Broadsides: Help for first-time buyers

Labour MP Jacinda Ardern and National MP Nikki Kaye.

Opinion

Two of Parliament's youngest MPs, Labour's Jacinda Ardern and National's Nikki Kaye, begin a weekly blog for nzherald.co.nz today. We ask them what can be done to make homes more affordable for first-time buyers?

JACINDA ARDERN

I need to start with a personal confession: I am a failed homebuyer.

I'm not sure at what point I earned that title. Was it when I stood at what felt like my twentieth auction and watched the asking price fly past me yet again? Or perhaps that moment when I called a real estate agent to place my life savings on a box with 'charm and potential' only to have the agent awkwardly ask "did you miss out a zero?"

But long before I failed, successive Governments did.

The signs were all there. In the 1990s, half of all 25 to 29 year olds owned a home. By 2006 this had dropped by 17 per cent. There were a couple of contributing factors, and housing affordability is right up there. Around 27 per cent of households are spending more than a third of their income on housing costs - up from 11 per cent just two decades ago.

How did we get to this place? Well for one, there just aren't enough houses, particularly in Auckland where we need to build 27 per day to keep up with demand. Local government and our planning regulations have been left wanting in the face of this growth. Sure, we've squashed in a bit of infill housing, but rather than encourage liveable dense housing, we built a city of tiny and often poor quality apartments with little to no green space to speak of (a forest-green public toilet doesn't count).

It would be unfair not to look to central government too though. Both teams have dabbled around the edges of this issue. Labour made a good start when it was in Government through policies like Welcome Home Loans and Kiwisaver. This superannuation scheme not only gives you a $1000 kick-start, it also allows you to withdraw up to $10,000 towards a deposit on your first home.

The current National Government had a go too. In the last budget, it changed the rules for landlords claiming depreciation against their rental properties. Unfortunately, this just led them to pass on the cost to their tenants; people renting in central Auckland (about 40 per cent of all residents) are now paying on average $20 extra a week. In twitter speak, that policy would earn the hash tag #EpicFail.

It's not too late though. We can turn this ship around and still hang onto our home ownership dreams. It's just going to take a bit of courage.

First, we need to change the fact that, for handful of Kiwis, owning multiple houses is not only a source of income, it's a tool to avoid paying income tax. This has a flow on effect for supply and first homebuyers. We have to address this issue: it's politically hard, but the right thing to do.

Second, we need to build more houses. The Government has a role to play here: they need to start investing in more affordable housing for low income families who are currently squeezed into inhabitable spaces, rather than their current policy of selling what little stock we have.

And finally, we need planning regulations that encourage our cities to grow up, not out and keep in mind that we're housing people and communities, not cattle.

I can accept being a failed homebuyer, but I can't accept that inaction by Government is putting thousands of people who desperately want a decent start and a decent house in the same position.

It's time for some action.

Jacinda Ardern is on Twitter: @jacindaardern

NIKKI KAYE

For many young Kiwis the dream of owning a house seems a long way off.

I was chatting to two young women in my office recently about whether they felt buying a house was within their reach. They said "it is a lot harder for us than it was for our parents when they were starting out." They were even more frank when they went on to say "unless your grandmother passes away leaving you a significant inheritance or you marry a rich spouse, buying a house is pretty difficult for a lot of people."

House prices rose faster than incomes during the 2000s. The average house price is now more than six times the average household's annual disposable income, compared to 1990 when the ratio was closer to just three times. While interest rates have dropped since the early 90s the price of housing has grown at such a rate that buying a home is out of reach for increasing numbers of people. This increase, combined with previously high interest rates (twice what they are now) means it has been more difficult for first time buyers to get a foot on the housing ladder. The fact that the new

Productivity Commission

has been given the task of an affordable housing inquiry demonstrates how high the priority is.

The Government has been addressing the cost of housing on a number of fronts. Our

review of the Building Act

found the system was too expensive and less efficient than it could be. We have reformed the

Resource Management Act

and some of the building rules to help maintain building quality, reduce compliance costs and red tape. These changes will help reduce the cost of building. The Government has also introduced the concept of the

simple house design

that can quickly be approved and built - thereby reducing overall costs. This concept however must be part of a wider cultural change. For a long time our houses have been getting bigger and this drives up costs. While the simple and smaller house will not suit everyone, it is part of the solution.

Another factor that has made it difficult to have affordable housing has been the number of houses taken out of the market due to Leaky Homes. The estimated number of houses affected by Leaky homes could be up to 89,000 houses. Last year the Government stepped up with an estimated $1 billion

financial assistance

package with a potential 25 per cent central government contribution to help people get their leaky homes fixed faster. The Government has also improved products like Welcome Home loans to help first home buyers secure a mortgage.

Nevertheless, in areas like Auckland over the past 20 years we have simply not built enough houses. It is not that we don't have the space, but in the past our Auckland local government system has not enabled us to deliver the number of houses that the Auckland region needs.

I believe the new Auckland Council needs to make affordability housing a higher priority by ensuring that affordable housing is not just in the spatial plan but is at the heart of all policies right across the council like the availability of land, development contributions and resource consents and zoning.

There is not just one single policy that will make buying a first home more affordable. If there was one silver bullet it would have been fired years ago. But if we want the kiwi dream of home ownership to live on, I believe we have to look at costs at every point in the process. This means culture change so that officials at every step consider the impact on home affordability of any proposed policy changes. From design, to consenting and building - and most importantly strong economic settings that keep mortgage rates lower.

Nikki Kaye is on Facebook and Twitter @nikkikaye

Do you have a topic you would like Nikki Kaye and Jacinda Ardern to tackle? Email online-editor@nzherald.co.nz