Reports & Media

Podcast: Finance Freedom: Rediscovering how New Zealand built itself

New Zealand spends more on infrastructure than almost any developed country, yet still cannot build the pipes and roads new housing needs. Why?

Oliver Hartwich and Benno Blaschke trace an idea the Initiative has followed for over a decade. It began in 2013 with a proposal drawn from how other countries fund the infrastructure needed to connect new suburbs to cities: let the people who move in pay for it, rather than loading the upfront cost onto existing ratepayers. At the time it seemed radical. Then the Initiative discovered New Zealand had done exactly this for most of the twentieth century. Communities could raise their own debt and build what they needed, without asking central government for money or permission, and funded more than half the country's local infrastructure that way, before the system was dismantled in the 1990s.

The Infrastructure Funding and Financing Act 2020 began rebuilding it, but the government still sits at the centre, and six years on only three projects have used it. Benno sets out a ten to fifteen year pathway to developing institutions robust enough that communities can choose to fund their own growth, carry the risk themselves, and build without waiting on councils or central government for permission. When communities can stand on their own feet, the government can step back. The result would take the burden off ratepayers and taxpayers, and give a more responsive planning system the infrastructure it needs to make housing affordable.

Read Benno's research resport Finance Freedom here.

 

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Transcript

This transcript was automatically generated and may contain errors. For the most accurate version of the conversation, please listen to the audio.

 

Oliver: Hello, and welcome to the New Zealand Initiative Podcast. My name is Oliver Hartwich, and I'm joined in the studio by my colleague, Benno Blaschke. Hi, Benno.

Benno: Hello, Hello.

Oliver: We want to talk about your new report. It's called Finance Freedom, and it's a new report, but it's an old topic for the initiative, actually,

Benno: one of- One of its oldest, potentially.

Oliver: Yes, one of the topics that really takes us back right to the beginning of the initiative in 2012, 2013, because it really is the continuation of a theme we started back then. Maybe I start us off because I was here, you were not.

Benno: Yep. You,

Oliver: you start. The question we asked ourselves at the time was, how can New Zealand deliver more affordable housing?

Benno: And underpinning that is the infrastructure problem.

Oliver: Exactly, and that was what we found. We had, at the time, three researchers on the project. We started the project with Michael Bassett, the former cabinet minister, and Luke Malpass, who is now the associate editor of The Post, so congratulations, Luke. Um, Just appointed yesterday, and Jason Krupp also joined the two for the final report.

I

Benno: worked with him a lot at local government New Zealand.

Oliver: It is a very New Zealand thing, it all connects together. Anyway, so the three of them worked on a report trying to figure out how to make housing more affordable. Luke, at the time, visited Texas and came back with a brilliant idea, and that was to separate infrastructure funding from council balance sheets.

Now, sounds very technical, but can you just briefly explain the logic behind that proposal?

Benno: Well, we... you can think of it as two kinds of debt. The main way that we currently fund infrastructure, particularly in New Zealand, is that we have balance sheets, so, like, the ability of what are called public bodies, like governments, like central government or local government, councils, they can borrow money, and when they borrow money, they have a certain headroom, or an allowance, of how much they're allowed to borrow until- Mm-hmm

and if they start encroaching on that limit, then they kind of ba- basically break a promise not to go over that limit. And if they do that, then suddenly, their borrowing costs overall start becoming more expensive.

Oliver: Okay. But put perhaps even more simply the question is actually who pays for the infrastructure when a city wants to grow?

Benno: Yes, and arguably ideally it would be those who benefit from that growth.

Oliver: Yep.

Benno: In the case we do it now is that the cit- the city, the council, like, front-foots the debt for that infrastructure, so it borrows the money. Yep. And then that goes basically through the entire rating base.

Oliver: So again, in, in very simple terms, you have a city The city shall grow and you are approaching the existing population and say, "Well, because the city is going to grow, you all have to pay more on your rates."

Benno: Yes.

Oliver: And that was the situation we found in 2012, and against that situation and the frustration that comes with that, because the existing population never wants to pay for the newcomers, came Luke's- And

Benno: there's a bit of a mismatch there. Yeah. I think that's, say, somewhat this... It's a bit fair.

Oliver: It is fair.

Yeah. It is fair. Yeah. But against that came Luke's observation from his trip to Texas, where he said, "Well, in America, well, parts of America, they found a way in which they can separate the existing population from the newcomers, and the newcomers effectively pay for their own infrastructure."

