Govt sends $159m lifeline to affordable housing projects

Housing Minister Megan Woods commits Crown to pre-purchasing or underwriting embattled housing developments. Photo / Sylvie Whinray

The Government is putting more money on the table to backstop housing developments at risk of failing.

It’s making $159 million available to get affordable housing projects, which would otherwise stall, off the ground.

It’s doing so by either offering to buy “build-ready” land, which would fit into one of the Government’s land acquisition programmes, or pre-purchase or underwrite homes.

The Crown underwriting homes makes it easier for the developer to secure finance because they can assure their bank or other financier than have a buyer of last resort.

Developers can apply for assistance via the Build Ready Development Pathway between May 29 and June 16.

The Government has already made more than $59m available to embattled developers via the scheme to help unlock the building of 144 homes.

Housing Minister Megan Woods noted the supply of new affordable homes fell off a cliff following the 2008 global financial crisis.

She hoped using the Crown’s balance sheet to help developers secure finance from a third party would help keep activity going as interest rates rise, credit conditions remain tight and economic growth slows.

Indeed, she characterised the arrangement as a “counter-cyclical” measure, aimed at preventing the loss of “critical supply of new housing”.

The risk to the Crown is that it ends up owning homes people don’t want to buy – for now at least.

While the first round of funding made available via the Build Ready Development Pathway is supporting homebuilding in various parts of the country, the second round will prioritise developments in areas impacted by recent weather events, including Hawke’s Bay, Tairāwhiti and Te Tai Tokerau.

To be eligible for support, developments need to be “build ready”, include affordable housing, and be located in areas that need new housing.

Woods unveiled recipients of the first round of support in August last year.

This backed six projects to the tune of $59m in South Auckland, Ngāruawāhia, Hastings, Waikanae, Levin and Lower Hutt.

The support will see 28 homes pre-purchased and on-sold for public housing to a community housing provider, iwi or other community-focussed housing provider; 10 homes sold to eligible buyers under the KiwiBuild scheme; 60 homes underwritten by the Crown and on-sold on the open market; and nine homes enabled due to other homes in the development being underwritten.

This is highly unlikely to cost the Crown $59m. For example, this sum covers the value of the 60 underwritten homes, which the Crown will only need to spend money buying, if they don’t sell.

Two more projects have been approved in Tauranga and Napier, taking the total number of homes unlocked under the first tranche of the programme to 144.