Greens adopt rent-to-buy home ownership policy

The Green Party has waded into the affordable housing debate with an ambitious plan to help low-income earners into houses.

Its Home for Life package comes two months after Labour launched its own KiwiBuild policy which would see 100,000 low-cost homes built over a decade in areas such as Auckland, Tauranga, Wellington, Nelson, Christchurch and Queenstown.

But Green Party co-leader Metiria Turei (pictured) wants to go further and says under Labour’s policy most Kiwi families would be unable to service the commercial mortgage or be able to raise the required deposit.

The Greens are proposing a shared-equity housing ownership model.

Here's how it would work:

  • Up to 100,000 homes would be built, in conjunction with Labour’s KiwiBuild policy. The exact balance between progressive ownership and KiwiBuild would be subject to “negotiations post-election”.
  • Each home would cost $300,000.
  • The houses would be built by the government (in conjunction with local government, iwi and the community sector).
  • Residents would be able to leverage the sovereign interest rate of 3.5%.
  • They would make a basic weekly repayment to cover the cost of the investment and would be able to make additional payments which would purchase equity in the property until they own the home outright.
  • No deposit would be needed.
  • Residents’ equity investment would be paid out if they move out before they own the home.

Ms Turei says the party’s figures suggest a weekly repayment of $200, an equity payment of $100 and insurance and rates costs of $50 per week.

People could end up paying $100 less than traditional weekly mortgage repayments to the bank, she says.

The party’s information is unclear about exactly how many homes it wants to build or the total cost.

“It’s unavoidable that the building of a decent number of affordable homes requires a large investment," Ms Turei says.

"Building 1000 homes averaging $300,000, for example, would cost $300 million. But there’s a large amount of unallocated money in future budgets – $700 million to $900 million a year of capital allowance – that can be used for building these affordable homes.”

So based on the Green’s calculations, using the additional $900 million would buy them an extra 3000 homes.

The party says it will be releasing more detailed costings closer to the election.

“There are hundreds of thousands of Kiwi families who are spending their lives paying rent to a landlord, rather than building up wealth and an asset of their own," Ms Turei says.

Changes to tenancy laws sought

Ms Turei also wants changes made to tenancy laws, including a new warrant of fitness for rentals and a secure tenancy policy.

This would mean rental properties need to meet a basic set of criteria which centres around insulation standards and weather-tightness.

The secure tenancy policy would ensure rental increases are limited to once a year and would give tenants the automatic right to renew a fixed term lease as it expires.

“This would encourage a more long-term approach to landlord-tenant relationships and redress the power imbalance that often exists.

“Security of tenure will allow tenants to request landlords fix problems such as maintenance issues without fear that it will lead to their tenancy not being renewed,” Ms Turei says.

bcunningham@nbr.co.nz

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This will never work as the market sets the pricing for housing. The average house price in Auckland (for December, according to QV) was $608,205 so it's hard to see how you can sell a brand-new house for half that value in a similar area. And what happens when that first owner decides to sell (provided they own it outright)? Does it have to sell at an "affordable" price (ie, half the average house price at that time) or is the seller going to make an impressive gain by selling it at market rate (ie, the price someone is willing to pay)?
My suggestion is a capital gains tax on secondary property and a stamp duty which will discourage overseas buyers from pricing out New Zealand first-home buyers. At this rate (in Auckland, at least) the only way a first-home buyer will get into the market is to inherit their parent's home.

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It's not the market setting the pricing for housing, it's the property investors. They are the ones buying, tarting up the place, then selling for a quick no-tax profit before the average house buyer can get in.

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I think your problem with that perfectly legal activity can be summarised as "Whaaa, not fair. What about me? I want my share."

Work. Earn money. Save. Buy what you can afford.
Don't expect others to subsidise your choices in life.

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And if there wasn't a 'market' demand no one would buy them.
No sale, no profit.

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You do not understand current legislation. If you are regularly buying and on selling property you are a property trader and will be taxed on the profit.

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I see the appeal of a capital gains tax and stamp duty, from a government revenue and the tax the "rich pr*cks" standpoint. However, all the hyperbole aside, if you only look at other markets where these exist already you'll see you still have a supply and demand issue that keeps prices high. San Francisco, Sydney, Melbourne. People want to live there. Auckland is our MEL, SF or Sydney. People want to live in the nice areas. And they will pay extra for it with a CGT or stamp duty, or both. The only winner from a CG or stamp duty will be IRD. By the way, 2771 listings today on Trade Me for property at or below 300K in the Auckland area.

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That is true, there are over 2000 listed properties in the Auckland region that list under 300K. However, if you delve into the detail, they are listed by rateable value, and most of them are going to auction. Seen quite a few auctions over the last year and can confidently say that (apart from the apartments), most of those properties will go for well over 300K ... in some cases, over 400K and beyond. Some will sell for below 300K and will require work. These gems are hard to find and there certainly isn't over 2000 of them.

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Capital Gains is not a "rich pr!cks" tax, it's simply a way to tax an income that is otherwise part of Dunne's acceptable TX avoidance regime.

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So, there will be fewer landlords, fewer rentals and even higher rents (supply and demand). Brilliant!!!!!!!!!!!!!!!

