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Sallies call for RBNZ to provide banks with guidance to help curb risk-aversion when it comes to lending against housing with alternative tenures such as progressive & co-ownership

Sallies call for RBNZ to provide banks with guidance to help curb risk-aversion when it comes to lending against housing with alternative tenures such as progressive & co-ownership
Image sourced from pxhere

The Salvation Army wants the Reserve Bank (RBNZ) to make it easier for banks to lend against residential property with alternative tenures.

In a briefing to the Housing Minister, the charity said a “mature” housing market should have at least 20% of its stock comprised of alternative tenures like cooperative ownership, co-ownership, progressive ownership, community land trusts and build-to-rent set-ups.

It said New Zealand would benefit from a market that provided more “choice, amenity and affordability”.

The Salvation Army maintained the country's housing policy advisors had failed to look beyond the “dichotomy of private rental and public rental housing as the sources of housing for those on modest incomes”.

It also noted “the inertia of banks, which habitually lend to owner-occupiers and mum and dad property investors and see little advantage in venturing further”.

The Salvation Army suggested Finance Minister Grant Robertson directs the RBNZ to look at how its prudential banking standards constrain banks from lending against housing with alternative tenures.

Clarity needed

Its call echoes that of the Society for Alternative Housing Developments - a New Zealand advocacy and research group.

Its chairwoman, Greer O’Donnell, said the RBNZ could give banks guidance around how their banking standards could be applied to alternative tenures.

Specifically, private housing cooperative developer, Andrew Body, suggested the RBNZ could write to banks to clarify its definition of a “residential mortgage loan” under its capital adequacy framework.

The argument is that giving banks guidance would make it easier for them to consider mortgage applications and reduce the need for applicants to go through a costly legal process to try to convince their bank they don’t pose undue risk.

O’Donnell made the case ‘community-focussed housing’ can actually be lower risk because developments are conducted with sales secured in advance and future residents involved in the process.

She suggested the Companies Act could also be tweaked to specifically define a new category - ‘community-focussed housing entities’. This would further give legal recognition to alternative tenures.

Bank experts weigh in

Victoria University Associate Professor and bank capital expert, Martien Lubberink, said the issue for banks is accessing collateral.

In other words, banks need to be able to get something if the borrower defaults.

Blogger, Michael Reddell, who formerly held a number of senior positions at the RBNZ, said: “One of the problems with new tenure types is you don’t know how they will hold up in court and you don’t know what the economic characteristics are. So, it is to some extent [a bank] taking a punt.”

He acknowledged a lack of regulatory clarity was what held banks back.

“You can’t force banks to lend, but you can create an environment where it’s a bit easier to put some moral pressure on them and say, ‘Look, this actually feels like a robust and safe proposition for you, subject to reasonable deposit requirements, etc, so why not?’

“At that point, maybe you start getting one player who’s willing to take a bit of risk and look for a growth in market share.”

Reddell supported prodding banks and encouraging innovation.

“But equally I quite like the fact our banks are quite conservative because that’s why they don’t run into troubles,” he said.

Robertson only prepared to ask banks to support the ‘productive economy’ at a high level

Robertson said he hadn’t looked into the issue raised by the Salvation Army and co.

Asked whether he would consider asking the RBNZ to provide banks with guidance to essentially prevent them from taking a narrow view around what’s a “residential mortgage”, he said: “That’s a really interesting question, because obviously the Reserve Bank sees its role as setting the rules rather than making those decisions at the other end.

“What I am prepared to do is continue to talk to retail banks about how they can support the productive economy; how they can support the overall goals we all have for the economy of people getting access to housing.

“There’s an issue there around different roles in the economy and the Reserve Bank is quite clear around their view of that.”

Robertson has butted heads with the RBNZ of late, as contrary to his preference, it has decided not to put conditions on its new Funding for Lending Programme. Both Robertson and his National Party counterpart wanted the RBNZ to require banks to on-lend the low-cost funding they secure from the central bank via the $28 billion scheme to productive parts of the economy.

However, the RBNZ has consistently made the argument that putting conditions on the programme could restrict its uptake, reducing its effectiveness. While the programme looks like a liquidity tool, its purpose is to help banks lower interest rates to boost inflation and employment in line with the RBNZ’s mandate.

