The tweaks Housing Minister Megan Woods is making to KiwiBuild are largely aimed at preventing a repeat of the scenario the Government now faces where it’s spending $207 million buying unsold KiwiBuild houses.
Woods on Wednesday said the Government was going to buy 461 KiwiBuild homes in Wanaka, Canterbury, and Te Kauwhata (in the Waikato) that weren’t selling or weren’t expected to sell.
She didn’t expect the Government to take a “haircut” as it on-sold these to regular buyers.
While relatively minor, the changes being made to KiwiBuild are aimed at preventing taxpayers being left out of pocket.
Firstly, the Government is reducing what it will pay developers if they can’t sell their KiwiBuild houses.
Speaking to interest.co.nz, Woods said the extent to which the underwrite, or government backstop, would be reduced would vary between agreements.
“What I can give you an indication of is that it [the underwrite] won’t be 100%,” she said.
Pressed on whether it would be 50%, 70%, etc, Woods said: “It won’t go as low as 50%. I don’t think you’d see a developer that will be accepting an underwrite for less than what they’re building it.”
Woods believed removing the 100,000-house target would prevent the Government from underwriting basically any development it could get its hands on to get runs on the scoreboard.
She conceded the Government mucked up in this regard and KiwiBuild houses ended up being built in areas where there wasn't demand.
While developers are set to shoulder an unspecified amount of extra risk to taxpayers’ benefit, Woods said tweaks made to broaden KiwiBuild eligibility should give them confidence demand was being bolstered.
The tweaks, detailed in this story, will make it easier for people who have owned homes in the past to qualify for KiwiBuild and enable owners of one-bedroom studios to sell up within a year rather than three years.
Those who qualify for government-backed mortgages will also only need a 5%, rather than a 10% deposit, and first home buyers who qualify for government grants and want to team up with others to buy property, won’t have their grants capped.
Looking ahead Woods expects a larger portion of KiwiBuild houses to come from government-led developments than is currently the case, where the bulk of building is coming from private developments underwritten by the Government.
She wouldn’t detail how this weighting would change.
Role of organisations that already provide progressive home ownerships schemes unknown
As for the progressive home ownership schemes the Government committed to introducing, Woods said she expected rent-to-buy and shared equity schemes to cater to between 2,500 and 4,000 households over four years depending on how they are designed.
She was vague on how community organisations that already provide these schemes would be brought into the fold, but said the Government planned to scale up work already underway.
Habitat for Humanity, for example, has helped more than 500 families into home ownership through its rent-to-buy scheme.
“This a quantum shift,” Woods said.
“[Community housing organisations are] really excited about the fact that we want to get into this space and we want to work with them to put the final design in place, because these are people who are successful in doing this. They know how to do this…
“We know we will have a strong relationship with those who have experience in this space.”
Not for profit organisations as well as property developers have been urging the Government not to crowd them out.
Woods expects a progressive home-ownership programme to be up and running next year.
She was coy when asked whether house prices still needed to fall, but said the market was starting to respond to tweaks made by the Government.
For more on these changes, see this story.