Soaring house prices relative to incomes mean that a growing number of first-home buyers are finding that the horse has bolted.
People sick of queuing at open homes, let alone helping to pay the landlord's mortgage instead of their own, are facing an uphill battle as the house price-to-income ratio is double that of their parents' day.
Speaking to Newshub about various Government housing initiatives completed and underway, Associate Housing Minister Kris Faafoi said that the lack of affordable housing has been created "over years of neglect - an issue that the Government is addressing on a scale that hasn't been seen since the 1970's."
"We are working to provide [path]ways into home ownership with things like changes to KiwiBuild criteria under the KiwiBuild reset, lower-percentage deposit requirements and development of progressive home ownership and rent-to-buy schemes," Faafoi said.
Brad Olsen, senior economist at Infometrics, confirmed that since 1999, household incomes have risen by 113 percent - but house prices have surged by 248 percent, putting the average cost of a house at 6.13 times the average household income.
"Between 1980 and 2000, the house price-to-income multiple reached a maximum of 3.89," he said.
"In 1980, the multiple was at 3.1 incomes, with a house costing just over $32,000 [in relative terms], and household income for the year being worth around $10,500.
"In 2018, those figures were $660,000 and $108,000 respectively."
The Government has confirmed a number of initiatives across different ministerial responsibilities designed to drive the supply of affordable homes - and help more people get into them.
An increase of the minimum wage to $18.90 has been announced for April 1 and a further increase to $20 is proposed for April 2021*. Fair Pay Agreements are expected to support lower-paid workers, while improvements to the Equal Pay Act are set to improve equal pay solutions for women.
"A Fair Pay Agreements (FPA) system creates a new mechanism for collective bargaining to set binding minimum terms at the sector or occupation level, thus improving wages and conditions," a Government spokesperson confirmed.
"We have already improved the support for those who want to make an equal pay claim and legislation currently being worked on will help even more."
Additionally, the Government confirmed that recent changes made to KiwiBuild and the First Home Grant and Loan, together with a new home ownership fund are expected to help remove some of the barriers to home ownership.
- The asset test of 20 percent of the value of a KiwiBuild home for previous home-owners has been removed (a household income cap of $120,000 applies)
- The minimum holding period for studios and one-bedroom apartments has dropped to one year
- The Government confirmed that changes have been made to allow for "greater flexibility" and "building of larger homes."
"KiwiBuild has a strong pipeline of affordable houses and the construction sector is building more homes than at any time in the last 40 years," a Government spokesperson confirmed.
Grants and Loans
As part of the Government Build Reset, changes were made to help more first-home buyers scrape together a larger deposit and get finance.
- The deposit requirement for the First Home Grant has dropped to 5 percent. The grant can now be paid to three or more buyers who are pooling their money together (income caps apply)
- The deposit required for a First Home Loan - for existing homes and new builds - has also dropped to 5 percent (income and regional price caps apply)
Progressive Home Ownership Fund
In September, the Government announced its intention to set up a $400 million Progressive Home Ownership Fund to help people who are able to service some, but not all of a mortgage.
Estimating that the fund could help between "1500 and 4000 households", the Government said that families with children, single-person households and Māori and Pacific peoples are among those on its radar.
"Officials are currently working with progressive home ownership providers, iwi and Māori organisations and financial institutions to consider how best to design a fund," a Government spokesperson said.
Additionally in October, 'Kāinga Ora', which consists of Housing New Zealand, Housing Land Corporation and most of KiwiBuild, was established help get more people into public housing and provide home-related financial assistance.
"'Kāinga Ora' will work in partnership with the development community, iwi and Maori, local and central government and others on quality urban development projects of all sizes."
Although changes to current initiatives and the introduction of new ones are designed to help more people afford homes, the solution also requires an increase in supply - something New Zealand has struggled to keep up with.
"Increasing both the amount [of land] available and speed of land zoning - and ensuring that finance is available for the infrastructure to [support] development (eg telecoms, wires, powerlines, water and wastewater pipes), are key to allowing for more construction as the population continues to grow," Olsen said.
Some infrastructure is designed to cope with a smaller population, so there's a need to build bigger assets to cope with population growth - and the main barrier is funding.
"Given the infrastructure gap across New Zealand, and the Government's slow speed of spending, I'd advocate for a Government fund for local government specifically for core infrastructure upgrades, like water assets," Olsen added.
As every community has its own housing and urban development challenges, the Government plans to adopt a "collaborative, place-based approach", working with local councils, iwi and other providers to implement local solutions, starting with a pilot in Hastings.
"The Ministry of Housing and Urban Development, (HUD) has worked with Hastings District Council, local iwi and other government agencies to understand the drivers of high housing need and to identify short and median term responses at the central and local government level, and by other players," a Government spokesperson said.
As house prices continue to show strength, Olsen said that given the current low interest rates and a sustained shortage of housing across key parts of the country, he expects house price growth to continue in the short-term - but there's likely to be a change in pace ahead.
"The rebound in house prices will keep construction efforts higher as housing supply issues are worked through, but the strong levels of construction at present will see more restraint in house prices in the medium term," Olsen said.
Although an affordable home remains out of reach for many Kiwis, loosening of criteria under KiwiBuild, the First Home Grant and First Home Loan may be the difference to help more get onto the ladder, while others living on the breadline may find hope is on the way through increases to the minimum wage and local progressive home ownership initiatives.
*Indicative rate agreed to by Cabinet and subject to confirmation at annual minimum wage review, conducted by MBIE.