The Green Party can go to the September 19 election saying it managed to follow through on its promise to deliver progressive home ownership models - only just.
The Government on Friday took its first step towards helping more New Zealanders into their first homes via progressive home ownership, by giving two community organisations a total of $23 million to scale up their existing offerings.
The Housing Foundation in Auckland received $17 million to deliver 78 homes mainly through its Shared Home Ownership Programme, and also its Rent to Own offering.
The Queenstown Lakes Community Housing Trust received $6 million to deliver 25 homes through its Secure Home programme which offers leasehold homes.
Each organisation will use the funding to scale up their existing programmes, offered according to their own eligibility criteria.
There are currently 7000 families on the Housing Foundation’s waitlist and 600 families on the Queenstown Likes Community Housing Trust’s waitlist.
Both organisations also offer other products and services, but the funding will help them ramp up their progressive home ownership offerings.
Housing Foundation general manager of operations, Dominic Foote, said the organisation was recruiting more staff.
Meanwhile Queenstown Lakes Community Housing Trust’s executive officer, Julie Scott, said the funding would put the trust in a stronger position when securing bank funding.
The Labour/Greens’ Confidence and Supply Agreement stipulated a commitment to delivering “innovative home ownership models within the State and broader community housing programme”.
It said, “A Rent to Own scheme or similar progressive ownership models will be developed as part of Labour’s Kiwibuild programme.”
Housing Minister Megan Woods said work was underway to establish an initiative within Kāinga Ora for households with an annual income of under $130,000 to receive shared ownership support directly from the Government.
This is expected to be available in early 2021.
In the meantime, the Government will look to support more community organisations to scale up their progressive homeownership models.
It has allocated $400 million towards progressive home ownership.
Asked why Kāinga Ora couldn’t simply lift successful models already in use, and roll them out at scale, Green Party co-leader Marama Davidson said: “The beauty about the community housing providers is that they have taken time to form relationships and they know the communities because they are in the communities. The Government can never immediately replicate that... This is the start to scaling up.”
This is how the Housing Foundation describes its Shared Ownership Programme:
Our Shared Ownership Programme provides an opportunity for you and Housing Foundation to share the ownership of a property. You would buy a majority share of the property (usually 60% or more) making it more affordable for you than if you were to buy 100%.
Housing Foundation would retain ownership of the remaining share of the property (e.g. 40%) and both you and Housing Foundation would be recorded on the property title as owners until you are able to buy us out. Most households are able to do this within 7-10 years. You will need a deposit (your savings plus KiwiSaver) and a mortgage for the balance of the purchase price to buy your share. This will all be explained to you in detail before you are asked to sign a Shared Ownership Agreement. Look at this example where you buy 60% and Housing Foundation retains the remaining 40%.
This is how the Queenstown Lakes Community Housing Trust describes its Secure Home model:
Secure Home is based on a leasehold agreement between the Housing Trust and the household. Essentially, the Trust retains full ownership of the property and the household purchases the right to occupy that property at the cost of house construction (excluding land). The household then pays an annual ground rent to the Trust for use of the land, which is set well below market value and only ever increases annually with inflation for the period the household remains in the programme. This ensures the initial purchase price (Upfront Payment) and ongoing ground rent remain affordable for the household in perpetuity.
The Secure Home agreement provides a 100-year lease, which provides the household with a home for their lifetime. Secure Home is not a rental arrangement. A household in the Secure Home programme has all the benefits and responsibilities any home owner has, except the ability to on-sell the property in the private market.
The lease cannot be transferred or on-sold on the open market, but should a household decide to move on, the Trust will purchase the house back at the original purchase price, plus an annual inflation adjustment (provided the house has been well maintained). If the household has made any improvements to the property which the Trust has approved, then these too will be factored into the resale price.
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The thing is, depending on the structure of the product offered, the lottery winnings are get funneled back in to more investment in more housing assets - theoretically producing more and more lottery winners.
I say theoretically because we haven't been using these innovative home ownership models long enough to get a real feel for the long-run benefits. The QLCHT offers four different programs wrt affordable housing:
Just got to love this country, God forbid if anything like Covid comes in again, our darling Govt and Central Bank are happy to publicize the loss whist its only we who have taken this good debt (by paying un-realistic premiums for dilapidated pieces of crap palmed off by those gorgeous agents) can keep the profits to ourselves when the Sun shines.
