Affordable housing handcuffs: Windfall profits means buyers have to keep their homes for three years before they can sell

46 Kaimoana St, Weymouth. Photo / Dean Purcell

• Windfall profits on taxpayer-funded homes trigger new rules
• Buyers will have to keep their homes for three years
• Housing Minister defends policy

Buyers in a new "affordable" housing project built with a $29 million taxpayer subsidy are now obliged to keep their houses for three years after some early investors sold for windfall profits.

One couple who bought a house in the Weymouth subdivision off the plans in August last year and finally settled with a full price of $540,000 on July 27 this year flicked the house on to new buyers on September 3 for $670,000 - a $130,000 profit in five weeks.

Emma Fergusson, a Massey University researcher studying the South Auckland development, said the developers told her that up to three other homes in the subdivision were also on-sold for easy profits. The developers have recently imposed the requirement to stay for three years.

"The rapid increase that we have seen with those examples of on-selling suggests that perhaps the [original] prices were below market value," Fergusson said.

The couple who made the $130,000 profit on the house at 46 Kaimoana St declined to comment.

But the couple who bought the house on September 3, first-home buyers Sankalp and Akanksha Dave, said no one had lived in it.

"The grass hadn't even gone on the front lawn," Dave said.

"When we bought it, the agent didn't tell us the exact reasons of why the house was being sold, apart from a 'change of circumstances'. We didn't know that those houses were being sold as low-cost housing through the housing trust."

The 295-unit Weymouth project is the sole success story so far for the 2013 "housing accord" between the Super City and the Government, accounting for 91 of the 102 homes built under the fast-track consenting provisions up to November 4.

Under the accord, developers in most special housing areas must sell at least 10 per cent of the homes at "affordable" prices to first-home buyers who intend to occupy them for no less than three years.

Weymouth was not subject to the same requirements because the $29 million state grant, announced just days before the site was made the first special housing area in October 2013, enabled the entire subdivision to be in the "affordable" price range, defined as below 75 per cent of the Auckland median house price (below $578,250 at current prices).

The grant from the now-defunct social housing fund included $8.9 million to buy land, formerly used by the Weymouth children's home, at a discounted price below its 2011 rateable value of $11.6 million.

The rest of the grant went towards the estimated $120 million cost of roading, other infrastructure and building the houses.

The project consortium, Tamaki Makaurau Community Housing Ltd, is owned by four equal shareholders: the Tamaki Collective of Auckland iwi, the Maori Trustee, the Community of Refuge Trust and the NZ Housing Foundation.

Housing Foundation director Brian Donnelly said new owners buying in the subdivision from "around the middle of this year" have been required to sign a statutory declaration agreeing to live in the home for at least three years.

He said about 200 of the 295 new homes were being retained by the project partners as social rental or rent-to-buy housing for needy families, leaving 95 to be sold to first-home buyers on the open market.

"In the first two stages that comprise 92 homes, so far we have less than a handful of homes resold."

Donnelly said those homes were sold off the plans last year at "market rates with advice from two independent registered valuers".

"There was no element of Crown subsidy in these prices," he said.

For the third stage, sold in September, the consortium introduced a ballot to "pre-qualify" first-home buyers. Houses were advertised from $445,000 for three bedrooms and from $520,000 for four bedrooms.

"It was not offering anything cheaper or giving anything away, but where you had more than one buyer, we didn't want a local person who really needed a house to be outbid by someone that was an investor."

Labour housing spokesman Phil Twyford said Labour's 2014 election "Kiwibuild" policy to build 10,000 new homes a year would have required first-home buyers to live in the homes for nine years. The policy actually said buyers would "need to live in the house for a period of time to be determined based on advice from officials".

Housing Minister Nick Smith said the situation at Weymouth was "no different to any other housing development in that a person buys a property well ahead of when it is completed and can make a windfall gain if prices go up or a windfall loss if markets go down".

"The Weymouth Housing Project involved a mix of social, affordable and private housing. The private housing was necessary to make the overall project viable."

46 Kaimoana St, Weymouth

• July 1, 2014: Rateable value $455,000.
• Aug 13, 2014: Sold off the plans at $540,000, with a deposit believed to be 5 per cent.
• July 27, 2015: Final settlement by first owners.
• Sept 3, 2015: Sold by first owners for $670,000.
• Profit: $130,000.