The government will make land available for a new home-buying scheme for 30 first-time and low income buyers, which will see them able to buy or build property, but defer payments on land.
Housing Minister Phil Heatley said buyers would be able to defer final payment on land for up to 10 years under the new Gateway Housing Assistance scheme.
The government has so far made 30 parcels of Crown or Housing New Zealand land available for the scheme, he said.
One parcel would be for one house.
Seventeen of these parcels are on the massive housing development in Prime Minister John Key's electorate in Hobsonville on the former airbase there. The Hobsonville site was designed by the previous Labour Government.
The Hobsonville packages were the only ones to already have houses on them, Heatley said.
The other 13 land packages were spread between Hamilton, Hastings, Gisbourne, Porirua, Palmeston North, Ashburton and Dunedin.
All 30 were currently zoned as residential land.
The parcels were firstly being offered to community housing organisations, such as Habitat For Humanity, who would then find people to buy them, Heatley said.
After the ten years, the organisations would have to pay the government out for the land.
The government would asses how successful the scheme was before making more land available.
A question and answer sheet (see below) sent out by Heatley's office said there would be two types of interest paid on the land purchases.
The first is a 3% annual fixed interest rate which is capitalised. The annual interest will only apply on the principal amount of the loan.
The second is interest that will kick in after five years of the scheme. This will need to be paid regularly, similar to a home loan. In the sixth and seventh years, interest will be charged at 1%; the eighth and ninth years at 3%; and the tenth year at 5%.
After ten years purchasers will need to start making repayments on the principal amount, which could be added to their home loan.
"Generally, it is expected that clients will talk to their lender and ask to refinance the Gateway cost into their home loan."
(Update 2 includes more Heatley comments)
The full release from Heatley is below.
Housing Minister Phil Heatley has today launched a new programme which will make it easier for first-time buyers and those on lower incomes to build or purchase their own homes.Gateway Housing Assistance allows purchasers to build or buy a property but defer payment on the land.“It is important the Government provides opportunities for people to move into home ownership. Affordable homes schemes such as Gateway is another way we can assist more people into a home of their own,” says Mr Heatley.“Under Gateway full and final payment for the land can be deferred for up to ten years. This ten year period allows people on lower incomes to concentrate on designing and building, or buying, their homes before they assume the additional burden of paying for the land,” says Mr Heatley.Community housing organisations are being actively targeted for the scheme as they will be able to develop the land and use the favourable capital and interest repayment terms to build even more affordable housing.So far 30 suitable parcels of Crown or Housing New Zealand land have been identified and made available for the scheme.Mr Heatley launched Gateway today in Porirua, where Habitat for Humanity has undertaken to develop two sections in Beauzami Crescent into three, to create affordable housing opportunities.“Gateway will be yet another tool in the affordable housing tool-box. The Government already supports housing affordability through a number of other measures including Kiwisaver First Home Deposit Subsidy and the First Home Withdrawal, Welcome Home Loans, the Housing Innovation Fund and the Tenant Home Ownership Programme.“We have also cut unnecessary bureaucracy and red tape to streamline building processes, which reduces the cost of building for everyone,” says Mr Heatley.
Here is the Q & A form from Heatley's office on the Gateway scheme
Q and A’s Gateway
What is the purpose of Gateway?
To improve access to affordable housing for first-time and low-moderate income home buyers.
How does Gateway work?
Land identified by Housing New Zealand or the Crown as being suitable for the scheme made available for purchase by Community Housing Organisations or first-time or low-income purchasers.
The current market value of the land is established by an independent valuer.
The purchaser contracts to buy the land through Gateway and then arranges to build a home.
The purchaser will need to arrange a loan to cover the cost of the house they wish to build or move into. Purchasers will need to make regular repayments towards the home loan, but won’t have to make payments towards the land for five years.
There are two types of interest on the purchase.
- Fixed rate interest, set at 3 percent per year
- Interest that applies after five years of Gateway
Purchasers pay three-percent-per-year and have it capitalised, which means that purchasers don’t need to pay it back to Housing New Zealand on a regular basis like their home loan. The 3 percent is calculated annually and added to the original Gateway balance.
The second type of interest is designed to progress purchasers to full home ownership without the need for Gateway. Therefore, no interest is payable in the first five years, but in years six and seven interest is charged at one percent of the original Gateway amount, at three percent for years eight and nine, and finally five percent for year ten.
Payment on the Gateway land is deferred for up to ten years. This payment break enables purchasers to get on with designing and constructing their home and gives them a chance to settle into mortgage payments before taking on the additional costs associated with paying for the land.
After 10 years, purchasers need to start making full payments for the Gateway land the house is located on. Generally, it is expected that clients will talk to their lender and ask to refinance the Gateway cost into their home loan.
How many sites are available?
At this time in addition to the three sites identified in Porirua, a further 30 sites will be made available around the country. 17 of these will be at the new Hobsonville site. The Hobsonville sites are two bedroom house and land packages.
Who can apply for a Gateway site and loan?
Community housing organisations who provide low cost home ownership options are being encouraged to apply.
Individuals, couples or households, who are either first-time or low-moderate income purchasers with incomes of, less than $100,000 for one or two people, or less than $140,000 for three or more people can also apply provided:
- They are NZ citizens or permanent residents with indefinite returning visa
- They are 18 years of age or over
- They are purchasing their first home or are previous home owners who are in the same financial position as a first time buyer
- They are able to secure a home loan to build or buy a house on the Gateway land
- They must agree to live in the house for the duration of the Gateway assistance (10 years)
- They have at least 10% of the house construction/purchase costs as a deposit
- They would not normally be able to afford the cost of the land and property together at the same time
- They have realisable assets totalling less than 20 percent of the average house price
How do people apply?
Housing New Zealand officials are talking to community housing organisations in areas where land is currently available to offer them the opportunity to take up Gateway.
Once that process is complete, any remaining land will be offered to individuals via Housing New Zealand’s website: www.hnzc.co.nz/gateway, or individuals can register to find out via email: email@example.com