Benno: Yes. So they're, so instead of the council just raising their debt on behalf of everyone, everyone paying into- that debt off the project community or the group of people that benefit from new growth- Mm-hmm

they raise the debt.

Oliver: And I remember Luke came back with one of those wonderful acronyms from that trip. Yeah, you're laughing already. The acronym is MUD. Mm-hmm. That sounds terrible, but it's a municipal utility district.

Benno: MUD.

Oliver: MUD. Well, we always talk MUDs here.

Benno: Yeah.

Oliver: So out of the MUD- ... comes the financing of new- In suburbs

suburbs. Yes. New infrastructure. Exactly. So the idea was you have a new suburb that you wanna build. So there's nothing there. It's a greenfield development. Of course, there- there's absolutely no infrastructure present, no pipes, no roads, no nothing. And so in order to develop all of that infrastructure, you separate this MUD, this new suburb-

Benno: Mm-hmm

Oliver: from the rest of the council and say, "Okay, we put all the infrastructure funding into a separate finance vehicle."

Benno: Yes.

Oliver: So far, I think so. You have

Benno: a geographic defined area that's separated out financially from the council.

Oliver: And then you repay all of this investment over decades. 30

Benno: years, 50 years,

Oliver: whatever.

Yeah. Yeah. So in practice, that would mean that whoever buys a house in that particular development would then have to pay the normal kind of council rates, but on top of that, a surcharge, effectively.

Benno: Yep, and you could argue that they might actually pay s- somewhat less rates as well.

Oliver: Yeah,

Benno: because- Because they're actually paying for the growth infrastructure.

Oliver: Exactly.

Benno: Exactly, and that then gets equalized over time.

Oliver: And in that way, we argued new development would become more attractive to councils because you would no longer have to actually finance this out of your normal kind of budget.

Benno: Yeah, and I think the reason why I use the term finance freedom is that it's not just about it being more attractive to councils, 'cause that might be more of effect of, this kind of revenue sharing, this new scheme that the government's doing, where the c- council actually benefits from saying yes.

Mm-hmm. But in this case, it's about the project community or those people who want the growth and need the growth- That they are the ones who can decide to do it independent of the council, so they are free to choose

Oliver: Okay. So that was the idea we published in, I believe it was September 2013. T-

Benno: it was 2013,

yes

Oliver: Yes

Benno: Originally

Oliver: And if I remember correctly, I mean, this is now some time in the past Mm-hmm,

Benno: mm-hmm

Oliver: It was quite novel for New Zealand, at least

Benno: It, it It was absolutely novel.

Yeah

Oliver: I mean, o- obviously we borrowed the idea from Texas

Benno: Well, in our historic memory, it was new Yeah.

Oliver: Yes. Yeah, yeah. I, I, but it clearly wasn't in operation at the time. No. Yeah I mean, historically, New Zealand of course has plenty of examples Yes But we didn't know that at the time, actually

Benno: Yes.

New Zealand had forgotten what it once did

Oliver: We only rediscovered that a little bit later, but at the time, we borrowed the idea not from New Zealand's history, but from Texas

Benno: Yeah, but I found that most interesting because the first time when I got introduced to the idea was also through this idea that, of the, your work at the initiative, plus other practitioners that were starting to chime in around that Mm-hmm And also study that kind of stuff and say, "Oh, in other places in the world, we, they do it differently, and this works this way."

And this was, and why don't we do it here? Yeah Because that helps us with our other planning goals Mm-hmm So it's not just about urban planning, but also about the infrastructure planning and financing

Oliver: Yep

Benno: But then it was later, it was actually years, years later that we then started realizing, well, hold on.

No We had that We

used to do this, and we used to do this all the time, and it was actually our main way of providing infrastru- most, more than 50% of all local public infrastructure got supplied this way in New Zealand Yeah We built New Zealand this way

Oliver: And well, we know how we found out about that, and it was by employing a historian at the initiative for a few years, and it was Matthew Burchall who came with a PhD from Cambridge in history and joined the initiative and Well, we put him onto a project on infrastructure, and of course, his intuition was, as a historian, "Well, let's have a look."

Yes. What was there before, and what he found out- Good man, yeah ... was actually, yeah all the wonderful stuff we found in Texas, actually New Zealand once had that, roughly like that.

