KiwiBuild has not been a first-home buyers' scheme since mid-2020.
A just-released Cabinet paper from March highlights the Government temporarily broadened the eligibility of the scheme in July 2020 more than it let on at the time.
It enabled current or former homeowners to buy a KiwiBuild home provided they have no “legal or beneficial interest” in a home when they settle on the KiwiBuild home.
So first-home buyers have been competing against owner-occupiers for a limited number of “affordable” KiwiBuild homes.
Because price caps on KiwiBuild homes haven’t been lifted as house prices have soared, KiwiBuild homes can be tens, if not hundreds of thousands of dollars cheaper than comparable properties on the open market.
KiwiBuild price caps range from $500,000 to $650,000 depending on the size and location of properties.
Demand for these homes is high. In some instances, people can only buy a KiwiBuild property if their name is drawn from a ballot.
However, a spokesperson for the Ministry of Housing and Urban Development told interest.co.nz only 18 of the 833 KiwiBuild houses sold between August 2020 and March 2021 went to people who owned a home.
The spokesperson said KiwiBuild remains “primarily targeted towards first-home buyers”.
Govt prepared for the worst
A Cabinet paper from July 2020 (released in October 2020) explains the Government temporarily broadened the eligibility criteria because it was worried uncertainty caused by COVID-19 would derail much-needed house building.
It didn’t want a downturn to put developers off building.
The idea behind KiwiBuild is that the Government underwrites a portion of houses that meet the KiwiBuild criteria in a development. This then makes it easier for developers to secure finance, all the while encouraging them to build more affordable houses.
The Government was so worried in July 2020 that house building would stall, it allocated $350 million towards underwriting houses at risk of not getting off the ground due to COVID-19 - beyond KiwiBuild.
However, it never followed through with using this ‘Residential Development Response Fund’ because the market recovered quickly. The Reserve Bank has also provided banks with ample liquidity to support lending.
Govt to review status quo mid-year
Housing Minister Megan Woods, in the July 2020 Cabinet paper, said the KiwiBuild changes would be reviewed in six months’ time.
Six months have gone by. The eligibility criteria on the KiwiBuild website says current or former owner-occupiers are eligible.
Woods is still considering the impact of changes made to KiwiBuild in July 2020 and will report back to Cabinet in the middle of the year.
To be eligible for a KiwiBuild home, a single person has to earn below $120,000 a year and a couple below $180,000.
To avoid KiwiBuild homes being used for speculation, buyers of properties with two or more bedrooms have to live in the house for at least three years.
A caveat over the property could see the Government prevent them selling within this period.
Alternatively, if they sell without the Government’s permission, they could have to repay 30% of any capital gain - potentially on top of paying income tax under the bright-line test if they rent the property out (which they could also be penalised for).
11 Comments
This seems like the kind of change to a flagship policy that should have been public before the election, not almost a year after it was made, and I see the prevailing attitude towards set deadlines has not change.
They're never going to right this ship. The idea is just to look good at the helm for a while and make sure you get off before it sinks.
Maybe so, but I don't see the opposition offering any policies or ability to do a better job in any respect.
At the very least, National would have never removed mortgage interest expenses from property investors, which is the single biggest change Labour has made that is likely to impact the housing market; although exactly how it changes things remains to be seen.
It seems you accept that the present Government is doing a poor job.
But the how you rationalise that away by comparing it to an alternative imaginary Government is pretty amazing.
We have one Government at a time.
How do you compare that to an imaginary Government not in power lead by the opposition?
How do you know what an imaginary Government would or wouldn't do?.
Signs that the Government bumbles its way through the housing crisis with yet another knee-jerk reaction.
No coordinated plan to address the multitude of issues - affordability, homelessness, accommodation supplements, a generation of motel children, supply issues . . .
Those “simple knee-jerk throw money at it reactions” often doesn’t solve the problem and usually compounds others.
The wider housing crisis is going to be around for some time yet.
Between August 2020 and March 2021, when house price increases were rampant, the Government allowed speculators who already own homes to purchase KiwiBuild properties and rent them out.
Sure there are penalties and such, but the capital gains over that period were large.
Even after paying back the 30%, and the income tax on the sales profit, and any penalties, that speculator would still be raking it in, while they have blocked a FHB from buying an affordable first home.
Utter nonsense. Made worse because the Government haven't repealed that change, even though it is quite obviously not needed. Must be a few MP's, or their friends, buying up KiwiBuild properties for personal gain.
"However, a spokesperson for the Ministry of Housing and Urban Development told interest.co.nz only 18 of the 833 KiwiBuild houses sold between August 2020 and March 2021 went to people who owned a home."
"Six months have gone by. The eligibility criteria on the KiwiBuild website says current or former owner-occupiers are eligible."
"To avoid KiwiBuild homes being used for speculation, buyers of properties with two or more bedrooms have to live in the house for at least three years.
A caveat over the property could see the Government prevent them selling within this period.
Alternatively, if they sell without the Government’s permission, they could have to repay 30% of any capital gain - potentially on top of paying income tax under the bright-line test if they rent the property out (which they could also be penalised for)."
So what's to stop a residential housing speculator from buying a KiwiBuild property and then selling it within 3 years? If it's having to repay 30% of the capital gains, and the income tax on the profits of the sale due to the bright line test, and some other penalties, they might very well consider that a reasonable price to pay, hence what I said was valid.
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