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NZ’s housing crisis has not eased. And it’s going to get worse.
Opinion piece by Dominic Foote, CEO, Housing Foundation
Published by the NZ Herald | 14 Mar, 2024
New Zealand’s housing crisis has not eased, and current market conditions are not making it likely to ease for many years. In fact, everything points to it worsening rather than improving over time.
The cost of living is making it harder for hardworking Kiwis to save a deposit, while high interest rates have pushed mortgage payments further out of reach for too many renting households. There is little that I see that will help our hard-working, renting families.
As the Government looks beyond its 100-day plan, now is the time to look at growing well-tested and accepted home ownership solutions. Shared ownership is a proven solution in New Zealand and overseas, and should be playing a larger role here than it traditionally has. It has already helped more than 500 families become homeowners. It is a proven model that breaks the cycle where generations are locked out of home ownership.
Under a shared ownership model, homeowners purchase a majority share in their home, with a community housing provider owning the remaining share, at no cost to the homeowner. A key part of the proposition is that the housing provider will work with you to help you get your finances ready for home ownership and will stay with you as your financial partner until you can buy their share. This usually takes five to seven years.
The housing provider plays the role that many parents currently play for their children. But not all young families are fortunate enough to have a parent who can help.
The beauty of this model is that it is not just a sale and purchase agreement with the first-time homeowner, it also enables the new owners to build their financial management history through mentoring support while they put their financial plan into action.
Home ownership is not just a nice to have. Not only does it provide better financial security, but also security of tenure, leading to better education and health outcomes for homeowners and their whānau. Entering retirement without this sense of security can be limiting and daunting. Research consistently recognises the positive social and economic impact of home ownership. Having a long-term stable home significantly improves wellbeing and mental health. Constant moving from house to house, suburb to suburb and city to city, is an unstable situation for any child to grow up in. Home ownership does foster school certainty, improves educational outcomes, and lowers engagement with the justice system.
New Zealand’s housing environment is unique. Set against a backdrop of low long-term rental supply, uneven housing policy, and an explosion in house price inflation over the past decade, too many New Zealanders have lost, or never had, any hope of owning their home. Later in life, home ownership also provides greater financial security. With an ageing population, the Retirement Commission has expressed its concern about decreasing ownership rates for Kiwis and what it might mean for the future. Currently, superannuation is calculated and distributed on the assumption that pensioners own their own home, without debt. Having outgoing rent payments makes it almost impossible for the average over-65 retiree to live with dignity.
While a strong rental market is undoubtedly important, the end goal for many households is home ownership. The decisions made by the incoming government have the potential to make a positive impact on the generations to come. The opportunity to unlock doors, literally and metaphorically, for hardworking Kiwis, is an important and exciting one. The Housing Foundation has provided this support to New Zealand communities since 2007. We have built more than 1200 homes in Auckland, Christchurch and Northland.
These Kiwis just need help getting onto the housing ladder so they can sustain a mortgage and put in place solid foundations on which to build their lives.
Putting the home deposit to one side, we know that over 150,000 Kiwis currently renting, can service mortgages that enable them to become homeowners.With some innovative thinking, such as the adoption of shared ownership as a viable funded home ownership alternative it’ll be great if, in three years, we could look back on the progress and see more people, not less owning their own homes.