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Govt's 'Gateway' affordable housing scheme scrapped; Funding to go to community organisations; Sections too valuable, Heatley says

Govt's 'Gateway' affordable housing scheme scrapped; Funding to go to community organisations; Sections too valuable, Heatley says

By Alex Tarrant

Low interest rates are helping low income New Zealanders into home ownership, and are one of the reasons the government is scrapping a scheme helping people buy their own homes, Prime Minister John Key says.

Defending the government's decision to scrap its Gateway scheme, Key said it was not the most effective way of helping low income people into home ownership. Housing Minister Phil Heatley has said the government would be looking to fund community housing organisations helping people buy their first homes, instead of running programmes itself.

Falling mortgage rates were a positive story in terms of home ownership, the NZ Herald reported Key saying yesterday.

"So we think the capacity for lower income New Zealanders to own their own home is greatly enhanced by the fact interest rates are lower," he said.

"If you have a look at the average home owner in New Zealand, they are paying about NZ$200 a week less in interest than they were under the previous Labour Government."

'But release of more land would help most'

Last month, the government-appointed Productivity Commission called for the immediate release of land on the fringes of Auckland and Christchurch for housing development, saying this would be the quickest way to alleviate housing affordability problems in the two cities.

The Commission also said poor productivity in the building industry, a concentrated and small-scale materials industry, building regulations, urban planning, the way infrastructure projects were funded, and the government's social housing policy, all needed reform in the quest to make housing in New Zealand more affordable.

Why Gateway is being scrapped

Meanwhile, the government says an affordable housing scheme is being scrapped partly due to low interest rates, and the high value of sections on government-owned land set to be sold off under the scheme.

Housing Minister Phil Heatley has confirmed the Gateway scheme would be closed down, and that the government would instead give money to community housing organisations for them to help first home buyers.

Gateway - launched by the previous Labour government - allowed low-income first home buyers or community housing organisations to defer payment for Crown land during the first ten years of ownership of a home purchased under the scheme. That means for those ten years, home owners would just pay off the mortgage they had on the house on that land.

Gateway land had been made available at the government's Hobsonville Point development in Auckland, in Ashburton, Porirua, Dunedin, and Palmerston North. Interest.co.nz understands just 32 homes have been sold nationwide under the scheme, with 17 of these in Hobsonville.

Cancelled

Speaking on Radio New Zealand Friday morning, Heatley said due to the high value of the Crown-owned land, particularly in Hobsonville, if low cost housing was to be built on this land then the properties would have to be made smaller. He said community housing organisations were able to better provide low cost housing than the government, and that was where funding would be focussed.

“We’re no longer going to do Gateway on Hobsonville, and we’re no longer going to do Gateway around the rest of the country, because we don’t think it’s a very good scheme,” Heatley said.

"We are looking at other affordable housing options, and it’s very difficult because the land’s worth so much," he said in relation to the Hobsonville land.

In part, the decision was made because interest rates had fallen considerably in recent years, and had stayed low, which was benefiting first home buyers. 

“When we first went into government, interest rates were up around nine or ten percent. Now they’re down at five or six percent. And much of the Gateway product was based on the fact that interest rates were very high, so we were giving people an opportunity to pay down the house portion before they paid down the land portion," Heatley said.

“But a wider issue that’s come to light is that we’ve found that community housing organisations and the New Zealand Housing Foundation, Habitat for Humanity, and others, can provide these home ownership or cheap rental schemes much better than we can. So we’re turning our mind to funding them,” he said.

“What we’ve discovered in the last two or three years is that mortgage rates have not only dropped, they’ve stayed plateaued at quite a low level. We are delighted by that, as are most homeowners. But the concept that mortgage rates would drop to six percent and stay there in 2009 wasn’t necessarily the case back then."

Heatley said the government was pleased it was managing the economy in such a way that interest rates were staying low.

Hobsonville

The 3,000-home Hobsonville Point development was the poster child for the Gateway scheme. In 2009, when construction began on the site, Heatley said up to 100 of the first 660 lots developed at Hobsonville would be earmarked as Gateway sites.

However, the NZ Herald reports a Housing New Zealand spokeswoman said the government had never intended to provide more than 17 houses in the development under Gateway, despite Heatley's 2009 comments.

The development is a public-private partnership between Housing New Zealand, Australian with Australian listed company AV Jennings, and local firm Dempsey and Wood on civil works and construction. See more on government housing PPP plans in Gareth Vaughan's piece, Govt eyes public-private partnerships for housing along the lines of a Westpac-led Sydney project.

"When Labour got the [Hobsonville] property into Housing New Zealand in 2002, they didn’t actually put a spade in the ground for six years," Heatley said on Friday morning.

"The reason is, developing that piece of land – it’s so very, very valuable. So what you’ve got is very valuable land, and the difficulty for any developer is, if you put an inexpensive house on a very valuable piece of land, then you can make no profit out of it. So it’s not attractive to them," he said.

