Skyrocketing personal debt is preventing people from accessing even the most affordable way to own a home, according to a provider of a rent-to-own housing.
Habitat for Humanity's schemes did not require a deposit, and offered interest rates half those of commercial banks. They were designed for people who could not afford to buy because they were on low incomes, or did not have enough cash for a deposit.
The charity had helped more than 500 whānau into their own homes in the last 30 years.
But fewer people were meeting the criteria to take them up because personal debt levels were soaring, its northern branch chief executive Conrad LaPointe said.
"[In] people who are applying for our housing, we are seeing just record debt levels, [which] is curtailing people's ability to access the programmes - to the point where ... over 80 percent of our applicants ... have personal debts of over $50,000."
The problem had been growing, and was affecting not just people on modest incomes, but also working families on higher incomes, he said.
"We're ... seeing more people apply, but less people actually being eligible, even though they're on household incomes up to $150,000.
"That's not a small amount of money for a household income, that is sort of above average. But it's within those affordability parameters that we're still finding people with a huge amount of debt."
The issue was not so much that potential buyers had debt, but that it was unmanageable - and as such it would be irresponsible for Habitat to accept them into a rent-to-own programme, he said.
"It's in neither party's interest to fail on this journey. It's a 10-year journey that the families go through with us, and we want to get them to home ownership on the other side."
But the problem is hard to fix.
Money Sweet Spot - a debt consolidation agency that helps people crunch down their loans - is only 15 months old, but it has already seen a rapid decline in the number of applicants they could support.
Previously, there were approving between 35 percent and 45 percent of applications, but that number had dropped to 9 percent last month, said co-founder and chief executive Sasha Lockley.
"It's really upsetting," she said.
"High levels of debt is a barrier to entry for better housing, first home owners, a better financial situation for families."
Increasing numbers of applicants were taking desperate measures to get ahead, she said.
"People feel that gambling is giving them hope for a better financial situation, which is heartbreaking."
Lockley said changes to the Credit Contracts and Consumer Finance Act would make it worse, giving easier access to personal loans and credit cards that people could not afford.
More support needed for rent-to-own programmes
One whānau that Habitat for Humanity had been able to help is Andrew Malele, his wife Hanna and their four children.
They moved into their Manurewa home in 2015 - and in 2020 became its proud owners.
"If someone was to say to me, back in 2015, that I'd be paying my own mortgage, I'd be laughing at them because at the time we just didn't see how we could do that."
The Maleles were "living on the smell of an oily rag" - but Habitat helped them manage their finances, and eventually become homeowners, he said.
"It was a change in mindset, to be honest, because you're already in that mind frame that you're not going to own your own house.
"Habitat came along, and said, 'Well, it's possible, you just need to do A, B and C, and you can certainly make it work'."
They could not have owned a home without the rent-to-own model and Habitat's help, he said.
"It was a confronting process but a great process because we learnt, and we're learning."
Another provider of rent-to-own housing - NZ Housing Foundation - said there was an opportunity to help tens of thousands more families.
Chief executive Dominic Foote said although they were not having to turn people away due to rising debt levels, demand was growing and it did not have the cash to expand, despite being backed by the government and philanthropists.
In 15 years, the charity had helped 600 families into home ownership, enabling them to put down roots in a community, keep children in school, and stable employment, he said.
Foote wanted to see more government investment in rent-to-own models - because it made home ownership possible for the growing number of families struggling with debt.
"I think any government has a duty of care to its people, and I think part of that duty of care is to enable people to become independent of government subsidy or government support."
The government's $400 million Progressive Home Ownership fund gives providers an interest-free loan.
Asked about the future of the fund and whether it might expand, Housing Minister Chris Bishop told RNZ the government wants as many New Zealanders as possible to see a path to home ownership.
"We are taking a close look at existing government housing programmes, including progressive home ownership."
How rent-to-own works
In Habitat for Humanity's programme, the charity buys the homes with the help of the government, who give it a zero-interest loan for part of the purchase.
The going price for a two-bedroom home in its new Māngere East development, for example, is $735,000.
The homes were not cheaper than the market rate - but the programme makes them more affordable for low-income whānau.
First, no deposit was required. Instead, when a whānau moved in, their weekly payments to Habitat went towards building equity.
Within 10 years, they would be able to get a mortgage from a bank, because the size of the loan would have reduced due to the equity. Plus, they get all the capital gains from day dot.
