The government has announced its latest set of moves to get people into homeownership. So what’s it about and how will it work?
What’s all this then?
At a standup this morning, housing minister Megan Woods announced $400 million would be put towards the government’s new progressive home ownership scheme, which aims to give people a pathway towards owning their own house, alongside a housing provider. It’s particularly targeted at low-income families who are struggling to get a deposit together or pay a mortgage, says Woods, along with being aimed at areas with wildly inflated house prices like Auckland and Queenstown.
And how is it going to do that?
Basically, families would partner with providers to eventually buy a house, under a couple of different models. The first of these is a shared equity model, in which a household owns part of the house and a provider owns the remainder, with the household buying that portion over time. There is also rent to buy, which is relatively self-explanatory. The third model that could be considered here is leasehold in which the provider would continue to own the land underneath a house, thus dramatically bringing down the price for the household.
Why is this necessary?
Have you seen what house prices have been like recently? Even so-called affordable housing, or properties aimed at first home buyers, are wildly expensive, and not getting any cheaper. High rents make it really difficult to put together a deposit, which is a necessary step to getting a mortgage. So cumulatively, those without wealthy parents (hello Max Key!) can struggle to ever get on the housing ladder.
How effective is this expected to be?
It certainly won’t be a silver bullet for housing unaffordability, but the government expects it will help between 1,500-4,000 households.
“Under-investment in housing and infrastructure in the past has made the aspiration of homeownership impossible for too many families,” said Megan Woods. “I’m delighted the government is once again delivering solutions to enable more families to own their own homes and secure their futures.”
What will the criteria be for those wanting to take advantage of it?
There are a few conditions on whether households will be able to get this:
- Applicants must be over the age of 18
- Applicants must not currently own any property in New Zealand or overseas
- Applicants must be a New Zealand citizen, permanent resident, or resident visa holder who is “ordinarily resident in New Zealand”
- Applicants must have a household income of under $130,000 per year
- Applicants need to be first home buyers or “second chancers” (as defined in the eligibility criteria for KiwiBuild)
- Applicants will need to be able to secure a commercial mortgage (ie good credit histories, minimal debt), and have saved some amount of deposit.
Can we actually expect this to happen, given the whole Kiwibuild thing?
Well, this project won’t require the government to get houses built in quite the same way, which – spoiler alert – it turned out they were pretty bad at on any sort of scale. By partnering with providers there’s a better chance that new homes will actually get built as a result of this, thus increasing supply overall.
Why is this being done now?
Well, there’s an election coming up, and it’s fair to say the current government hasn’t set the world on fire with its work on housing. So it’s potentially the case that they want to get a new policy going so there’s something to run on, rather than just having to talk about the aforementioned Kiwibuild stuff. As well as that, the scheme is in the confidence and supply agreement with the Greens, which will be expiring at the election.
What are the Greens saying about it?
Greens co-leader Marama Davidson said: “This fund means more low-income families who have been locked out of the housing market will finally have a chance at owning their own home. We’re proud to be part of a Government working to ensure everyone has the home they deserve”.
Didn’t something just like this get announced quite recently?
You’re probably thinking of the “KiwiBuy Coalition scheme”. From a fact sheet attached to the announcement, here’s the difference: “While the KiwiBuy proposal and the Progressive Home Ownership Fund share an objective of scaling up provision of Progressive Home Ownership schemes by existing providers, the Fund will also provide new pathways to access such schemes and support a wider range of households into homes than the KiwiBuy proposal.”