Benno: Yeah, and we got rid of it in the 1990s, '89 and 1996.

Oliver: Still, around the time we published the report, we had forgotten that legacy.

Benno: Yep.

Oliver: And so the ideas we presented were actually relatively novel, once again for New Zealand. And actually they were not just novel, they were quite out there. People thought that was quite- Yep ... a radical idea, and I mean, as always with think tank reports and people say, "Oh, yeah, it's just a kind of ivory tower discussion and will probably never happen."

But-

Benno: And it was also perceived as a kind of foreign import idea.

Oliver: Yeah, that too, of course. Which it

Benno: wasn't.

Oliver: I mean, yeah, sure. That happens every time you try to introduce some international ideas into the New Zealand policy debate they are labeled immediately.

Benno: Mm-hmm.

Oliver: Until we realize actually that's exactly what we've done before.

Now, 2013, that was the report, then what happened? I think the idea grew legs.

Benno: Yes. So Labor got in, and they were campaigning on housing affordability.

Oliver: Actually, Labor got in 2017.

Benno: Yep.

Oliver: There was stuff before I think actually what first happened was Bill English came in, and I remember actually one of the last things that the previous National-led government did was they repurposed the Crown Fiber holdings- Yes,

Benno: correct

Oliver: into Crown Infrastructure

Benno: Partners. So they started the institutional formation around this possibility.

Oliver: Yeah. So before Labor even got in, I think the idea was already getting some traction with- Yeah,

Benno: so it

Oliver: was- ... with Bill English- Yeah ... and Steven Joyce.

Benno: Yes. So, so before, before Labor there were some policy practitioners that...

And also, as you say, Bill and, and Joyce, they were starting to have that conversation, and so they were starting to prepare the institutional ground.

Oliver: Yeah.

Benno: But it was then that was their last legs in government. Yeah. And then-

Oliver: And then there was Phil Twyford ... and then

Benno: Twyford came along, and then Twyford understood this right from the s- right from the get-go, and he labeled it also the twin evils of unaffordability, right?

So it was planning plus infrastructure funding and financing, and he made it a s- one of his central pillars in the urban growth agenda to build this, to rebuild or reconstitute this system that we've lost.

Oliver: Yes and that was another part of the initiative's involvement in all of this because Phil and I had a good solid working relationship at the time, even to the point where we wrote a joint op-ed for The Herald- Mm-hmm where we laid out our ideas. So Phil effectively took over from what English and Joyce had started-

Benno: Yep ...

Oliver: formalized it even further.

Benno: Yes. And- And he then created the IFF Act under him.

Oliver: Yep. We have to probably just explain what is the link then between the initial idea that we had in 2013, the Crown Infrastructure Partners idea from English and Joyce, and the IFF then that happened with Twyford.

Benno: So th- so they, they pr- prepared the institutional ground, so they repurposed the entity that was rolling out broadband for infrastructure.

Oliver: Yep.

Benno: And then what happened was that the Milldale project came along.

Oliver: Yes.

Benno: And the Milldale project was a project of a private developer that decided to basically levy itself-

Oliver: Mm-hmm

Benno: over time, so raise debts. But it was only a single developer, and it was a complicated process of putting encumbrances on titles, and it wasn't formalized. So that was then the example that was then taken by the, by Twyford and the urban growth agenda and then redeveloped into a, what you call a statutory framework.

And then put into what we call now the Infrastructure Funding and Financing Act.

Oliver: Yeah. And the name of the institution leading all of this has changed several times along the way. Yes. So that-

Benno: It was Crown Infrastructure Partners- Yes ... as it was established, and now it's NIFCO.

Oliver: What is NIFCO?

Benno: National Infrastructure Funding and Financing Company.

Oliver: Which is the, well, as you said, the successor to Crown Infrastructure Partners, which was itself the successor to- Yes ... Crown Fiber Holdings.

Benno: Yes, exactly.

Oliver: So all of this has a very long history, but okay the basic idea is still the same. Yep. So, so the basic idea is you wanna make it easier for councils to finance growth.

Benno: Yes.

Oliver: By taking it away from councils.

Benno: By, exactly, by enabling communities to raise their own debt and then not burden the council, not burden everyone else.

Oliver: Okay. So, and now we have established, this is an idea we put out in 2013. It is based on the Texas model, it is based even on something that happened- Mm-hmm

way before that in New Zealand, but where does the idea stand now?

