The Government has been given insufficient credit for respecting the Reserve Bank's independence and refusing to intervene to exempt first-home buyers from new mortgage lending restrictions.
But it deserves very little for the FirstHome policy announced on Tuesday. The Labour Party's description of it as a "desperate sideshow" seemed particularly apt. More than anything, the policy provided palpable evidence of the extent to which the Government sees itself on the back foot over the issue of housing affordability.
The FirstHome initiative, introduced, far from coincidentally, on the same day as the Reserve Bank's limit on low loan to value ratio loans took effect, will see some first home-buyers gifted a 10 per cent deposit - as much as $20,000 - to help them buy vacant state houses. There are a couple of catches, however. These make it of virtually no interest to the vast majority of the first home-seekers who regard themselves as locked out of the Auckland market, particularly, by the Reserve Bank restrictions.
One is that the 400 unwanted state houses are all in provincial centres. There are none in Wellington or Christchurch, let alone Auckland. That rules out buyers who cannot, because of job availability, work in the provinces and others who do not want to live there. There are good reasons why these houses are vacant. Indeed, most lie in areas where, by and large, there is much less of a housing affordability problem.
A further condition is that buyers cannot earn more than the average wage, $53,000 a year , or $80,000 as a household. That will eliminate other potential purchasers. The upshot is that very few of the buyers will be the young first-home seekers in Auckland who are now required to stump up a 20 per cent deposit to get their mortgage approved. It is far more likely that the beneficiaries will hail from other age groups.
They may, for example, be retirees who have never owned their own home and see no problem in shifting from one of the main centres to Northland, Waikato and the central North Island, the location of most of the vacant state houses. They will also have no problem living in the house they buy for three years, a requirement designed to prevent speculation.
The policy's shortcomings do not end there. The Housing Minister, Nick Smith, says the sales will free up capital to invest in new state houses in high-demand areas such as Auckland, Wellington and Christchurch. This would help ensure state houses were "in the right place, are of the right size and are of good quality". That ambition is, obviously, worthy. Unfortunately, the location of these properties will considerably limit their contribution to that drive. And any savings in rates, maintenance and repairs on the empty homes will be offset by the purchase subsidy. Indeed, Housing New Zealand expects to make a loss of $152,000 on the first 100 homes to be sold.
This, then, is hardly a lifeline for first-home seekers. Nor is it a lifeline for a Government whose housing policy also includes changing the Resource Management Act to free up land and increasing the eligibility for KiwiSaver first-home subsidies and the Welcome Home loan. Labour's new leader, David Cunliffe, erred badly in saying he would not allow the Reserve Bank to include first-home buyers in its mortgage lending restrictions.
But his party's support for a capital gains tax and a low-cost home building programme suggests both a greater appreciation of young home-seekers' frustration and a more effective way of bringing house prices down. The FirstHome initiative merely reinforces the impression of a Government struggling to find anything like the right answers.