NZ First is considering a Crown co-investment election policy for first home buyers that Shane Jones says would give FHBs access to mortgage interest rates ‘cheaper than what the Aussie-owned banks are charging’

NZ First is exploring a co-investment model where the Crown would jointly invest in property alongside first-home buyers to address a “thirst for systemic change” in New Zealand’s housing market.

It follows NZ First pitching to delegates at its annual convention and campaign launch over the weekend that the party could support first home ownership for young families; “through targeted housing initiatives, including reduced mortgage interest rates and other affordable home ownership measures.”

The remit, which was approved after being put to a delegate vote, was one of many remits on Sunday that NZ First delegates voted on as the party gears up for the upcoming general election on November 7.

Speaking to Interest.co.nz on Tuesday, NZ First deputy leader Shane Jones said for the remit to have “long-term impact”, NZ First will have to bring home ownership support ideas into its party manifesto.

According to Jones, housing is a focus for the party as it heads into the general election. He described NZ First members as being “desperate for practical examples” on how first-time buyers can get on the housing ladder.

“They are growing more and more apprehensive that we’re going to lose too many young Kiwis out of our country because they'll never own their own home. So, yeah, there's a high level of expectation amongst our members and I think it's fair to say they probably reflect anxieties that are rippling throughout New Zealand,” Jones said.

“There’s a thirst for systemic change.”

A co-investment model

The initiative Jones said the party is currently considering is something NZ First started working on in 2014, while the party was in opposition during the fifth National government.

Jones said between 2014 and 2017, NZ First had looked at how the Crown could act as a joint owner “with qualifying families” who were buying their first home. The party is now reconsidering that idea and looking at how it would work in NZ's current housing environment.

“The Crown has the ability to borrow at a level cheaper than any other entity in New Zealand,” he told Interest.co.nz, describing the idea as a “co-investment model.”

“In practice, how it would work is that within defined areas, if you wanted to facilitate New Zealand families owning a home, then the Crown would own the home with you,” he said.

“And to lessen the burden of the full acquisition cost, qualifying households would become joint owners with the Crown, which over time would either sell down its equity or wait until the house was actually sold and the Crown would take out the portion of the value of the property at the point of disposal.”

Jones said this idea was something NZ First “did toy with” during the sixth Labour Government when NZ First was Labour’s coalition partner.

“But the officials struggled to make it work,” he said, adding that Treasury hadn’t liked the idea at the time because it saddled the Crown’s balance sheet with “a whole host of ownership interests and personal property.”

“And they felt that there was a better way for the Crown to use its balance sheet,” he said.

Jones said NZ First was conscious that if a co-investment model wasn’t well implemented, “it could have the effect of feeding a cost frenzy in relation to housing because the developers would see that the Crown was the guarantor buyer.”

He wouldn’t share the criteria and eligibility range NZ First was considering for the co-investment model idea now, but indicated to Interest.co.nz that the primary focus would still be on families.

Families who already pay “a significant amount of dough on rent” could turn around and “dedicate that dough” to meeting their portion of the costs of their own home, he said.

“That's not to say that's the final word,” he said, adding that the party was still “number crunching” and it was just one of several housing support proposals that NZ First was mulling over as it approached the election.

The Government already provides some financial support for eligible home buyers through Kāinga Ora, the Crown agency that provides rental housing for New Zealanders in need.

The First Home Loan supplied by Kāinga Ora is designed for people who can afford regular mortgage repayments but are finding it difficult to save a 20% deposit. Instead of the standard deposit, eligible buyers can purchase their first home with a 5% deposit, with the loan underwritten by Kāinga Ora.

The agency told Stuff last month that it underwrote $7.033 billion in loans across 13,757 borrowers, with an average loan value of $511,195 as of June. 

ASB, Westpac, Kiwibank, SBS Bank, The Co-operative Bank and some credit unions and building societies are part of this scheme.

‘Followers, not leaders’

While pitching the home ownership remit to delegates on Sunday, NZ First said that its targeted housing initiatives could include “reduced mortgage interest rates.”

However, political parties don’t actually hold the power to change these rates.

Interest rate decisions rest with the banks responsible for setting those rates. How banks set interest rates is influenced by the Reserve Bank (RBNZ), New Zealand’s central bank. 

The RBNZ has statutory independence from the Government and oversees the Official Cash Rate (OCR). The Reserve Bank is charged with using the OCR to maintain inflation in New Zealand within a 1% to 3% target range, with a specific target of 2%. 

When the RBNZ makes changes to the OCR, banks in turn adjust their interest rates. The Reserve Bank raised the OCR from 2.25% to 2.50% at its July Monetary Policy Review (MPR), the first time since May 2023 the RBNZ has increased the OCR. 

Following the July MPR, NZ banks moved to raise some rates. 

“We’re not doing any work at the moment to control interest rates,” Jones told Interest.co.nz. 

But he said through NZ First’s potential co-investment model, eligible first home buyers would be able to secure a more favourable mortgage interest rate because of joint investment from the Crown.

“You’re gaining access to an interest rate that is cheaper than what the Aussie-owned banks are charging,” he said.

New Zealand’s four largest banks – ANZ NZ, ASB, BNZ and Westpac NZ – are all Australian-owned and control 84% of bank lending in NZ.

Asked if he thought banks would be interested in the co-investment model, Jones said banks “continue to throw dough at the housing sector” and described them as “followers, not leaders” when it came to New Zealand housing.

“So I think that any innovative product, they're always going to be interested in it,” he said.

“They will demand, however, if they reduce their interest rates, that the Crown subsidises [them].”