Progressive Home Ownership
As house prices have increased, families who would once have bought a home have been priced out of home ownership.
These are families who, for example, can afford mortgage payments but are constantly chasing the market in terms of saving a deposit, or families who can get a small deposit together but are not able to afford the ongoing costs of a mortgage at current house prices.
The Government's $400 million Progressive Home Ownership Fund will help between 1,500 and 4,000 New Zealand families buy their own homes. The Fund will enable low to median income households partner with a progressive home ownership provider to access shared ownership, rent to buy, or leasehold arrangements to step into home ownership.
The Fund has a specific aim to address housing affordability issues for three priority groups: Māori, Pacific peoples, and families with children. The Fund will focus on places in New Zealand where housing affordability issues are most severe and where progressive home ownership can best help to address this.
Eligible households will be able to access the Fund through one of two approaches:
Low to median-income families can access the Fund through progressive home ownership providers, who will support these families into home ownership. Under this approach, there will also be a dedicated iwi and Māori pathway, with a specific focus on better outcomes for Māori. Further support through this approach will be available later this year.
Households at or above median incomes will be able to access progressive home ownership arrangements from a provider or directly from government. The government scheme will be available in early 2021.
Phase 1 of the Fund
We are taking a staged approach to the Fund and starting with initial funding of $45 million to support New Zealand families buy their own homes.
To deliver Phase 1, we are working with well-established housing providers with existing progressive home ownership products. These providers are experienced and have the scale, size, and access to developments needed to operate more quickly.
The first two providers contracted to deliver Phase 1 of the Fund are NZ Housing Foundation and Queenstown Lakes Community Housing Trust. Together they will help around 100 low to median income families step into home ownership in Auckland and Queenstown.
These providers are already working with families to help get them prepared to be home owners. We expect to see the first group of families start progressing into home ownership in November this year.
More Phase 1 providers and projects for other areas of the country will soon be announced.
Later this year, funding will be available to a wider group of providers covering a broader range of locations.
From early 2021 households can access the direct scheme from Kāinga Ora – Home and Communities website.
Family helped into home ownership
The video below featuring Tony and Tonya Seiuli shows how the Progressive Home Ownership Fund is already impacting the life of a family as they partner with the NZ Housing Foundation to become home owners.
Tony: The best thing about owning our own home is having a place to call home. Having somewhere where our children can always come back to when they grow up and they decide to have their own children.
Tonya: If we were to go and rent again we would just be starting all over again. We've moved out of so many properties because they've been sold and had to restart, restart. Over and over again.
Tony: It's very difficult to buy a house. In any area, in and around where we were brought up. So we're from Manukau and in this area here, Flatbush it's just way too expensive.
Tonya: Since we've been together we've rented four different houses and we've never actually settled and been stable in a house. It's always been packing up and moving packing up and moving. I've been really worried because every time you move we've had to change our daughter's school. She's never got the stability that she should get in her education.
Tony: So do you guys know where your bedroom is going to be? I think your room is going to be up the top.
Child: No my room is right here.
Tonya: Ah that's the garage.
Tony: Owning the house for us is amazing. Owning a house in this area with the schools that are available to our children is just what we've dreamed about and it's something for them for their future and definitely an investment for us as well in the future.
We couldn't have bought a house without this fund available.
For more information
We have listed some Frequently Asked Questions about the Fund - please see the section below.
If you live in Queenstown and you’re interested in accessing the Fund, please contact the Queenstown Lakes Community Housing Trust on 03 450 1702.
If you would like further information about the Government’s Progressive Home Ownership Fund, please email info@HUD.govt.nz.
Frequently Asked Questions
What is 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.
Why is the Government funding the Progressive Home Ownership Fund?
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.
Who is the Progressive Home Ownership Fund going to help?
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.
Who is eligible for funding?
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
- applicants need to be first home buyers or ‘second chancers’ (as defined in the eligibility criteria for KiwiBuild), and
- applicants will need to be able to secure a commercial mortgage (i.e. good credit histories, minimal debt), and have saved some amount of deposit.
How many people will the Fund help?
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.
Will the Fund help more Māori into home ownership?
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.
Why is the Government prioritising Auckland and Queenstown?
The first two confirmed providers are for housing projects in Auckland and Queenstown, both areas with significant housing affordability issues. More Phase 1 providers and projects for other areas of the country will soon be announced.
How much is this going to cost?
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.
Will the government get the $400 million in funding back?
Yes, funding needs to be returned to the Crown.
When will housing providers be able to apply through the Fund?
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 later this 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.
When will the direct government Fund be available?
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.
Is the Progressive Home Ownership Fund the KiwiBuy Coalition scheme?
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.
What information has been used to model the funding?
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.
Published: July 24, 2020