Progressives canvassing on housing
3 December 2004
Hon Jim Anderton MP, Progressive Leader
Progressives canvassing on housing
policy starts this weekend
Progressive leader Jim Anderton visited the Hutt motorway site of one of the Progressive billboards on housing today, the day before the Progressives start door to door campaigning on their housing policy.
"The Progressives are running a profile raising campaign on our key policy initiatives so people understand we are pro-business with a social conscience.
"In order to fund our social policies we need economic growth. By cutting the company tax rate we can get businesses to reinvest their money into research and development, skills training and technology.
"By supporting economic growth, we can then provide further assistance for New Zealand families on low incomes by helping them into their first home. We can also offer students with loan debt incentives to stay home and work here. The Progressives are also campaigning to lift the drinking age because the research shows us this is the most important part of a package to address the youth binge drinking problem.
"Tomorrow, canvassers in Auckland, Wellington and Christchurch will be talking to people about our housing policy, which offers a package of options to help young families into their first home," Jim Anderton said.
Progressive housing policy
Progressive policy initiative on helping low income families into their first home
Something to come home to
Families will be able to capitalise Family Support to create a deposit for their own home
Home ownership has become a dream rather than a reality for a large number of people on lower incomes.
Progressive wants to help low income families to buy their first home, bringing them financial security and a sense of belonging in their community.
There's nothing worse than a young family having to move every time their landlord wants to sell up. It is not only an added expense, but children's lives are disrupted and their health and education suffer. It is our intention to reduce this disruption by helping young families into their first home.
The biggest barrier for low income families in buying their own home is getting the deposit together.
Progressive will let families capitalise their family financial support payments (including Family Support, Family Tax Credit and In-Work Payment) for the first child for a period of 6 years (or more where necessary), to finance a deposit. This scheme would operate from the 1st of April 2007 when the full 'Working For Families Package' is implemented, so that families are able to afford the capitalisation scheme.
In general, families will simply be accessing their family financial support payments earlier than they would otherwise. The usual period of capitalisation has been set at 6 years in order to avoid the problem of people capitalising and then because their incomes increase, becoming ineligible for family income assistance. There would need to be some flexibility and discretion built into the scheme to allow for house price differences in regions throughout New Zealand. It is not the answer for everyone because some families will not be able to afford to live without their weekly family financial support payments, but it will be very helpful for many families, struggling to save their deposit.
Some families, for example, pay more in rent payments than they would on a mortgage. These families will get the double benefit of buying their own home and having more cash for their weekly living expenses.
Progressive is also considering a number of other options for those who may not be able to afford to capitalise their family financial support. For these people, 'rent to buy', no deposit mortgages, and longer term mortgages will be considered.
Family financial support gains in the 'Working for Families' package
Almost all families earning under $45,000 a year and many families earning between $45,000 and $75,000 a year currently receive family financial support. The amount received depends on family income and the number of children. Families with more children or lower incomes receive higher payments. This sort of support is standard in the OECD, and until recently (due to the Labour Progressive government's 'Working for Families' package'), New Zealand provided much less than other OECD countries in support for families.
The biggest payment is for the first child, and lower increments are added for subsequent children. Increased payments from the Working for Families Package have started to be introduced. From April 1st 2005, a family on an income of less than $40,000 receives an extra $25 a week for the first child under 16, but by April 2007 this will be increased to $104 a week. Payments for subsequent children (under 12) will also be lifted, but the Progressive scheme only capitalises the first child payment, leaving funding for further children to continue.
How the Progressive capitalisation system would work
Progressive will allow families to capitalise their financial support payments in order to save a deposit for a house. In the first instance, capitalisation will be over 6 years of family financial support payments for the first child.
The 6 year period is important in three ways. a. In 2007, a 6 year capitalisation on first child payments would provide enough money for a deposit on a $200,000 house. b. Many New Zealand families move in and out of lower incomes, rather than stay there for long periods of time. The shorter period reduces the amount of time that is capitalised, when the family may otherwise be ineligible for financial support. c. The lower the income a family is on, the more important it is to lift their weekly cash flow. By keeping the capitalisation period down, the family income is lifted more quickly again after the 6 years.
There would need to be some flexibility and discretion build into the scheme to allow for house price differences in regions throughout New Zealand.
Some families will be better off paying a mortgage than paying rent. Other families may be a little worse off, but choose to own their own home to gain financial security and to settle into a community without the threat of having to move on when a landlord sells the house or increases the rent. Bringing this scheme in after the 2007 adjustments to family financial support means that families should be better off than they were before the financial support increase of 2007, even if their mortgage is higher than their rent.
A family on $35,000 in 2007 will receive $104 a week for their first child.
They can capitalise 4 years of family financial support to get a deposit of $21,632.
With a 10 per cent deposit, this means they can buy a house for $216,320 and get a mortgage of $194,688.
This option uses a 30 year mortgage at 7.25 per cent, resulting in weekly repayments of $277.
A family on $50,000 in 2007 will receive $69 per week for their first child.
They can capitalise 6 years of family financial support to get a deposit of $21,528.
With a 10 per cent deposit, this means they can buy a house for $215,280 and get a mortgage of $193,752.
This option uses a 30 year mortgage at 7.25 per cent, resulting in weekly repayments of $305.
Ball park cost
Because of the wide range of family income possibilities and various entitlements under the new Working for Families package, it is difficult to judge how many young families will want to utilise the capitalisation scheme.
However, the government would not have to pay Family financial support for those families which take up the capitalisation option over the next 5 years after initial payment, so initial capital costs would be offset. New families would, of course, come in to the scheme every year.
Further options for low income houses being considered by Progressive
The Progressive Party is also looking further options for home ownership including: - 'Rent to Buy' state housing, - longer term mortgages, - a Guaranteed Mortgage Insurance Scheme, similar to Kiwibank's current pilot, - increasing the supply of state houses.