How a KiwiBuy scheme could work

The Government supports the concept of a rent-to-buy housing scheme which has been floated by the community housing sector - so how would it work? 

Rent-to-buy is one of a range of programmes that fall under the KiwiBuy campaign, touted as a solution to New Zealand's housing crisis, by countering rising rent prices through subsidising home ownership. 

The idea was floated by The Salvation Army's Social Policy and Parliamentary Unit in its November paper Beyond Renting. It questioned the Government's KiwiBuild scheme, which it said only focused on medium-income earners. 

The Salvation Army is now joined by Habitat for Humanity, Community Housing Aotearoa and the New Zealand Housing Foundation in challenging the Government to adopt KiwiBuy to get low-income Kiwis into their own homes. 

Phil Twyford, the Housing and Urban Development Minister, said the rent-to-buy concept is part of Labour's confidence and supply agreement with the Greens, and that work is underway to explore options in that area.  

"We share the aspirations of the community housing sector - we want as many families as possible to own their own home," Twyford told Newshub. 

But he said there would be a "significant cost to the taxpayer of such a scheme", therefore it would be important to "get the details right and make sure it will help those who need it most". 

Housing Minister Phil Twyford.
Housing Minister Phil Twyford. Photo credit: Getty

'Very slow to act' 

Campbell Roberts, director of the KiwiBuy campaign, said the non-government homeownership programmes under it have been "hugely successful". He has urged the Government to adopt it alongside KiwiBuild. 

Roberts told Newshub he's received positive responses from the Government about it, but the "reality is, they've known this for quite some time and they're very slow to act in this area". 

KiwiBuy includes ways of helping low-income Kiwis into their own homes, such as a shared equity scheme whereby the Government would buy a percentage of a house - say 30 percent - and the homebuyer could pay it off over time. 

"For the Government, there's real advantage in the fact that it only has to put in minimum amount of money upfront," Roberts said.  

The other programme he said has been successful is a rent-to-buy scheme whereby homebuyers pay a small up-front cash contribution and then make regular payments - some of which would go towards paying off the home. 

It would be similar to paying a mortgage where part of your payments would be interest, however you'd be dealing direct with the vendor and the payments could be more flexible than dealing with a bank. 

Most banks require up to 20 percent of the purchase price up-front, so a rent-to-buy scheme could be an option around that. It would also build up your equity in the property and establish a savings history which could show a bank that you can afford a mortgage. 

"In some sense, what we are saying is KiwiBuy is actually alternative ways of funding a house because people at the moment can't buy houses even at the price of KiwiBuild so there needs to be some other things in the market," Roberts said. 

What about KiwiBuild?


Asked if the Government should get rid of its KiwiBuild scheme, Roberts said it should stay and operate alongside KiwiBuy.

That's despite the Government's flagship housing project failing to meet the interim target of 1000 homes by the end of its first year. The programme was "re-calibrated" by Twyford, and has since been relentlessly attacked by National.  

Roberts argued that KiwiBuild deals with low housing supply in New Zealand, but that only middle-income earners are able to afford the houses which have a price cap of $500,000 to $650,000 depending on the region. 

He said there are lots of low-income earners who should be able to get into home ownership - those who KiwiBuy targets. They are already getting into home ownership with community housing projects, he said, and that could go further with Government support. 

"There is only so much they can deal with so there needs to be either more resources given to the community housing sector or the Government itself needs to take over one of these programmes."

Finance Minister Grant Robertson reflected Roberts' point that KiwiBuild would still serve a purpose alongside an initiative like KiwiBuy, because "we still need to buy or build the houses". 

He told The AM Show: "Like any other housing, you either have to buy it or build it - it's not like these houses are already sitting there in the Government's coffers."

Roberts said if the Government placed some KiwiBuild houses with community housing providers, their shared equity and rent-to-buy schemes would see families with incomes over $50,000 in homes of their own.

"High-income households often have resources and support that assists them to achieve homeownership. However, for lower-income families, it is far more challenging."

Twyford noted how home ownership "gives families security which improves their lives in so many ways such as better educational outcomes" and "increased wellbeing by being able to put down roots in a community".