Progressive Home Ownership

Progressive home ownership enables a family to partner with a provider to help them become homeowners. It can take several forms, including:   

• Shared equity or ownership, where a household owns part of the home and a third party owns the rest. Over time the household buys back the portion of the home from the third party (e.g. housing provider or the Crown).  
• Rent to Buy, where the provider purchases a house outright and a household rents that home from the provider, possibly at below market rates to enable them to save a deposit. Alternatively, a standard market rent could be charged with the provider setting aside a portion of that rent as a deposit on behalf of the homeowner. The household may have the right to purchase the home either outright or through a shared equity scheme. 
• Leasehold, where a provider sells a home to a household but retains ownership of the land beneath it. The exclusion of land from the purchase lowers the deposit and servicing cost for the homeowner. The homeowner may be required to pay a ground rent to the landowner for ongoing use of the land. In some cases, homeowners may have the right to purchase the land from the provider at a later date, once the homeowners have paid down some of their debt and are better able to afford it. 

As house prices have increased, many families who could once have purchased a home have been priced out of home ownership. Families who can service some but not all of a mortgage are more likely to be families with children, Māori, and Pacific peoples. Given the gap between house prices and what is affordable to these families, many will not be in a position to purchase a home in the future. Progressive homeownership schemes can help these families by sharing the cost of a mortgage and addressing the deposit barrier.  

These innovative arrangements are already offered in small numbers through community housing providers. Building a role for Government in their delivery, and supporting those that provide them to scale up and expand the number of people they can help, is a way to increase the number of New Zealanders able to own their own homes and to build the country’s housing stock.

The Progressive Home Ownership Fund aims to help:

• lower to median income families who are unlikely to buy a home without a reasonable level of financial and non-financial support, and 
• at or above median income families who cannot get a large enough deposit together to buy a home due to high rents and fast-growing house prices, and/or have insufficient income to service a low deposit mortgage at current house prices. 

The Fund sits alongside our other key housing programmes to help ensure every New Zealander has a safe, warm, dry home to call their own. It will be an important tool to assist some people into home ownership who otherwise would not be able to buy a home. The Fund is part of the government’s comprehensive housing programme, which includes working to:

• prevent and reduce homelessness and reduce reliance on motels as emergency accommodation. Funding provided through Budget 2019 will expand and strengthen the Housing First programme and help to fund and maintain over 2,800 transitional housing places throughout New Zealand
• make life better for renters, by passing the Healthy Homes Guarantee Act 2017. We have also banned letting fees, and our reforms of the Residential Tenancies Act are underway
• increase the stock of public houses owned by Kāinga Ora and community housing providers. Through Budget 2018, we funded the delivery of 6,400 new public housing places, of which 2,178 were delivered in 2018/19.

The Government has also improved incomes for low- and middle-income families with children through the Families Package in 2018. The Families Package increased the Accommodation Supplement, providing around 135,000 households with an extra $35 per week on average to help pay for their housing related costs.

The criteria for funding includes:

• applicants must be over the age of 18,
• applicants must not currently own any property in New Zealand or overseas,
• applicants must be a New Zealand Citizen, Permanent Resident, or Resident Visa Holder who is 'ordinarily resident in New Zealand',
• applicants must have a household income of under $130,000 per year ¹, and
• applicants need to be first home buyers or ‘second chancers’ (as defined in the eligibility criteria for KiwiBuild).

^{1  The income cap for assistance from the Fund is set at $130,000 per year, with some flexibility for multi-generational households. However, progressive home providers funded through Phase 1 are able to use their existing processes for selecting households within this income cap, as this is an essential part of the success of providers’ schemes. Furthermore, in retaining flexibility for who they select, we expect that households assisted are from providers’ existing waiting lists that are ready for a progressive home ownership scheme.}

We expect between 1,500 and 4,000 households will be helped into home ownership through the Fund. The number will depend on the amount of money loaned to each recipient and how quickly they are able to pay it back.

The Progressive Home Ownership Fund has a specific aim to address affordability issues for Māori, Pacific peoples, and families with children.  

Officials are working with iwi and Māori providers and organisations to ensure that the Fund can deliver better home ownership outcomes. This includes looking at:    

• how progressive home ownership schemes can be accessible to Māori (including in rural areas and on Māori land), and     
• how Māori providers (existing or emerging) are able to scale up.  

The Government has made $400 million available for the delivery of Progressive Home Ownership schemes. Funding is also available for providers to provide households with non-financial support, such as financial capability services.

Yes, funding needs to be returned to the Crown.

Phase 1 of the Fund has started with community housing providers already experienced in delivering progressive homeownership schemes. We expect funding will be available to a wider panel of providers early next year.

While Phase 1 is significant, with a sizeable amount of funding available through repayable loans, the full Fund will have a much bigger scale. A provider that is not involved in Phase 1 may (if eligible) still be engaged for the full Fund. HUD will share lessons from Phase 1 with all providers so there is no first mover advantage.

HUD is still designing the Progressive Home Ownership Fund that will be available direct to households. We expect that it will be available in early 2021 and will be led by Kāinga Ora.

No. While the KiwiBuy proposal and the Progressive Home Ownership Fund share an objective of scaling up provision of Progressive Home Ownership schemes by existing providers, the Fund will also provide new pathways to access such schemes and support a wider range of households into homes than the KiwiBuy proposal.

We have modelled the financial outcomes for the scheme on a number of assumptions such as interest rates, regional prices, capital value increase, target group characteristics/incomes, and exit paths. We have also undertaken initial actuarial modelling and sensitivity testing. These will be refined as more data becomes available through phase one.