If you read into the models employed by each of these two NGO organisations, you would feel far more optimistic. For example, as I understand one of the various products offered in Q-town, the purchaser purchases only the built assets (not the land). The land is held in trust and when an owner sells, the capital gain on the land realised by the trust is used to the benefit of the trust expanding its offerings. Good in that the initial purchaser (debtor) doesn't take on such a large debt - and the trust which does take on that land-cost, related-debt retains the gains in order to provide another purchaser with a similar opportunity.
what is the point of ownership then? if one cannot keep the capital gain (which is almost 100% on land)? it will be much easier to offer long term rental properties, with up front agreed and fair rent increases and security of tenancy than it is to push people into pseudo ownership arrangements that will not financially benefit the lower income people targeted by the plan.
In presence of secure, long term tenancy, the only advantage of owning a house is that it helps to create a small pool of wealth over a long time. If you actually have alternative investment plans (e.g. kiwisaver) AND secure tenancy, ownership is not important at all (specially of you are not owning the actual asset, i.e. land).
The point? Perhaps home ownership for something other than capital gain/loss
And what does 'home ownership' achieve? If the public sector provides for people who don't want to own homes, isn't that a good thing? It has worked particularly well in Japan where it's entirely possibly to opt out of home ownership and rent from the govt at an affordable cost. That way, h'hold income can be used for different pursuits. Different policy, but a similar situation exists in Austria.
JC and Believer1980: You both make good points. Given the knee-jerk "must get on property ladder" NZ mentality, I really did mean: Will be interesting to see who is up for that.
Well the problem that exists now is that housing has been financialized to the extent that it is a 'risk'. If the economy wants to recover, govt policy should aim to provide people options that don't involve taken on risk that could make their lives misery.
Sure, like the German model I believe. It (secure, long term tenancies) require a lot more regulation around tenancy provision, such as rent and housing standard controls. Trying to engineer these into our existing rental market would put all sorts of landlords out of business - if I read the comments from landlords right, when it came to the healthy homes standard, for example.
You're right, but whether implementing a largely private sector housing market around secure, long-term tenancies is questionable. Other government interventions (such as these) might be a better way to skin the cat.
mmm, you can have the same outcome with long term rental agreements with formulated rental increases. Security of tenancy does not require ownership specially if there is no financial benefit for assuming such ownership (no gains, but sharing the loss). It does not make any financial sense to be honest. If you have so much income to waste on a an asset that is losing its value, you surely will not be struggling for a roof over your head. If you have very little money, you have to be extra careful where you put it.
Not for profit rental models are better than the help you to own types, as the latter in substance is the former but more expensive, less flexible and more costly to run.
Not for profit rental models are better than the help you to own types, as the latter in substance is the former but more expensive, less flexible and more costly to run.
Spot on Believer. This is what Japan, Austria, Germany, and S'pore have achieved. For the wider economy, this potentially means that more money can be spent into the economy instead of housing costs. There are multiple benefits for the tenant and the govt.
I don't have concerns about this in principle. This sort of thing is quite refreshing actually - recognition that the answer to our housing problem is the building of more houses and helping people achieve full and proper ownership of those houses, not the quite frankly stupid idea that we can tax our way out of a housing crisis.
If anything, an interest rate rise would be welcomed by boomers. FHBers would eventually find themselves with negative equity and be squeezed but it would be unlikely to crash the HM. About the only thing a rate rise would do is hurt the export sector due to our dollar rising
Mate, this would suit me down to the ground. Cash strapped youngins needing help to exit their house.
I would welcome it with open arms and be the ambulance at the bottom of the cliff to help them out for 50c's on the dollar. Then there is the side of me that feels sorry for the poor buggas.
Yeah it might bankrupt some FHBs, many may wish they were bankruptcy - because they could then buy a better home, for a cheaper price than their previous purchase.
Obviously they would probably fail to obtain a loan for a few years [bankruptcy]. I don't see interest rates going up in the short-term and I don't see interest rates solving a shortage of suitably located/quality housing.
Whilst I'm not and never will be, a Labour/Greens voter, it is encouraging that Govt can think outside the box. Better late than never. This type of scheme, when scaled up, could be a game changer for FHBs especially if the houses are actually where and what people want. Certainly seems more promising than Kiwibuild.
I'm pretty sure other providers will be in the pipeline now.
The whole revamp of Housing Corp/HNZ to Kainga Ora is another arm of the wider reform agenda on addressing housing issues. Just as the UDB and the NPS-UD are.
There is a lot going on in the housing 'space'.
