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Maryan Street: Affordable housing initiatives

9 May, 2008 Speech

Affordable housing initiatives

Speech by Housing Minister Maryan Street to Local Government New Zealand Zones 5 and 6 in Dunedin.

Thank you for inviting me to Dunedin to participate in your Forum, and discuss affordable housing initiatives and the role of local authorities.

Affordable housing is an extremely hot topic at the moment. It is becoming increasingly difficult to achieve the Kiwi dream of owning your own home, even in the erratic housing market at present.

Home ownership rates have fallen from 74 per cent to 67 per cent between 1991 and 2006. If current trends continue, this rate will fall to about 62 per cent by 2016, a scenario unpalatable to me and a great many other New Zealanders.
There is no quick fix to our affordability problem. Nevertheless, research has established that there is a broad range of steps we can take collectively to tackle the affordability issue. Some of these will have an immediate impact, and are already doing so. Others will take time to have an influence.

I want to outline some of these steps today, but before I do so I want to stress that the responsibility for affordable housing does not rest with the government alone. We all have to work together to come up with sustainable solutions to create healthy, balanced communities, and that includes local government.

I want to take this opportunity to congratulate some among you for recognising this, taking a constructive approach to the problem, and assisting central government in developing its suite of proposed initiatives. Clearly, affordability issues will bite in different communities in different ways, and as a consequence different councils will have different priorities.

I recognise that, and our response to housing affordability needs to be flexible enough to enable us to apply different tools in different places. What works in Southland does not necessarily work in Auckland, and vice versa.
This leads me to one of the government’s affordability initiatives which I would like to discuss today, the Affordable Housing: Enabling Territorial Authorities Bill, which from this point on I shall refer to as the Bill.
I introduced the Bill to the House for its first reading in December last year. You will all be aware that the government drafted this Bill in response to a request from territorial authorities for legislative clarity over their ability to encourage affordable housing.

What is proposed in the Bill is not new – the United Kingdom, Australia, United States and Canada are all using similar tools as those proposed in the Bill, which will allow councils to offer a range of incentives to developers such as density bonuses, in exchange for the provision of affordable housing.
It also prevents the use of covenants on land titles that aim to exclude social and affordable housing. These covenants unfairly discriminate against some of our most vulnerable people, such as older people, children and people who require assisted living for various reasons. The use of such covenants is a small but growing issue.

The Bill does not aim to address building costs. Nor is it the purpose of the Bill to address land supply or land price issues, although it may have a positive effect on these in the future. Instead, the Bill balances the need of the community for affordable housing with developers’ needs for consistent and predictable planning guidelines. It promotes housing choice through ensuring that a range of housing types, tenures and costs are being built in new developments to meet the needs of moderate income households.

Obviously, the definition of affordable housing depends on the market where the housing is located and the size and type of housing. What is affordable in Auckland compared with what is affordable in Invercargill is likely to be quite different.

Consequently, any definition of affordability needs to be regionally specific in order to respond to regional variations in house prices and incomes.
The Affordable Housing Bill seeks to increase the availability of housing for those who live in households with low-to-moderate incomes and have no existing legal or beneficial interests in property. The housing itself must be priced so people can meet their housing and other essential living costs.

The Bill enables territorial authorities to further refine the definition of affordability and target affordable housing to their local housing market.
The problem is, there is a huge diversity in circumstances around the country and one size does not fit all. Because of this, the select committee process is invaluable in capturing all the concerns, and we do have to let that process run its course.

I am aware the select committee received 21 submissions from local councils. Many of the councils support the intent or principle of the Bill, but not the Bill in the current form. All councils recommend changes to the Bill, and I would like to assure you that we are looking closely at your concerns.
According to Local Government New Zealand’s submission, the Bill:

- contains complex and open ended processes that duplicate and complicate existing processes
- contains processes that involve risk and cost to territorial authorities
- contains a number of unclear definitions and approaches
- does not provide the mechanisms territorial authorities need to implement affordable housing policies – by avoiding the necessary link to the Resource Management Act 1991.

Corporation officials will meet with representatives from Local Government New Zealand to discuss LGNZ’s Alternative Bill, where it differs from the Government Bill and where there is common ground.

