The Government has announced it will axe the First Home Grant and redirect some of the savings to fund more social houses through private providers.
Newshub reported Tuesday night that the grant, which was first established by the National Party in 2010, would be abolished in the Budget next week.
The grant offers first home buyers up to $10,000 for a newly built home, or $5,000 for an existing one, if they earn less than $95,000 individually or $150,000 as a household.
On Wednesday afternoon, Housing Minister Chris Bishop confirmed the First Home Grant would go, saying it was an “expensive and inefficient” way to support first home buyers.
“Evidence shows the grant brings forward the purchase of a first home – but in most cases it does not make a difference to whether someone can buy a home or not”.
He said subsidising demand for houses was not the answer to the housing crisis, which would only be fixed through increasing the supply of houses.
The First Home Loan, which allows buyers to purchase with a lower deposit, will remain, as will the ability for KiwiSaver members to withdraw their balance.
Kāinga Ora will not accept any new applications for First Home Grant but it will continue to process applications it has already received. Approvals and pre-approvals will still be valid for six-months.
Scrapping the grant should save approximately $245 million across the next four years with a “minimal effect” on home ownership rates.
A chunk of those savings will be redirected to fund the creation of 1,500 social housing places with private and community providers.
Bishop said this would help the community housing sector set up a pipeline for their building programmes and scale up their operations.
Kāinga Ora will not be allowed to access this money and will not receive any further funding until the new board has delivered a turnaround plan — intended to halt operating losses.
Former National Party minister Bill English has advised the Coalition Government to redirect more housing funding to community providers and force Kāinga Ora to compete.
Bishop said the community housing sector already provided over 13,000 social houses and had the “capability, expertise, and desire” to grow further.
57 Comments
Bishop talks a lot of sense. Can they please make him the minister of everything.
Tinkering at the edges does not make a great leader. I don't see anything anything more startling from this guy compared to Robbo and Dame Jacinda Kate Laurell Ardern GNZM.
What's more, Bishop has never really achieved anything. Very good student, then a professional life as a 'yes man' and a lobbyist.
We are a nation of mediocrity.
Abolishing first-home-buyer grants and subsidies, and any other indulgences for would-be property investors, is sound government. It is not the business of the state to be using taxpayers' money to help people become property investors. Chris Hipkins is a clown to criticise its abolition.
It is not the business of the state to be using taxpayers' money to help people become property investors.
In that case then I can't wait for someone to tell him about this link: Accommodation Supplement - Work and Income
Gee this National Party don't like young people.
One thing they do like is Ponzi schemes and they are hell-bent on getting it started again.
I really feel for the young people in this country the National party main supporter are the baby boomer and that's all they are interest in looking after.
You can under why the younger generation is leaving in droves.
We are not going anywhere fast under this leadership.
Given this policy was always for the wealthiest and least at risk youth, being largely available to older property investors and not those who have housing need it is of no surprise they are complaining. Just look at how much noise property investors make when a free money jar is closed and funds are restricted to those who actually need support. You would think the sky is falling and not that we actually thought housing homeless families would do more good for society.
The FHB grant was never available to those who suffer housing barriers the most. It was always a vehicle for wealthy, low risk, able adults who would have no trouble getting into housing on their own.
"subsidising demand for houses was not the answer to the housing crisis, which would only be fixed through increasing the supply of houses."
Fair play to him, he is saying some sensible things about housing at the moment. Quite unusual for National. Let's hope he can see through the supply changes.
I'm currently not sure what to think about favouring community providers over KO.
I think it's great. Although on the face of it you get less economies of scale, you also get fewer layers of bureaucracy and a closer connection to the local community than a large central govt entity can provide. These will often be reasonable sized entities like Salvation Army etc and other church groups.
In a lot of cases, the community providers also provide some degree of wraparound care services.
Some issues they should also fix up.
CHPs pay higher interest rates because they are classified as institutional investors (more than 4 houses by RBNZ standards) and pay 50-100poinrs more than residential. Also they don't get the benefit they should do from certainty of 25 years guaranteed rent from Govt. Swing that bat.
CHPs will go buy or rent existing houses and units and use them for social housing. Compare Kainga Ora who will not buy or rent existing houses for social housing - they insist on only buying, building or renting brand new houses. Only the best for beneficiaries you know! CHPs probably provide social housing for half the cost of Kainga Ora these days.
If they have trouble saving 5-10k on top of an already 200k then they are in far more serious trouble, cannot manage investment to save their lives and definitely should not buy a home in the next 2 years.
In reality none of these FHB were in need of the support and they literally did not have a serious need for housing unlike those who the policy was actually meant to support. But hey its ok if our most vulnerable families go homeless while investors who literally could not save less then 5% of the deposit they already have get a leg up on the poor eh.
Gifting a lump sum of government money to purchase anything at all is an unwarranted subsidy and inequitable to all those who are not included. In the old days of State Advances the Family Benefit could be capitalised but it wasn’t a gift. FHBs in this same position should be offered a tax rebate that can be accrued and off set similarly. That way they there is incentive to earn the money.
Why wasn't a gift? If my understanding of capitalizing the Family Benefit is correct, what it effectively meant is that you could get a lump sum of money, from the government, that you could put towards your house deposit. Sounds awfully like the recently deceased FHB subsidy to me (though of course there were different qualifying criteria).