“The only way around that is to have very, very small parcels of land – very small sections – so you’re only building small houses on small sections, post-it stamp sections. Families of course don’t want to move into a two-bedroom house."

The government wanted to turn its attention to funding the community housing sector. Heatley made an announcement on Thursday that the government would give over NZ$8 million to the New Zealand Housing Foundation for its first home buyer programme.

“Businesses like New Zealand Housing Foundation, Habitat for Humanity, and a myriad of others, can do a much better job than we can. And we’ve found that we’d rather back them. Not only that, they provide services around it. So what we’re saying is, rather than use taxpayer funds to do something that other organisations can do much better, we’d rather support them.

The question of providing affordable housing question in Hobsonville was still one the government was wrestling with.

"But we’ve found that this Gateway scheme is not the way to do it. It is difficult because it is such very, very valuable land," Heatley said.

"You need to accept that because the land value is so very high, it’s hard to get properties at a decent cost for anyone. Otherwise you end up with a postage-stamp section, and a very cheap house. So we’ve just got to be a bit careful," he said.

What was being sold

Below are the most recent listings on Housing NZ's Gateway pages:

Hobsonville

Application for house and land packages for in the Hobsonville development in Auckland under Gateway Housing Assistance have now closed.

Porirua

191 Sievers Grove, Porirua

  • Single section
  • Certificate of title reference - WN 49B/478
  • Lot 58 EDP 27742
  • Land area 885 square metres
  • Territorial local authority - Porirua City Council
  • Current market value: $72,000. (QV Valuation dated 1 June 2010).

Download the land package information sheet for 191 Sievers Grove (PDF, 262KB).

47 Morere Street, Titahi Bay, Porirua

  • Single section
  • Certificate of title reference - WN50A/344
  • Land Area 689 square metres
  • Tenure - Fee Simple
  • Territorial local authority - Porirua City Council
  • Current Market Value: $124,000. (QV Valuation dated 2 August 2010).

Download the land package information sheet for 47 Morere Street (PDF, 243KB).

Dunedin

72 Aberdeen Road, Dunedin

  • Single level section
  • Certificate of title reference - OT11B/1127
  • Legal description - LOT 5 DP 20114
  • Land area 592 Square Metres
  • Tenure - Freehold
  • Territorial local authority - Dunedin City Council
  • Current market value: $80,000. (Valuation from registered valuer as at 29 July 2010).

Download the land package information sheet for 72 Aberdeen Road (PDF, 191KB)

286 Pine Hill Road, Dunedin

  • Single level section
  • Certificate of title reference - OT9C/41
  • Legal description - LOT 51 DP 6806
  • Land area 661 square metres
  • Tenure - Freehold
  • Territorial local authority - Dunedin City Council
  • Current market value: $75,000. (Valuation from registered valuer as at 29 July 2010).

Download the land package information sheet for 286 Pine Hill Road (PDF, 191KB)

Palmerston North

21 Anderson Street, Hokowhitu, Palmerston North

  • Single level section
  • Certificate of title reference - WN50A/966
  • Legal description - LOT 25 DP 15479
  • Land area 515 square metres
  • Tenure - Freehold
  • Territorial local authority - Palmerston North City Council
  • Current market value - $145,000 (Valuation from registered valuer as at 18 August 2010).

For more details download the land package information sheet for 21 Anderson Street (PDF, 1.3MB).

2 Esk Street, Palmerston North

  • Single corner section
  • Certificate of title reference - WN33B/48
  • Legal description -LOT 4 DP 64363
  • Tenure - Freehold
  • Land Area 850 square metres
  • Territorial local authority - Palmerston North City Council
  • Current Market Value: $85,000. (Valuation from registered valuer as at 17 August 2010).

For more details download the land package information sheet for 2 Esk Street (PDF, 1.4MB).

Ashburton

38 Andrew Street, Ashburton

  • Single level section
  • Certificate of title reference - CB4D/413
  • Legal description - LOT 9 DP 15101
  • Land Area 642 Square Metres
  • Tenure - Freehold
  • Territorial local authority - Ashburton District Council
  • Current market value: $105,000. (Valuation from registered valuer as at 30 July 2010).

Download the land package information sheet for 38 Andrew Street (PDF Document, 218kb).