The select committee will be hearing the last of the oral submissions on the 15 May. They will then present their report to the House on the 10 June.
This Bill is one of a number of tools to address affordable housing. In the meantime there is a number of other initiatives that the Government has to offer.

Housing New Zealand Corporation provides Housing Innovation Fund loans and grants to local authorities and community-based organisations to supply additional housing units, or to modernise or improve existing housing.
This has grown the capacity of councils and community groups to meet the social housing needs of their local communities, and helps meet the goal of expanded social housing options, affordable rents, and good quality housing.
Since the Housing Innovation Fund was established in 2003 the Corporation has invested around $63.99 million, providing 1,201 social housing units. This represents 890 new and modernised units provided by local government, and 311 by community groups (including those yet to be completed). In addition, the Corporation has contributed $2.2 million from internal funding, providing 19 social housing units by community groups

An example closer to home that demonstrates the effectiveness of the Housing Innovation Fund and partnerships, is the work of the Queenstown Lakes District Council.

The council recognises that housing affordability is a serious issue for the economic and social well-being of the district and in 2005, it developed the ‘Housing our People in our Environment’ Strategy.

The strategy, otherwise known as HOPE, set out a range of actions that the council and community should take to address issues of housing affordability.

One of its 32 actions, was to establish a community housing trust.
In 2007, Housing New Zealand Corporation assisted the council in establishing the Queenstown Lakes Community Housing Trust, and then the trust, with support from Housing New Zealand, established a pilot programme called Shared Ownership to help low to medium income earners into long-term affordable housing. Housing New Zealand contributed two million dollars to the pilot programme from its Housing Innovation Fund.

So far ten households have been approved in both Wanaka and Queenstown, with the first couple in Queenstown moving into their new home last month. The success of this scheme bodes well for a scheme that will achieve a similar outcome, called Shared Equity, which I will launch in July.

The shared equity scheme aims to improve home ownership affordability for modest income households living primarily in moderate to high-priced areas, such as Nelson, Christchurch and Queenstown. Similar to the shared ownership pilot in Queenstown, shared equity would see the Crown take equity stakes in properties as a way of lowering the cost to families.

Another initiative for New Zealanders who may not qualify for shared equity is the Welcome Home Loan scheme.

Welcome Home Loan was piloted in 2003 through Kiwibank, and launched nationwide in 2005. The purpose of Welcome Home Loan is to assist borrowers, who sit just outside the lenders' traditional criteria, into their own home.

These are New Zealanders who have the income to support a home loan, but haven't been able to save the required deposit. Welcome Home Loans assist borrowers by removing, or reducing (this depends upon the amount being borrowed), the requirement for a deposit. They do this by removing the risk to the lender of 100% lending.

The uptake in the South Island of Welcome Home Loans has been high. As at March 2008, 3,341 people nationwide had taken up a Welcome Home Loan with a large proportion coming from the South Island, where 1,475 loans were granted. To date 24% of the loans granted nationwide have been paid back in full.
The last initiative of interest is the Kiwisaver first home deposit subsidy. This is administered by Housing New Zealand and will be available from 1 July 2010. It is available for members who have belonged and contributed to KiwiSaver for three years.

The subsidy, is $1,000 for each year of contribution to the scheme, up to a maximum of $5,000 for five years for each member.

To be eligible for the deposit subsidy your income must be less than $100,000 (for one or two people) or $140,000 (for more than two people). Also, you must buy a lower quartile priced home. Housing New Zealand will review and set the lower quartile price caps annually from 2010. At the moment they are set at $400,000 or less in higher-priced areas such as North Shore City, Auckland City and Queenstown Lakes District, and $300,000 or less in the rest of New Zealand. Housing New Zealand is still designing the finer details of the first home deposit subsidy and application process details will be published before 1 July 2010.

As you are probably aware the government is also investigating a range of other potential initiatives and interventions which it believes may play a role in increasing housing affordability levels. Considerable work is going on in a range of agencies in this regard.

Options include expanding the role of the not-for-profit sector in the provision of social housing, which is obviously relevant to a number of councils. If we want more affordable housing options for our citizens and ratepayers strong partnerships between a range of sectors, including developers and local and central government, must be fostered as we all have distinct roles to play. I look forward to working with you all.


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