Labour’s Phil Twyford has been talking a lot of good sense on housing supply, but I am having a hard time making sense of his policies on foreign buyers. So far, the good outweighs the bad.

Twyford proposed that councils use debt to cover the infrastructure costs of new development. The bonds could be paid off by special rates attached to the new developments.

National’s Nick Smith deemed the switch from developer levies to council bonds “fool's gold”, but Twyford here has made the right call.

In theory, the two mechanisms could yield the same results – but it hinges on a few side assumptions. In the real world, the ultimate price paid by homeowners winds up being rather on the higher side when developers have to cover the charges up front. Why? Developers who have to sink an extra twenty or thirty thousand dollars into development contributions years ahead of a house being sold have to recoup that, plus the time cost of holding the money, plus their usual margins. If councils have a shorter time window between sinking the infrastructure and collecting the rates, they can charge less for it.

Plus, since roads and pipes wind up reverting to council ownership, council’s paying for them up front and recouping the cost through rates over the longer term makes sense. But so too do other options like Municipal Utility Districts, as outlined in the Initiative’s report Free to Build.

But it is harder to make sense of Twyford’s proposed restrictions on foreign buyers. His member’s bill, drawn from the ballot this week, bans non-resident foreigners from buying existing homes in New Zealand. They would only be allowed to buy new houses.

While the proposal is intended to increase new home construction, the main constraint against new building is on the supply side: regulations preventing new construction. As the policy would not affect the number of people seeking to live in houses, it would be far more likely to change the nationality of the people who finance new construction than the quantity of new construction. As I explain at the Initiative’s blog, it is hard to make a case that it would affect house prices.

The effects on Chinese perceptions of Kiwi xenophobia, on the other hand, are rather more clear. And new migrants on work visas would feel just a little less welcome.