Reviving the fading dream of home ownership

The Salvation Army today called for radical new strategies from the Government to reverse an alarming trend in falling home ownership rates.

A Salvation Army report released today, From Housing to Homes, urges the Government to assist low and modest income households into home ownership. The report outlines options, and the costs and risks involved.

The Salvation Army Social Policy and Parliamentary Unit's director, Major Campbell Roberts, said home ownership helped prevent people falling into poverty and the Government should be doing more.

"Promoting and assisting people into home ownership used to be an important part of government housing policy.

"It needs to become so again."

Government statistics show the expectation is that home ownership rates are likely to fall below 65 per cent within 10 years.

Home ownership in New Zealand peaked at 73.8 per cent in 1991 but it fell to 67.8 per cent by 2001.

Younger people have seen the biggest reduction in home ownership with a decline of about 12 per cent for those aged 34 and under, and 10 per cent for people aged 35-39 years.

The report says younger people do not appear to have the same focus on home ownership as they prefer to be portable for job demands, and free of the rigid demands of a mortgage.

Student debt is also blamed for delaying or preventing first-home purchasing as people struggle to save after paying a percentage of their income in debt repayment.

Fewer mortgages now go to first homebuyers. Affordability is especially critical for lower income households in major metropolitan areas.

In Auckland over the past decade, the median house price has gone up by 67 per cent, but salaries and wages in the region over the same period have only increased by 25 per cent.

Low and modest income households have limited ability to absorb income shocks, such as increases in interest rates or job changes. They are unable to keep paying a mortgage without government help.

Consumer debt adds to the woes. Since the deregulation of the financial sector in 1984, New Zealanders have become increasingly debt-ridden. It is easier now to access credit than ever before.

The Salvation Army report says that in December 2004, New Zealanders spent around $2.1 billion on their credit cards, taking the debt on credit cards to over $4 billion for the first time.

Differences in house prices between urban and rural areas continue to grow.

Maj Roberts said in a statement that home ownership encouraged savings and asset accumulation and gave people a sense of pride, belonging and commitment to the community.

The report examines the options of shared equity, right-to-buy, land lease and supported savings schemes -- already operating successfully in other countries -- as solutions for New Zealand.

The downsides include an increase in interest rates and the possibility of economic inflation in response to a booming building and property market.

"We have explored a number of policy options because it is important we have a range of programmes," Maj Roberts said.

"One policy lever will never meet the diverse needs of New Zealand's varied households and housing markets.

"What is needed now is commitment from government to do detailed work on the options so that more New Zealanders can recapture the Kiwi dream of a place of their own."

The report urges a wider view -- the capital that homeowners create provides social stability, contributes to savings and contributes to the overall wealth of the nation.

The Salvation Army says while there are risks to all the options, the costs of not proceeding far outweigh the disadvantages.

- NZPA