Benno: Well, the- So the original group that was thinking about housing affordability was also thinking about this, and that was the infrastructure funding and financing challenge. And we knew that we needed a model that was so, so basically a local government, like a framework for financing infrastructure at a local level that was responsive in a similar way that we wanted the planning system to be responsive.

Oliver: Let me just get in quickly here. You said, "We knew." Who was we?

Benno: So policy the, the main group was partic- like policy officials in the treasury, in the housing team, basically under Tom Hall, and that was Chris Parker, myself, and a few people that were around that group.

Oliver: And there was a separate advisory community really- Yes

put together by the ministers, and that included people like yourself-

Benno: Yeah, so- ...

Oliver: Eric ...

Benno: yeah, so that was actually just a stage later.

Oliver: Yeah.

Benno: So first, the infrastructure funding the, the ideas got basically disseminated in, into the public service, and then the Infrastructure Funding and Financing Act got built.

But what happened is that the original idea of what we wanted got then taken off that group, and then the Infrastructure Funding and Financing Act was developed by a different group, which is why the act is what it is now and not where we would like it to be basically in the future, and that's what the report's gonna be about.

So after the IFAFF Act was already put into place, then the TWIFAD decided to put a group together.

Oliver: The famous TWIFAD group.

Benno: The famous TWIFAD the, the land markets group. Yep. And that land markets group was I was in that group Eric was in that group, Ch- like Chris Parker, or the, the typical, the, the- The usual

Oliver: suspects

Benno: the usual suspects, yes. And the first paper that we wrote was about the planning system, obviously. So a more responsive planning system for housing affordability, and the second report was on this infrastructure funding and financing.

Oliver: And just to clarify that group included people from all sorts of different organizations.

Yes. You were with LGNZ still. I was

Benno: at LGNZ at the time, yes. Yeah. And then we had Treasury, LGNZ, HUD- Initiative ... so Ministry of Housing and Development, and d- this, the initiative, Eric, yes, so quite a few, and also people that were outside of the public service.

Oliver: Quite an unusual grouping really. If you think about it

Benno: Yes.

It is a, you could argue a, like, a horizon three, like very f- future horizon possible worlds, very alternative way of thinking, but also very steeped in the economic literature, so So

Oliver: basically we have to give Twyford a lot of credit here because he managed to identify the people from all sorts of different backgrounds who had a

Benno: joint- Expertise and new ways of thinking- Yep

and were nerds.

Oliver: Nerds. Policy wonks.

Benno: Yes. Yeah

Oliver: In the best possible way.

Benno: Yes, but also had a maverick rebel kind of quality to them in the sense that they were willing to think outside the box.

Oliver: And they were willing to ch- challenge the-

Benno: Exactly ...

Oliver: existing institutions.

Benno: Yes. So we wrote that paper together.

Eric and I worked very strongly on that. It was the a new approach to funding and financing our cities, and that was, you could even say, part one of this report of Finance Freedom. So it's the first time we started re- thinking more deeply about the importance of this type of alternative finance for housing affordability.

Oliver: If I could just pause here for a moment. Yeah. I think that idea actually of bringing together experts from totally different backgrounds, different institutions, groups, think tanks, LGNZ, I mean, it- it's a good one, but it's something that probably wouldn't occur to some people out there that this might be a good way of delivering policy.

We often have

Benno: a lot of- It's a very difficult way... It's a difficult thing to do for a minister.

Oliver: Yes.

Benno: So it's it was very risky.

Oliver: It is risky because it exposes the minister to all sorts of accusations.

Benno: Yes, and it also rubs badly against, Public service ... the officials who feel like- Sure ... that's, you're in- you're encroaching on their terrain.

Oliver: So that was bold, courageous.

Benno: That was ve- it was ex- I think it was extremely bold. Yeah.

Oliver: But it did work because in the end you had a- It

Benno: worked for New Zealand.

Oliver: Well, yeah, it worked, it worked for New Ze- but no, but it also worked because you had the right kind of people with the right attitudes. And they-

Benno: Yes,

Oliver: but- They all wanted the same.

Yes. They wanted to make housing more affordable.

Benno: Yes.

Oliver: And they were creative, and they were well, well qualified, and then it didn't really matter where they worked.