(Updates with Key and Heatley quotes, what's available)

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10 Comments

"When Labour got the [Hobsonville] property into Housing New Zealand in 2002, they didn’t actually put a spade in the ground for six years," Heatley said on Friday morning.
"The reason is, developing that piece of land – it’s so very, very valuable. So what you’ve got is very valuable land, and the difficulty for any developer is, if you put an inexpensive house on a very valuable piece of land, then you can make no profit out of it. So it’s not attractive to them," he said.
How valuable is it and how did that value come about?  Who exactly is trying to make the money of the land?
Latest GV (July 11) works out at under $50 sqm undeveloped.
http://www.stuff.co.nz/auckland/local-news/western-leader/5387686/Land-deal-done-in-secret
In 2000, 4.3 hectares was only $500k and 5 years later the local council agreed to subdivide and buy back 3 hectares for $7.65M.  This deal went wrong and in 2008 the local council was to buy back the entire site for $15.225M.
Eligibility for Gateway http://www.hnzc.co.nz/rent-buy-or-own/gateway/eligibility-criteria  These appear to have been relaxed/widened somewhat over the past year or so.  Was $80k max for single/couple and 15% deposit.
Paying for Gateway land http://www.hnzc.co.nz/rent-buy-or-own/gateway/paying-for-gateway-land

Excellent forensic analysis:
 
So, in simple terms 4.3 hectares of land which is currently valued @ under $50 per sqm undeveloped is worth $2.150 million when it fact it has supposedly sold for $15.225 million, most recently in 2008? 
 
So the minister is not exaggerating when he claims this is a very valuable plot of land. But seven times it's current value, back in 2008?
 
No wonder the Deputy Mayor was panicking:
Council spokesman Glyn Walters says a confidential agreement has been reached.
"The settlement of all litigation between the council and Mr Lloyd has been reached. But the terms of the settlement are confidential to the parties," Mr Walters says.
Deputy mayor Penny Hulse says the council should be more open with the public.
"We should have a free and frank discussion with the public about what has happened," she says.
"It should be public knowledge.
"As a council we need to be more transparent," Ms Hulse says.
   

Surely Close Up can do much better than this.
Certainly not without Paul Henry.
 

I was so enraged watching that piece of tripe last night I started ranting at the family. I had to stop before my kids called 111. There sat two representatives of the four largest protagonists (a big bank CEO and Alan Bollard were missing) in the current property bubble and Sainsbury tossed up half volleys for them to bat away.
A story on housing affordability and not one piercing question on landbanking by councils, not one on the massive costs and red tape associated with the consent process in Auckland. A simple question like - why does the average new build in Auckland cost in council consents over 10 times the cost of a new build in Gisborne (as a representative provincial centre).
No questions of the government representative regarding resource management costs or process, tax policy favouring housing speculation, banking regulation that favours housing over business.
I despair at the poor understanding of these issues in the NZ Media. Until there is change here I don't think there will be change in the issues. Bernhard does his best but he is a lone voice.
Better go. Kids are looking at me funny again.

Aus's loss NZ's gain. I've had the pleasure of meeting Oliver, nice fellow and NZ has gained a serious advocate for planning reform and housing affordablity

Is there an echo in here?

I had to laugh at the PM's assertion that for people who have been struggling to get into their first home, NOW is finally their chance to jump in..... Okay, so we have people that have been unable to save for a deposit or service a mortgage being encouraged to jump into the market.... fine, right now it's affordable. But what we're at here is a minima, in 2-3 years, interest rates won't stay this low forever, and all our key property market drivers other than new build supply are looking grim.
- Low immigration numbers (net)
- Large glut of people about to retire/downsize/moveout of the family home.
Recipe for disaster for the poor fools.

Just one sentance: I am sick of reading Hugh Pavletich and Christchurch!!

Yep, copious drivel.....but do as I do, point out its demented and defective and move on......if the deludable and desperate follow him, well thats their choice.
regards

Seems 2billion is the tip of the iceberg, post this in one piece as its too had to cut back...

"The unit at the centre of JPMorgan Chase’s $2bn trading loss has built up positions totalling more than $100bn in asset-backed securities and structured products – the complex, risky bonds at the centre of the financial crisis in 2008.
These holdings are in addition to those in credit derivatives which led to the losses and have mired the bank in regulatory investigations and criticism.
The unit, the chief investment office (CIO), has been the biggest buyer of European mortgage-backed bonds and other complex debt securities such as collateralised loan obligations in all markets for three years, more than a dozen senior traders and credit experts have told the Financial Times."
"Among other things, it appears to have taken more than half of the residential mortgage-backed securities issued in Britain over the past three years.
But of course, the fact that these risks are being taken by a too-big-to-fail institution, whose failure would cause a global crisis, which would therefore inevitably be bailed out if it got in big trouble, and which benefits from taxpayer-backed deposit insurance, is no cause for concern. None at all."
http://krugman.blogs.nytimes.com/2012/05/19/no-systemic-issues-here/
So a zero sum game? lets see when JP blows and its a when IMHO, just who pays this debt? why the US voter/tax payer initially....and the rest of the world in-directly....who wins, the hedge funds betting on the other side....and the funny things on 2 levels are of all is the right wingers complain about taxes, yet its taxes that will be paying this and its taxes that will have to go up to pay it (or default on debt or obligations)...but the taxes for the rich who invest in hedge funds wont of course, they deserve every penny....
regards

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Days to the General Election: 35
See Party Policies here. Party Lists here.