtown area, and with a long stretch of apartments (here, less on the beach and more stretched along a rapid transit line). It has loads of space to grow - up, and along.


A friend advises that all around the Northern Expressway, the ground is about as good for building tall buildings on as Auckland CBD. I can’t think of a funny name riffing off Commercial Bay for massive developments along the North Shore, but it would be incredible and make extend the joys of urban living to tens of thousands more people.


What Kainga Ora Could Be: A New Model for Aotearoa


There’s no particular reason for Kainga Ora to remain a Crown entity on this model. It could be a private or Mixed Ownership Model company. What it needs are powers of compulsory purchase and a viable model of building and developing land that aligns with new and improved public transportation.


There are times government does stuff because no one else can or will. MTR is a publicly listed company that subsidizes railways with property earnings. NHB is basically self-funding. Hobsonville made money. That isn’t the case here, government just has the time horizon and the broader motivation to do it. Precinct put a billion dollars into Commercial Bay, but it didn’t build Britomart. Conversely, the government often thinks it a good idea to build things like Britomart, why wouldn’t it want to put a billion into something like Commercial Bay next to such publicly-minded projects?


The intended mix of general urban development goals, but also as a profit-making venture, mean several structures could work. could be a Crown Entity like KO, but it seems perfectly valid to be a company and, if it is a company, why not take some private money? At that point, it can be a Mixed-Ownership Model company or it could eventually be partly publicly listed. I’d tend to think you want very patient money, so having, say, a 40% interest from superannuation and insurance interests (probably from a few Kiwisaver funds that don’t mind overweighting their portfolios towards NZ and commercial property).


The Urban Development Act permits compulsory acquisition for urban development purposes signed off by the government (by the current bit of KO that I propose splitting off, as far as I know). My own views that we should have a Private Works Act are slightly sidelined, because the Urban Development Act basically serves the same role in this context. But KO could apply to have UDA schemes approved by the government even if it was partly or wholly private.


The key to the model is to ensure that development is aligned with public transportation and high-density living. This aligns KO as a developer with any government shareholders and being a long-term complementary stakeholder with government agencies on transport and urban development. It also makes money and justifies the use of compulsory acquisition for the public benefit. Obviously KO should pay for land, but given the wider benefits, landowners shouldn’t be allowed to say no.


This model I have proposed is closest to the MTR mostly commercial model. I think the right sort of urban development projects are likely to cost a shitload, so they will need market-paying renters or buyers for financial viability. But if you tinker with the assumptions - more government funding directly, more focus on housing rather than specifically transit - and other options and models become more plausible. I quite like my idea, but your idea might be pretty good too.


Hot off the press - a NSW halfway-house


Or we can follow a new model from NSW: the Minns state government has offloaded some spare land in Camperdown onto a project to build 200 Essential Worker homes (from a fund with 450m$ for the subsidy) and 300 private or other affordable homes, on top of ground floor commercial or retail link link. This is in a high amenity and dense neighbourhood near hospitals (where presumably some of the Essential Workers [nurses] work) and the University of Sydney.


Its not quite what I am getting at above, given the amount of funding taken from other bits of government. This feels a bit more Bill English (maybe the subsidies? Also a bit Kiwibuild) than Hobsonville. In my vision, the developer would just build the 500 homes on its own land, then rent it out itself to make money and, inshallah, help fund another one next door. But if Aus Labor is on board with this sorta thing, then the Labour government we might get in 18 months could be on board with this sorta thing, which could be close enough.


Conclusion: Kainga Ora’s Next Chapter


Kainga Ora is better off doing fuck-off developments on and around transit hubs (that it may eventually plan and build, too). Rather than melting through money building politically unpalatable social housing, it could be a highly capitalised, highly profitable firm, propelling it forward without ongoing government support. In turn, this creates momentum for it to constantly build high-density, transit-oriented spaces to make New Zealand super baller. We’ve seen it work in Hobsonville, Hong Kong, and Singapore. We can see it work again.


This model isn’t just viable—it’s profitable. Hong Kong’s MTR and Singapore’s HDB show how urban development can fund itself. Hobsonville proved it can work here. With the right projects and political will, KO could become a self-sustaining engine of urban transformation.