Benno: Yes. Having said that, I just want to acknowledge that I do think that Twyford, so Minister Twyford expended a decent chunk of political capital on this.

Oliver: Yes, he did,

Benno: But he did it for the good of New Zealand Inc. That was, and I think that's, that needs to be said.

Oliver: Yeah, and I mean, Twyford in many ways has become a bit of a tragic figure because what really publicly defined his work as housing minister was, of course, the whole entire KiwiBuild fiasco

Benno: Which was not his own

Oliver: Which was really a- Which he

Benno: inherited, yeah

Oliver: which he inherited, which was really not his fault. It was a, let's put it frankly, it was a stupid policy idea that he was saddled with, whereas his real passion, his real expertise-

Benno: Yep ...

Oliver: was elsewhere, and it showed actually in what he-

Benno: Yes ...

Oliver: put in place there.

Benno: Yeah, and the group that he put together that reflected his passion- Yes

and his w- his desire to really push the boundaries.

Oliver: So he was only housing minister for a couple of years I think A few

Benno: years. He was a f- he was housing and urban development minister-

Oliver: Yep ...

Benno: for a few years, and then he lost the housing portfolio, and then

Oliver: he was- Yes, in

Benno: 2019 I think ... yes, yeah, and then he was urban development minister, and then that l- didn't last much longer

Oliver: either.

Yeah. But what he did over that short time is, Is

Benno: incredible ...

Oliver: he left a lasting legacy, and something that his successors are still building on.

Benno: Yes, so Minister Bishop is currently continuing on that path. And arguably- And,

Oliver: and actually gives him credit for

Benno: everything Exactly. Exactly, yes. And his the amendment bill to the RFF Act that Bishop has now put in place is basically continuing to evolve.

It's an affirmation of the necessity of this type of alternative finance and the necessity of evolving it

Oliver: just amazing as a policy making story really, if you think about it A decade,

Benno: more than a decade

Oliver: Yeah Okay, so now that we've established what all of this is about, let's talk about your report.

So, finance freedom, I mean, who do you want to free here?

Benno: The freedom is really of communities, developers, and individuals who want to develop when they decide to develop

Oliver: Which is close to the original idea we had in 2013, but never- Yes ... quite got implemented in that way

Benno: No, so the original IFA Act set up an alternative way to finance, and that is off balance sheet of the count- well, that was the idea, of the council.

But everything got rerouted through central government, so the central government ended up needing to guarantee the scheme itself against itself. So basically lenders would be reluctant to borrow money to private lenders. Given that central government cabinet you could say makes decisions, but then they could also make change the, the decisions.

So, so the Crown had to guarantee to lenders that if the Crown does any adverse action, that would impact the lenders recouping their money, that the Crown would cover it. So that, so it had to cover that, and then it also decided that the Crown itself needs to make the decisions what projects should and should not proceed, and that then created a host of costs and checks and balances and massive machinery of government process where multiple departments from Ministry of Housing and Development, to Treasury, to NIFA, to, and everyone's lawyers from every department gets involved

Oliver: Isn't that the usual story of New Zealand localism?

You, you start out with a great idea of decentralization and empowering communities, and then you put central government in charge

Benno: Yeah. Yes. Having said that I, d- it might be arguable that it was a kind of a necessary misdesign, you could say

Oliver: Okay. In what way?

Benno: Well, we dismantled our institu- our in- our institutional landscape that enabled this alternative system in 1990, so, so '89 into 1996.

So we lost the system and the provisions and the institutions and knowledge and experience in the system that can actually set up an alternative finance that can also fail without the government feeling like it has to step in. And so without that system in place, the Crown had the feeling like, "We need this alternative finance, but we can't rely on the system yet to really do its job, so we have to step in."

Oliver: Okay

Benno: So it's kind of an a weird thing where the, I would say- It depends how bold you are. Do you know what I mean? How far you want to go in the first shot. But the decision was made that we're gonna do an interim step, we're gonna c- Crown guarantee it, we're gonna make- Crown's gonna make decisions, we're gonna scrutinize everything by the Crown to have a first few experiments, but now we need to move o- move on.

Oliver: And now is the time to do what?

Benno: Basically to start building that system that we lost so that we can-

Oliver: You mean the original system that we had- Yes ... in the 19th century or

Benno: early 20th century Exactly. Exactly. So, and part of that is for, I'll just give you an example, is building a s- you got a legal structure that allows infrastructure to fail, projects to fail, but in a fail in a orderly way so that the common good that's being built through that p- project gets protected.