What I've found interesting is that the colaition are pretty much following the program of advice put out in this excellent 2013 research piece;
https://www.salvationarmy.org.nz/sites/default/files/uploads/GiveMeShel…
Remember Kiwibuild was a flagship policy of Labour. They were never going to let it go until forced.. thanks Judith. I'd rather die in a muddy ditch than vote for L/G's but I do think this plan B might be worth pursuing. Of course they do have to actually build these homes first but I'm prepared to let them try. Certainly it's electioneering but at least the funds are allocated.
Sorry brain fade, it won't happen again.
Not that long to wait untill the housing market bubble to crash... there you go, that'll feel better.
If we do get a crash we will be revisiting this Green Party 'win' and 103 house buyers will have nothing to good to say about them.
DING, go to your corners and come out fighting.
Here is how I see what government and reserve bank is doing:
To first home buyer:
"You can't afford to buy a house? No problem, let me help you. If you have some deposit, I can lend you this much loan at lowest interest rate... Oh, you don't have enough deposit? All good, you'll just need a 10% deposit, we will sort out the rest for you. What? you don't have 10% deposit? Hmm, let me think of a solution for you. Right, we will find you another person who can do a joint ownership with you. So you will just need 3% deposit and he will get the rest for you. You'll just need to slowly pay it back. Deal? Yeah!!! congratulations on your 'first home'. " Then quickly turn around to others, "who said houses here are affordable? If this gentleman can afford it, you can as well" ;)
They can not build houses bigger than one bedroom for the above mentioned prices in my experience.
From what I understand this money is in partnership with the organisation, homeowner and a third party (bank).
We should see a home owner stump up some bucks, the Govt money and the bank money thrown into to build. The issue becomes an issue if / when property prices fall and the owner gets into strife in a troubled economy. They now owe the Govt and the bank and guess who is going to take second place to getting paid... yes the tax payer.
In this articial above we have $23 million allocated, it then gets put through the TV1 media PR spin and it was stated it is a $400million dollar project that will start next year. That is the extent of our mass media and Labour PR spin machine. That is what the masses heard and they will take it as a major win for Labour but the truth is far from that.
Lets see. HF. $17m for 78 houses. That's ~$218k/house. A $3000/m2 that's ~73m2 or 87m2 at $2500/m2. Not too bad as a starter house for a 3 person maybe 4 at a squeeze family. HF a charitable Trust with a board that seems pretty experienced and competent. I always have a suspicion of charitable trusts and wonder how much goes into running costs, particularly salaries and the number of staff. Could well be better than Housing New Zealand though.
In new Plymouth 2 years ago. i thought Akl would be $3000/m2 for a low specced house. of course if the house is on a slope and you have crap ground it goes up substantially. I was being generous so the size goes down to around 60m2 if $/m2 say $3300 and easy foundation conditions
If govts really cared about FHBs it would remove the 90k GST on a new $600k home (and thus also reduce the FHBs 30 year mortgage interest anchor around the FHBs neck). But... Its not going to happen because all pollies want the dosh for their pork barrel policies.
Those savings will be gobbled by the vendors and not passed onto the first home buyers.
The price of housing is not set by cost it's set by what buyers are willing and able to pay. The difference is pocketed by landbankers and ticket clippers.
If you want prices to come down, raise interest rates, put DTI restrictions on lending, axe the accomodation supplement, kiwisaver withdrawals, bonuses etc.
'If you want prices to come down, raise interest rates, put DTI restrictions on lending, axe the accomodation supplement, kiwisaver withdrawals, bonuses etc.'
Maybe the government could build housing for FHBs.......That could bring the cost of housing down a lot. Takes out the profit margin, for a start
You know, us Kiwi's can't just go build a house on Department of Conservation Land - we'd be arrested.
That's not even mentioning buildings codes and standards. But the truth is we all need shelter.
Kiwi's need houses and there's lots of land in New Zealand, suitable land too. I know it's common place to say this government or that government has "failed" on some various issue - so I won't.
Could it be the government is scared to address the RMA, NIMBY Neighborhoods, Monopolizes, Lending, Councils, etc? Do they just find it all too hard?
We are not asking MPs to actually build anything in the physical, just rules so the game can work.
House building would be a great industry for New Zealand .. worked grate for the Australian economy .. and economies of scale ment the cost of building was greatly reduced.
The true lesson of Monopoly comes at the end. The economic structure led to the 'winner' actually loosing. In the end, said winner was left with nobody able to afford to stay in their hotels - so they too went back in the box.
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