Essentially the Family Benefit was welfare, a leg up, assistance to young families with children in low income brackets. It could thus be spent on anything but the purpose was to help with household essentials, keep the kids clothed, fed and warm. Obvious not all capitalised it towards a house purchase that was just an option, but all families across the relative board got the payment regardless. Whereas the FHB payment is limited to one sole purpose by an arbitrary qualification. Some might perhaps argue that all welfare is a gift but would imagine any worthwhile academic could write quite a large treatise on the ins and outs of that as a subject.
Sucks a bit, as I was factoring this in my deposit, but agree with its removal.
This grant, like other "helping FHB" measures, just fuelled the house prices toward the moon.
Next: Restrict/stop KS withdrawal for house purchase (which was a reckless idea in the first place.)
Cue Hipkins saying the first home grant is crushing FHB dreams of home ownership. What an economically illiterate thing to say. It's small beer in the grand scheme of things. The evidence says it brings a purchase forward a little but doesn't improve chances.
It also adds $10k automatically to house prices, just like rent hikes correlated to when the benefits/pension go up.
From the KO:
You may be able to apply for a First Home Grant if you, or anyone you may be buying a home with:
- .....
- have a deposit that is at least 5% of the purchase price, including the addition of the grant, KiwiSaver withdrawal amount, savings or family gifts supported by a gifting declaration.
- ........
The price of homes and level of debt required is crushing FHB dreams of home ownership. What then are the causes and how do we rectify them?
The idea that having a home is a dream, and not a basic requirement of individual and collective wellbeing is another issue. Where did we inherit that belief from and why are we so resistant to changing it?
- Uncompetitive banks
- Land use restrictions
- Uncompetitive building material market
- One size fits all building standard (more or less)
- Addiction to custom houses meaning things like joinery don't achieve economies of scale
- Historically bad apartment building or regulatory failures mean no-one wants to build up.
- Unbalanced tax incentives
- Low wages/high living costs.
Pick 3 to fix, except 1, 3, 7 or 8, because that is not allowed.
I don't really agree to 5, as joinery has nothing to really to with whether a house is custom designed or not. We already have things like standard sized doors etc. NZ needs an IKEA and other similar companies. We have a lack of competition and many brands are just owned by a single parent. IMO it is worse than Supermarkets, but it is something no one wants to touch as it will be a nightmare to solve.
Building? You mean buying. It will be far cheaper for CHPs to buy or rent places in cheap areas than to build brand new ones. That was the mistake Kainga Ora made. As if gang members and drug addicts deserve to live in brand new houses located in the most expensive areas of cities, while productive tax paying members of society make do with living in run down old ones.
Most of those in social housing are elderly and disabled. Unless you think little old grandmas are running the meth trade from their zimmerframes you are far out of line. But the image of the monty pythons grandma reenactment of famous battles does come to mind with a smile, it is handbag fighting at noon.
Here is a hint clueless one: 98% of homes are inaccessible. Hence they have to literally build more homes to be accessible to a growing elderly population. It costs many times more then a new build to retrofit an older house (think removal of walls, adding a lot more structural supports, resizing and rebuilding all entrance ways, replumbing the entire place for accessible safe bathrooms all while trying to be in step to the existing building,... it is far cheaper just to ship in the frame & parts needed rather then the added removal and disposal costs and a lot less unfortunate surprises and risks then the older buildings have once you start taking them apart)
It was a stupid grant and only helped to push up house price prices. It didn't work for self employed as you needed to put in a % of your wage into Kiwisaver for a minimum period. Social housing is ambulance at the bottom of the cliff stuff. Kiwibuild 2.0 is what we really need, but the building sector needs a complete revamp before than can occur as it is seriously broken.
Here is what really happened to the grant.
It effectively stimulated demand in a restrictive market, meaning that FHB paid more for the house in total than they would have had they not needed the grant.
And within one build cycle house prices increase because of this, by at least the value of the grant, but in reality more than this due to:
1) How much extra demand it generates, and
2) Because they are borrowing and paying back over time, they can leverage this amount by a factor of approx. 4x, so this normally means a minimum increase of $40,000 due to this gift.
And of course, as time goes on the value of the grant is artificially inflated way as it becomes less as a % of the purchase price over time, ironically by the actions of the grant itself.
Don't worry. Come July, house prices are going to fall by at least $5k due to the Brightline reduction bringing a flood of 2-5 year old housing to market (and the brand new ones are going to have to drop prices to match them). FHB will be better off in the long run by having to borrow less to buy a house.
Would it be more than that though, since the amount was applied to the deposit would it then lower the borrowing amount by a proportional amount, e.g a 10k deposit would have allowed $50k more in the amount allowed to be borrowed? Or do you mean the overall effect on the market would be about $10k. Either way it wasn't a great value policy but does suck for those who thought they would be able to use it.
An interesting spinoff of this is that the first home grant was an incentive to consistently contribute to Kiwisaver for the 5 years preceding a first home purchase. With that gone, I wonder if contributions will dip?
Good job on getting rid of this, but to be weighted evenly the other property subsidies would have to also be removed at local, regional and national government level, and replaced by cost recovery.
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