Oliver: Give me an example. So, failing means, okay, you laid the pipes, but-

Benno: Yeah imagine a half-built half-built project us- Okay, half-built ... so, so you've got ha- half the land is has got some infrastructure, half hasn't. Mm-hmm. The infr- now the the developer basically goes bankrupt.

Oliver: In which case you would still say, "Okay it's only half-built, but it's still an asset."

Benno: Yes, it's still an asset, but now you might have creditors and secured creditors, so a secured creditor has claim over the assets, who's motivated to sell.

Oliver: But to whom?

Benno: So either it sells in, in bits in bits, or it sells to another developer. But the c- the challenge is that you've got multiple types of creditors, and with different motivations, so it's very hard to get a coordinated response so that the services that have already been built keep going- Mm-hmm

and that then the project can still be continued and finished in its development, and then basically the lenders take the hit in terms of the borrowing, right?

Oliver: Now, the problem with all of this is, of course, politics, because we can easily imagine cases where things go under and there will be a public outcry.

Benno: Exactly.

Oliver: And the public will then demand government to intervene.

Benno: This is exactly the point. So that's w- what I mean by we need to build that institutional- the- those institutions that can hold the project failure and people know, okay, there's been now a financial failure by the developer, but that doesn't mean that people won't get water.

It doesn't mean that the good that was intended to be created by the project won't be created. And if we can allow this developer to fail, the system can hold the situation, and then, for example, a new developer step in without the Crown getting involved.

Oliver: And you believe that our political debates are mature enough for that?

Benno: I don't I don't think that... I don't think we can go to that state from one day to another, and that's why I've outlined a 10 to 15-year kind of pathway-

Oliver: Mm-hmm ...

Benno: to step-by-step build the system, and then step-by-step pull the Crown slowly away from it. So as we build the security envelope in the system so the system is robust and can stand on its own, to that degree, the Crown can feel safe to start stepping back and allow people to take responsibility.

Oliver: How important would it be, then, to have bipartisan agreement on this?

Benno: It's absolutely necessary to, that we have this kind of continuation as we've had it, because it's gonna take years, many years, and not just one cycle.

Oliver: And actually, how important is it to have politicians who really understand the subject matter?

Benno: Also very important, and we've been lucky. New Zealand has been particularly lucky with Tw- with English, Twyford, and Bishop, is that they are arguably kind of policy nerds. Yep. And they also understand the issue. And they are... They have what I would say quite a high cu- like, curiosity. Yeah.

So that they're interested in sitting down with people that understand this stuff and actually wrapping their heads around it, and then and then taking really pragmatic steps, and then also respecting the work that has happened before them.

Oliver: Would that system then still work in the future if we ever had a minister who didn't really understand the issues as well as English, Twyford, and Bishop?

Benno: It would work if the system's in place because once your system's in, in place central government's no longer needed, right? Mm-hmm. So the system can operate itself, so people can vote on it. A basic body can then approve that the basic specs of the project are fine, and you can raise the debt, and all that happens of its own without the Crown, right?

But if we're in a situation where we still need to build the system so we can get to this point, then having a minister that doesn't understand it then undermines that process of building this you could say both market experience but also institutional experience, et cetera, can be quite disruptive.

Oliver: What's the governance arrangement, by the way, for organizations like NIFCO? Do they have a board? Do they have people actually around who ensure that the philosophy is maintained? Would that be an organization, for example, in the future for if they ever retire from politics, I mean, people like Twyford and Bishop and potentially Bill English as well?

Because- It is a

Benno: company, so yes ...

Oliver: I think it would need- Yeah ... that kind of institutional knowledge somewhere.

Benno: It would be really good to have that, yes. Having said that, the... Yeah, and the challenge that we currently have is that we have- This is my judgment. We have very good practitioners in NIFCO at the moment.

They really understand this stuff, and they can also see the future. So they're currently practicing in the current regime, as capable and frustrated as they might be with the limitations of the current regime or some relationship to the urban planning system, and they can already see where this can go.

So, but of course, those types of people may not stay in that- stay around, right? So you need to build that kind of institutional knowledge and make sure that we can retain it.

Oliver: Now, it's altogether quite a close-knit community of experts in this field.

