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More help for first-home buyers

Media Statement

Hon Steve Maharey
Minister of Housing

22 August 2005

More help for first-home buyers

A Labour government will provide more help for first home buyers in a third term, Housing Minister Steve Maharey announced today.

"Labour in government will introduce an Equity Share Scheme and increase the number of low-interest loans and grants available through the Housing Innovation Fund," Steve Maharey said. "This will build on the substantial help for first-home buyers already announced in the budget." Steve Maharey said equity share schemes - where government provides a portion of the purchase price as an equity contribution - were an innovative way to help to help low and middle-income households into their first home.

"Both Housing New Zealand and the purchaser will have an equity stake in the home, meaning a first home becomes more affordable for low income families. The purchaser is required to repay Housing New Zealand's share if they sell or move out of the property.

"Equity Share works best in areas where there is high growth in property prices and strong demand for housing. A similar scheme in the UK has been hugely successful in helping families to own their own home."

"The scheme will complement existing home loan assistance such as Welcome Home loans and will work alongside KiwiSaver when it kicks in. It will be especially helpful for households trying to buy in higher priced areas, such as Auckland." The Housing Innovation Fund encourages third sector group and local government to increase their involvement in providing rental housing and home ownership opportunities to low-income earners and those with special needs.

These policies will build on other new initiatives announced in Budget 2005:

- Welcome Home loans will help people who can support a mortgage but can raise little or no deposit. It has been piloted through Kiwibank, and is now being expanded to other lenders to assist up to 8,000 first home buyers a year.

- A one-off deposit subsidy up to $10,000 will be made available to couples who are first home buyers and who both belong to the KiwiSaver governmentsponsored work-based savings scheme. KiwiSaver members will also be able to put their savings and interest towards the price of their new home, and their subsequent KiwiSaver contributions towards their mortgage.

- Home ownership education seminars will be run for up to 5,000 people a year.

First home buyers will be strongly encouraged to take up this opportunity to improve their knowledge of what home ownership involves.

ENDS

Home ownership – supporting the Kiwi dream

LABOUR’S VISION

We believe that owning your own home is an important aspiration for most New Zealanders. We are looking at cost-effective ways of assisting New Zealanders who would otherwise struggle to achieve this important milestone.

We have already put in place a range of initiatives in Budget 2005.

- Our Mortgage Insurance Scheme will help people who can support a mortgage but can raise little or no deposit. It has been piloted through Kiwibank, and is now being expanded to other lenders to assist up to 8000 first home buyers a year.

- A one-off deposit subsidy up to $10,000 will be made available to couples who are first home buyers and who both belong to the KiwiSaver government-sponsored work-based savings scheme. KiwiSaver members will also be able to put their savings and interest towards the price of their new home, and their subsequent KiwiSaver contributions towards their mortgage.

- Home ownership education seminars will be run for up to 5,000 people a year. First home buyers will be strongly encouraged to take up this opportunity to improve their knowledge of what home ownership involves.

We intend to build on these initiatives by putting in place further options for first home buyers, both directly and in partnership with the community. For instance, the Housing Innovation Fund assists community organisations helping low-income earners and those with special needs.

Labour will:

- Expand the grants and low interest loans available through the Housing Innovation Fund, and make sure it is easy to use, with a focus on providing rental housing and home ownership opportunities.

- Develop our own ‘equity share’ scheme where Housing New Zealand Corporation provides a modest equity contribution to help modest income families with buying a home with repayment being required on sale or refinance.

Equity Share - backgrounder

Who will it assist?

Equity share will assist low and middle-income households who find it difficult to save for a deposit and who may not have sufficient income to service a full commercial mortgage. The scheme will complement and support existing home loan assistance such as Welcome Home loans and KiwiSaver. It will allow more households to buy in higher priced areas, such as Auckland, by providing an equity component to allow purchase of a starter home.

How does it work?

Both HNZC and the purchaser will have an equity stake in the home. HNZC provides a portion of the purchase price as an equity contribution. The size of HNZC's equity contribution has yet to be decided but will be at a level that allows target households to buy a starter home.

HNZC's equity contribution allows the purchaser to take out a smaller loan, which reduces the households’ mortgage servicing costs. This means that a starter home for a low-income first home owner becomes affordable.

The purchaser repays HNZC's share if they sell or move out of the property. HNZC will gain or lose value depending on market fluctuations. Consideration will be given to allowing the purchaser to make small payments against HNZC's equity when they are able to gradually reduce HNZC's equity over time.

Equity Share works best in areas where there is high growth in property prices and strong demand for housing.

Support for an Equity Share scheme in New Zealand

The Salvation Army released their comprehensive report "From Housing to Homes" in March 2005 which supported shared equity as one significant way the deposit gap can be bridged.

Housing policy expert and senior Auckland University planning lecturer, Tricia Austin, said in March1 that NZ needed more than one option to help get families and individuals out of the "rental trap" but agreed shared equity is a very good option because it gives people the security of being in their own home but without the full costs.

1 Source NZ Herald, Help for Home buyers likely, 3 March 2005.

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