The Government is hitting reset on its faltering KiwiBuild scheme. Housing groups are hoping the refreshed version will include innovative ownership models which extend Kiwibuild to middle-income earners - including rent-to-own. Isaac Davison reports.
Ten years ago, Jean Aereaiiti was living in her mother's garage in Manurewa with her three children.
Working part-time and with her husband Jason studying, home ownership was out of the question.
"It just wasn't possible," she told the Herald. "Those thoughts never came into our mind."
A friend referred her to Habitat for Humanity, which discovered she qualified for its rent-to-own scheme. Aereaiiti and her husband helped to build a three-bedroom home in Clendon Park, which was owned by the charity.
She paid a $500 deposit for it and received an interest-free loan. The family paid a discounted rent of $215, which rose with inflation. And last year, she bought the house from Habitat for Humanity using some of the rent she had paid during her decade-long tenancy as a deposit. She expects to pay off the remaining $70,000 within three years and will be mortgage-free at age 55.
"We feel blessed," she said, noting that most of her neighbours are renting for about $500 a week. Next door, there are 15 people living in a similar-sized house.
Habitat for Humanity has housed 530 modest-income families like Aereaiiti's in the past 25 years through its rent-to-own scheme.
It now wants the Government to accelerate its plans to adopt similar progressive ownership schemes. Along with the Salvation Army and the NZ Housing Foundation, it has launched a campaign called KiwiBuy to give the Government a hurry-up.
Labour and Greens' confidence and supply agreement already includes a promise to "deliver innovative home ownership models" including a rent-to-own option within the KiwiBuild programme.
Housing Minister Phil Twyford has begun work on new ownership schemes, which he has previously said would be rolled out next year at the earliest.
"We are working hard to develop shared equity and rent-to-buy schemes," Twyford told the Herald yesterday. "We'll have more to say on this in due course."
A shared-equity scheme is likely to involve the Government or banks co-owning a home with a buyer, which reduces the size of the home loan and the mortgage payments, and allows the buyer to purchase it outright at a later date.
The KiwiBuy group feels the minister is "dragging the chain" on new ownership options. It hopes a rent-to-own option could be included in an imminent "reset" of the KiwiBuild scheme.
"It is something that we all waited with bated breath around at the Budget," said Habitat for Humanity chief executive Claire Szabo.
"The Housing Minister said that this is something that they are looking at … so we are watching with great interest."
The KiwiBuy campaigners say new ownership options are needed for the group known as the "missing middle", who earn too much to qualify for social housing but not enough to afford a KiwiBuild home.
They are teachers, police officers and nurses whose households make about $100,000 a year. There are an estimated 200,000 families in this group, 90,000 of them in Auckland.
State housing could also be turned into rent-to-own properties, Szabo said - an idea which has previously been proposed by the Green Party.
Property economics researcher Ian Mitchell said there were two big challenges in setting up a large shared-equity scheme. The first challenge was the cost.
"It's not insurmountable from the Government perspective but it's just whether they want to borrow that amount of money."
The second challenge was deciding who qualified for the scheme - something which has proven controversial in the KiwiBuild scheme.
"If you make subsidised capital available, the income threshold would be quite critical in terms of gathering public support," Mitchell said.
Szabo said the costs of her organisation's rent-to-own scheme were significant, especially as the housing and rental market had become less affordable.
Habitat for Humanity discounted homeowners' rent ($125 a week in Auckland), and it cost $7500 to select a suitable family and a further $2600 to get them ready for home ownership.
The charity also forgoes any capital gain. Aereaiiti's house was worth $530,000 by the time she bought it from Habitat for Humanity, but she paid the original price of $170,000.
But these downsides were balanced out by the inter-generational benefits - children of homeowners were far more likely to buy their own homes.
"There's no feeling like having your own home," Aereaiiti said. "The freedom and future benefits for your own family - there is nothing that can compare to that."
RENT-TO-OWN - HOW IT WORKS
• The house is owned by the charity and offered to a family with a minimal deposit and interest-free loan.
• Families then pay either 30 per cent of their income or 75 per cent of market rent. In Auckland, most pay 75 per cent of market rent, around $425 a week.
• They are offered the option to buy after five or 10 years. They pay the price of the house when they move in, and are not charged for any capital gain.
• A portion of the rent they have paid contributes to the deposit.
(Habitat for Humanity)