Benno: Yes.

Oliver: And I think you probably know all of them.

Benno: Most of them, yes.

Oliver: And you have probably also circulated a draft of your report among that community.

Benno: Yes. So, given that the Treasury was involved in creating the first model, and also that Treasury is the main entity that's involved in the, what we call the government support package, so the underlying guarantee I have worked closely with so shared a lot of the material and had close discussions with the Treasury around the model, but also how it's evolved from just a few years ago to where it is now just to make sure that we understand where things are at properly.

And we've also shared the material with NIFCO itself and have, have- I had conversations with them about the on-the-ground experience of what's happening.

Oliver: And what has been their feedback on your report?

Benno: I don't want to put too much language in their mouth, but they really enjoyed it. Like, particularly the practitioners on the ground that are working with this felt that this was what the most, sophisticated say ex- like, like explication of this type of thinking as we have seen it yet on paper.

Oliver: Okay. '

Benno: Cause it, this is not, I think the important thing is people overseas that do this, right, like in Texas, for example, that actually, I wanna carefully express this, don't know what they're doing, in the sense that they, they know their practice, but they haven't got a meta reflection on it.

It's not like there's an academic discourse that reflects that's takes a step back and looks at it as an object and then examines it and talks about it. They don't do that. It's just what they do. They just, it's just what they do. So, there is not much in the world in the sense of this kind of meta reflection of how they do things.

It's just natural to them. So if, what we have sort of struggled with in the last 10 years is to observe, wow, you guys do this, and then when you talk to them and say, "Well, why wouldn't you?" And then other reactions are like, "Well, if you wouldn't, then houses wouldn't get built."

Oliver: Okay.

Benno: And then you, and for them, that's a natural, right?

But then we are looking at it and trying to make a s- make sense of it, an- analytically dissect it, and how does it work, what do you need to make it work, and then to basically that you can transfer it to a new context, like to us. Sure. So that kind of thinking and writing and he- doesn't really exist.

There is not much out there.

Oliver: So your report is really geared towards driving the whole debate on different infrastructure funding mechanisms forward-

Benno: Yes ...

Oliver: and actually grounding it in a bit more theoretical research as well.

Benno: Yes, and I'm also explaining in detail how our existing model works, how those other models work, how New Zealand has worked in the past, and then basically what we need to get from where we are to building this f- system in this full sense where the Crown is no longer needed as a, as basically a middleman that's imposing a lot, granted beneficial to, to, in a good re- for good reason right now, but in the future, no longer, shouldn't be needed.

So how we get to that point where the Crown can really step back, and we then, communities can be free to choose, but also if, with that freedom, take responsibility, and that the system can hold that responsibility, and the Crown doesn't feel anxious and compelled to control everything and step in or, and bail out and for all that reason then- impose the, all these costs and checks and balances on the system

Oliver: And all of that, of course, with the one goal of making housing more affordable

Benno: Yes, 'cause with a more evolved model, and where communities are free to choose, that means going back to our urban stuff, we have what we call threat of entry.

We have people that can choose to enter the market or enter the land market, and housing and urban development, and then get on and building, and they compete. And with that, the whole dynamic changes. But w- th- they can't really happen if we need to spend two to three years asking ca- cabinet for whether we are allowed to or not.

Yep And then let's imagine we have 100 projects, 200 projects, 300 projects, lots of projects all around all the cities, everyone going to cabinet, "Can you please spend all your time that you meant to be governing New Zealand on our little project?"

Oliver: And indeed that is the motivation, that was the motivation behind the original series of reports.

We wanted to make housing more affordable. Our last report was called Free to Build. This is exactly the mechanism that would make it free to build. So, you stand in a long tradition of Initiative reports, you stand in an even longer tradition of actually New Zealand doing things like this, going back to the 19th century.

Benno: That was a great discovery

Oliver: But I think you're also not just standing in the tradition, you're actually driving it forward, and you're giving us more ideas and more practical ideas. And on that, I can only congratulate you on that report, and I wish you all the success in the world with your recommendations, and I hope it's useful for the policy community driving this forward

Benno: Yeah thank you, and I also h- hope that it's helpful for future and younger generations, effectively

Oliver: Let's hope so.

Thank you very much, Benno Thank you And you can find your report, of course, on our website at nzinitiative.org.nz, and it's called Finance Freedom. Thank you very much.