Election 2017: Labour and National appeal to first home buyers

Jackie Harrison struggled with housing costs until she got assistance from a community housing organisation. Photo / Jason Oxenham

Today we launch a series on the big election policies. We start with an area that has become one of the hot button campaign issues - housing affordability.

At a glance, voters might see little difference between National and Labour's policies on how to make New Zealand housing more affordable.

Both major parties are promising to build tens of thousands of houses, help councils build infrastructure, free up more land, and create a new government agency to oversee big housing projects.

But there are key differences between their manifestos, not least Labour's promise to build 100,000 affordable homes compared to National's 26,000 homes, some of which will be affordable.

The parties also have very different approaches to handling demand for housing. Labour wants to come down harder on property speculation, and would ban foreign buyers from the market - a line which National will not cross.

The Government's official measure of housing affordability - which is still being fine-tuned - now shows 77 per cent of people who are currently renting in New Zealand cannot afford to buy a starter home. The figure in Auckland is higher, at 82 per cent.

It is not a problem unique to the National-led Government. According to the same measure, the level of affordability has ranged between 75 per cent and 85 per cent under the previous Labour Government.

Other indicators, however, suggest that affordability has worsened under National, at least in Auckland. The median house price is around 10 times the median household income in the city - well above the affordable threshold of three times the median income. As a result, home ownership rates are at record lows.

National's main response to rising prices and severe property shortages was to create specialised housing zones for developers which allowed them to get fast-tracked consents to build houses. The 154 Special Housing Areas had mixed results. More than half of them were scrapped without any homes being built, and developers often sat on the land or found ways to avoid a requirement to make a share of the houses affordable.

To help encourage developers to build more houses, National introduced grants of between $5000 and $20,000 for first-home buyers. More than 30,000 people have now taken up the grants, though uptake has been slower than predicted in Auckland.

While National has ruled out heavy-handed measures to control demand - such as a land tax - it introduced a measure called a bright line test in 2015. It requires anyone who resells a property (except the family home) within two years to pay tax on any capital gains - regardless of whether they aimed to make a profit or not.

Labour has dropped its plans for a capital gains tax but wants the bright line test to be extended to five years. The Greens are now the only party which still wants to introduce a capital gains tax on property. Labour, the Greens, NZ First and the Maori Party all want to ban sales to non-residents living overseas.

After years of rejecting calls for a state-run building programme, National changed tack in late 2016 and conceded that greater government intervention in the market was needed. In May, National announced its flagship housing policy: 26,000 houses would be built over the next 10 years in Auckland. Of that total, 20,600 would be sold on the private market and 4500 would be sold for less than $650,000 to first-home buyers.

Labour has described National's as a "lite" version of its Kiwibuild policy, which would build 100,000 houses in 10 years for first-home buyers, all of them in an affordable range ($300,000 to $600,000). The policy raises questions about whether there is enough space and enough builders, so the party says it will train more apprentices and possibly even buy up private land to build homes on.

Smaller parties have also focused their housing policies on first-home buyers, but want more innovative ownership schemes. The Greens and United Future are championing rent-to-buy schemes, while NZ First wants a new housing agency which will secure land for housing and let first-home buyers pay off loans for the land with a fixed interest rate of 2 per cent.

The Opportunities Party are offering the nuclear option. It wants to charge tax on housing, including the family home, to completely remove any incentive to invest in housing.

The other key difference between National and Labour's housing policies are their changes to the planning limits, which have been blamed for making housing more expensive.

National has overhauled planning laws to make simple building consents easier to get. It also requires councils to free up land for housing in line with population growth. Labour has a much blunter approach. It would scrap the rules which prevent developers from building up into the sky and beyond the margins of the urban area. The Act Party has a more extreme solution - it wants the Resource Management Act to be scrapped altogether in big cities, and replaced with less restrictive rules.

Jackie Harrison says she's lucky. Photo / Jason Oxenham

"THE WORST I'VE EVER SEEN"

Jackie Harrison says she is one of the lucky ones. She is a solo mother of four who owns a house in Auckland.

But her path to home ownership was bumpy, and she only made the leap with some innovative support.

Harrison, a public health worker, moved from Wellington to Auckland 15 years ago to be near her family after her marriage ended. She found the cost of renting was increasingly unbearable in the city.

"Rent was significantly going up every year. For a four-bedroom home, it was costing at least $580 a week. That takes a chunk out of my single income, and it was really difficult to support my family.

"It could come down to not having as much food in the cupboard, not going out or doing any activities, not being able to pay for school books for the kids, or sports activities."

After re-training, she was able to cover her rent more comfortably but home ownership was "totally out of the question" in Auckland's inflated housing market.

In 2015, she was thrown a lifeline by the NZ Housing Foundation, which helped her to buy a newly built four-bedroom house in Weymouth, South Auckland, through its shared ownership scheme.

She used her $30,000 in KiwiSaver savings and a KiwiSaver first-home grant to cover some of the deposit, and the foundation paid the rest. She now co-owns the house with the foundation, and her mortgage payments are capped at a third of her income.

Such schemes are relatively rare in New Zealand, but are increasingly being used by community housing groups to get low-income families into secure housing.

Harrison stresses that she's lucky. Many others in South Auckland are still struggling with the cost of housing, she says.

"If you walk down the main street of Manurewa, you will just see homeless. You can see families parked up, with kids.

"I grew up in the area, and it's the worst I've ever seen it. We need more houses, built more quickly."

In a sign of how tough it is for others to get on the ladder, her home's value has risen by $200,000 in the two years since she bought it.