The RBNZ has repeatedly said monetary policy is a blunt tool and it’s up to the government to create policies targeted to specific sectors.  

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Personally I am a traditionalist and have looked at nothing but fee simple/ freehold properties as it gives far more security and potentially far fewer headaches.
Heard too many horror stories related to cross lease, leaseholds, body corp, unit titles and rent to own and nothing here to suggest alternatives would be better than fee simple / freehold. Always very skeptical of something new unless well proven over time. .
If some form of shared ownership is intended then a trust with clearly defined provisions suitable to those involved would seems the way to go and seems would meet the needs suggested by the Sallies. Trust ownership seems very common.

Unfortunately limiting their house search to fee simple only is a luxury many FHB can't afford nowadays.

Yes . . . and many retirees today buy into body corporates and - the worst of all arrangements - license to occupy.
All are tenures that are compromises on price and have inherent risk.


I want to ban the term "mum and dad property investors" it is used to hide the truth, that around one sixth of all of our houses are owned by people who have 20 or more of them. That is INSANE!
Everything that encourages home ownership or at the very least leasing that looks more like Europe's or maybe our own commercial tenancies is absolutely vital, if we are to again have an engaged society, people with a sense of community and security, and every day this isn't happening, I get more furious.

What is your source that "one sixth of all of our houses are owned by people who have 20 or more of them"?
I assume that this private ownership you are referring to and excludes government owned properties.

It was a Newstalk ZB article, but I'm struggling to find it again. Thought I'd saved it, but no. I would assume it does not include state owned houses

Thanks very much - greatly appreciated.
A very important bit of research and related article.
Clearly some issues identified regarding actual ownership and nature of properties but the research results are really surprising.
Definitely well worth all people posting on this site regarding property reading.


I truly believe the insecurity of housing is a major contributor to the lack of social cohesion we see now, too many people with very little hope of getting ahead.
All these people worrying about their retirements don't seem to have any concern for those who have little ability to do the same for themselves, in fact, it is those people's retirements the "investors" are stealing. IMHO

Sorry to burst your bubble but Nz has always had a high proportion of tenants and rental stock. That's nothing new. Those are the facts as I am sure you're aware but they don't have the same emotive ring to them as your spin

The articles this week about the lowest home ownership rate since 1951 suggest what do you think...

You know the statistics very very well ... from the article "home ownership peaked at 74% in the 1990s, but by 2018 had dropped to 65%." Not a huge swing. 74 percent peak ownership suggests more than one quarter of rentals in 1990 was the best figure that nz had done. Not flash in the jome ownership stakes ..... EVER

This whole business of the rise of the rentier class began in the mid/late 80s, I was there, working in real estate and I watched first hand as these buyers would come in and purchase from stressed (often) vendors.
There hadn't been anything to compare with this before then, and it was the Roger Douglas era that heralded it. It was the day of the Bob Jones' and Robert Kiyosaki and other "self help" books telling how to get rich on real estate. It just did not really exist in this country before then.
The biggest problem now is how the pool of home ownership is draining from the bottom as the ages of home owners gets higher and higher, we were in our early/mid 20s at first purchase, as were most of our group of friends, and no-one was in what you would think of as high earning jobs, particularly. It was just the norm, it no longer is.
Things need to change, radically, because these %s are only set to grow in favour of investors and that is not good.

"was there, working in real estate and I watched first hand as these buyers would come in and purchase from stressed (often) vendors"

You were take their money though

Tainui owns 480 hectares just in the Ruakura suburb of Hamilton. More elsewhere. What are they doing about getting tribal members into their own homes. The poverty 'cycle' is not sustainable or environmentally friendly

No, actually. I worked in the rural side, only for a short while though, as the 87 crash really stuffed it fit someone fairly new to the game. I got out soon after that never dealt with the vultures, but saw it

I think you live in Hamilton right and have lots of contacts there. You obviously have a sense of justice and a persuasive persistence... don't waste your time just venting, push the tribe to use their land properly not just on commercial developments to get richer and richer while their members are up sh!t alley. Nobody in tainui should be on the bones of their asses generation after generation. Up to you

I'm not Maori either

I didn't assume that you are I apologize if I implied something.

