Before anyone can build a house in New Zealand, someone must pay for the pipes and the roads that connect a development to the city. While this seems like a minor detail, it is a central issue for housing affordability.

Almost always, the council pays for these connections upfront. And a council can only borrow so much, about two to three times what it collects in a year. Once it hits that limit, it can no longer pay for the water pipes, the drains and the roads that a new suburb needs. As a result, the council rejects proposals for new housing developments. It uses its planning rules to keep the land empty instead.

The land just sits there. Fields that could accommodate homes are held back. When there is too little land to build on, the price of housing climbs. Those who buy homes for the first time pay that price, if they can afford it. Others, including many young families, are locked out. The money flows to whoever happens to own the right field.

This is where our housing crisis begins. Not with greedy builders or lazy councils, but with a Council borrowing limit with no practical alternative.

But there is another way to pay, alongside the council borrowing, for the infrastructure that housing developments need.

Investors put up the money for the pipes and roads at the start. The families who move in pay it back slowly, over many years, through a small charge on their homes. Think of it as a mortgage for the pipes. The debt belongs to the project. It never lands on the council.

The real difference between the two is in who loses money if things go wrong.

Under the current way, any loss falls on ratepayers and taxpayers. With the new way, it would fall on the investors who backed the project, and on no one else. That keeps the public safe. It also lets people get on with building, instead of waiting in line for a council that cannot say yes.

Some may raise an eyebrow because risk sounds like something to avoid. In an interview, Bill English explained that risk is not something to expunge. Rather, in his words, risk is "something that you take". It is acceptable, he says, for things to go wrong sometimes. We can do this by creating orderly ways to fail.

We used to treat risk that way.

For most of the last century, a town that wanted something built could vote to tax itself, borrow the money, and build. Harbour boards did it. Road boards did it. Water schemes and power lines were also paid for this way across the country. If a project failed, the lenders lost their money. The public did not.

Then, between 1989 and 1996, we shut the whole thing down. We have paid for that choice for thirty years.

In 2020, Parliament brought the idea back. It passed a law to let towns and builders pay for pipes the old way again. But six years on, only three projects have used it. The tool exists but it is gathering dust.

Why? Because the government pushes and pulls at the same time.

With one hand, it promises to cover investors, so they feel safe to lend. With the other, it checks every single project itself. Each one must go all the way to Cabinet. Routing every project through Cabinet piles on so many checks and costs that the model cannot grow. Only large-scale projects can afford all this. The gate that councils once guarded is now guarded by the government.

Behind all that checking sits a fear. The government cannot accept the possibility of a project failing. So it guarantees the scheme, retains the power to decide what projects may be built, and gets financially involved. This leads to the government feeling compelled to scrutinise every project. As a result, caution becomes a constraint.

The way out is to create a new way to pay for projects that allows them to fail without negatively impacting anyone who did not choose to invest in them. If a project runs into trouble, the taps keep running for the families living in the area. The investors who backed it take the loss. It stops with them and never reaches ratepayers or the government.

Create that, and the government can take its hand off the brakes. The reward is a country in which communities are free to act and carry the weight of their own choices.

My report, Finance Freedom, outlines how to achieve this. Willingness to embrace risk built much of the infrastructure we rely on today. If we are serious about homes that ordinary people can afford, we need to learn it again.