Based on that article, there's the housing crisis right there.


"Everything that encourages home ownership absolutely vital"

I disagree, everything that discourages investment in owning multiple homes is absolutely vital.
Demand is the issue here. You won't fix it with more demand.


Yes HOME ownership, a home is a whole lot different from investment properties, they are not homes, for anyone, just roofs over heads, till the landlord gives you notice.

I own multiple rentals. They were derelict when I bought them and I spend in average $80k-150k and 4-6 months on restoration. I invest for cashflow and it's how I make it work. Not every property investor is at auctions competing with FHBs and losing money year on year.

Good to hear.

I'm confident that in a world with fewer incentives to invest in property, there will still be people investing in property, and doing 'good business' like investing in making it more livable, will still be a good business.

Investing in and improving the housing stock, well done.

Yes but the problem with that is that when everyone does it, the cheaper end of the market disappears and everything else shuffles up in price.

Re the FLP my understanding is that there has been little uptake by banks so far.
May be not surprising as I read Tony Alexander (yeah, blah, yeah) comments today that banks have an additional $10bn in deposits despite many depositors moving term deposits into assets such as housing and equities.
Agree totally with Roberstson that FLP should be targeted; current rate of increase in house prices is unsustainable and poses risk of a correction (however I do see prices due to LVRs and affordability slowing increases and likely flattish).

Yes, the FLP has only been available since the start of the week and hasn't been used at all yet. 

At 0.25% borrowing cost it won't be long before the banks start making moves. I have already left a message with my bank letting them know it's time to trim their rates or I am walking.

I've heard the same - I'm hearing that banks are feeling like their bank margins are now in a good position and are reluctant to lower rates any further so are avoiding taking the FLP as a result
I'm also hearing that the 4 big banks are concerned the housing market is overheating and many investors may have paid too much relative to the rents they will receive (especially with low immigration and no sign of new overseas students for at least another year) they fear there may be anoversupply of rentals with new developments completing in the next six months.This is why the banks have been enthusiastic not to wait for the RBNZ to reimpose LVR's- they are highly concerned that investors may default and will want buffer if they need to force sales.

Personally, I can't see the banks having any appetite to lend for anything other than traditional housing. If it goes wrong they can sell the prope however, we do not need to invent the wheel here. Look to Europe and see how they have built multi family units. The US also has lots of these types of buildings too which are owned by very wealthy families or multi rich investor groups.

Yup ANZ just bulked at a small loan for a NZ start up going gang busters and huge growth booked in. Unless it a house loan they are just bored and could not care less. Looking forward to next years negative rates.

Get an angel investor maybe

Alternate tenure: You will own nothing and you will be happy!

Worthwhile models to pursue in the longer term (i.e., assuming these would be design/build projects) but that doesn't provide immediate rent relief - which is needed now.


In the context it is being used, it is admitting defeat.

It's being chosen under the guise of 'that's how we like to live, ' but it really is about 'that's all we can afford.

But since they are on that track, they could also look about how you title out single rooms in a house, even beds for use as 'hot bunking.' etc.

The irony is, in NZ you pay a lot more to own part of a house than people in jurisdictions that care about their people, do to own the whole house.

This new bank idea is just following the trend of paying more and getting less.

Banks are correct and have pointed this out on multiple occasions, unfortunately New Zealand does not have the legal framework to support development under more advanced ownership scenarios. It's a huge oversight that shows how little politicians understand the housing market.

Yep it’s a massive oversight, get some informed bods together in a room for a day and this could be done. It’s amazing how, as a nation, we can be very creative about some things and bizarrely timid about others.

RBNZ intervention.....

RBNZ = Promiting and Supporting Ponzi = Only solution = Only Real Economy


"Victoria University Associate Professor and bank capital expert, Martien Lubberink, said the issue for banks is accessing collateral. In other words, banks need to be able to get something if the borrower defaults."

This is part of the problem. Lending is tilted towards residential lending overall and away from productive business lending.

It is absolutely absurd that recourse mortgages exist & banks can chase you for the rest of your life for the debt.

Recourse mortgages should be banned.