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Nonymous, I don't follow your logic here. Why would this reduce the number of landlords (which, in my view, is actually a good thing)? What is does is reduce the number of people who are forced to rent and fund someone else's retirement. I do not think the way it is presented is perfect, but anything to eliminate the culture of "buy property and rent it while you do nothing to maintain it" is a good thing. We need CGT, and anything else that will discourage house prices from going up. The property market in NZ is already overvalued and needs a major correction.

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And it's people like you, who are allowed to vote, who vote for the 'feel-good parties' like the Greens with their hair-brained, half-baked ideology that is never going to float and in most cases will have the opposite effect.

PS: If, as you say, that "the property market in NZ is already overvalued and needs a major correction" was actually the case, why are houses still selling? It's called the market, and the market sets the price!

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Try buy a cheap block of land anywhere and sticking a two-bedroom box on it. Houses by nature cost money to build.

The market isn't overvalued, people just expect to get something for nothing.

My current home I spent $540K building. By the time you factor in land, engineering, architects, permits, materials and landscaping it's a lot of money.

Five years on, why shouldnt I be able to ask $580-600K? No more sections within 15 minutes of town any more, and outer suburbs sections are $200K plus (not including a house).

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Like most Green policies, it's populist and devoid of real detail. Residents’ equity investment would be paid out if they move out before they own the home. Who pays this out? And what happens if at the time of moving there is no equity in the house? I built a new home three years ago and today I would, if sold, just (maybe) get my money back. Where is the Greens homeowner in this situation? Who qualifies? I suggest Ms Turei gets back on her calculator. A loan at 3.50% over 25 years is a repayment of $345 per week. Already her tenants/owner cannot afford the rates and insurance.

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Who is going to pay the interest on all the borrowed capital tied up in these houses? This scheme is worse than the old State Advances Housing loans scheme.

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Interest servicing is part of the weekly payments. Check out the discussion paper summary: http://www.greens.org.nz/housing

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I have. There is no mention of the land price in this ridiculous scheme - a scheme designed to empower the communist Greens with control of the NZ economy, because the economically illiterate will vote for this.
The cheapest sections are still about $150,000, so that makes the whole package $450,000.

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All the rich pricks who supposedy have plenty of spare cash. I'm pretty well off myself but any excess money is going to pay my mortgage, and then once paid it's going to buy my daughter her first home.

We look after our own. The Greens look after people with other people's money.

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I like the warrant of fitness idea

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In theory, rent should be determined by the quality and WOF of the house. If you increase the standard of the house, the rent should increase.

All this will do is increase the payment of accommodation supplement to landlords. The benefit would hopefully be lower medical costs from having healthier homes.

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Yes! A WOF for tenants. Some of the tenants I have endured would have been overhoused in a cattle yard.

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And where would such homes be built - for $300k house and land package?
One can only assume rural and/or regional, which will not necessarily help to improve unemployment unless there are jobs in these locations.
Or do the Greens envisage helping the unemployed into their own houses at the expense of the taxpayer?

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Who said anything about unemployed people? Low-income earners are not unemployed, you fool. Earners, suggests working. Low-income people are the taxpayer, too.

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It is about time the slums that serve as NZ rentals are looked into and brought up to a decent standard. Perhaps then all the slum lords will dump these houses not fit for dogs and people who want to own can buy and renovate to bring them up to scratch.

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Yet there are a large number of comments complaining about investors buying houses, doing them up and selling them before moving onto the next house. So what do you people actually want?

If people are willing to live in these houses what does it matter, people can pay a premium for a higher quality house if they want to. I've just come from a 1910-1920 era house in Dunedin, all you do is wear a few more layers and your fine. Sure I could have paid an extra 30% and had a nicer house, but I chose other things instead.

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I don't think "you people" were talking about property investors taking unhealthy homes, doing them up to adequate standards and selling them for a reasonable price. Please have some integrity in your arguments.
Your anecdote is weak and shows your ignorance of the true nature of how bad some houses can be. Yes, I too have been in cold '1920s Dunedin homes, but I've also met patients who live in far worse conditions - houses so cold and damp that they cause respiratory conditions that prevent the person from working and allowing them to afford better homes.
Being forced to live in such a house because of financial strain does not equate to being 'willing to live in these houses'. Lucky you, having the option to pay more, but some are not as lucky.

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Stuff affordable housing. Has anyone asked them the really important question facing NZ at the moment?

Where do the Greens stand on the extermination of cats?

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Ye Gods – don’t let the watermelons anywhere near the country's cheque book!

So they want all taxpayers to fund private ownership of houses for those in society who elect – for all sorts of reasons – not to better themselves through study and hard work so they can earn a better income?

If someone currently does not have the ability on their own to service a commercial mortgage, providing mortgages fully funded and underwritten by the taxpayer is almost exactly the same as the conditions in the USA, where Freddy Mac and Fannie Mae were compelled to provide mortgages to those who also could never afford it in the first place… and multiplied by hundreds and thousands… and we have the events that started the GFC!

But don’t worry, the Greens will print money until we get out of debt? Ye Gods!

I think Ms Turei has been standing too close downwind of her constituents smokin’ crack if she thinks landlords have all the “power”.

I’ve never heard of a landlord wanting to evict a lease holder who pays the rent on time and looks after the property to the agreed standard. But try and evict someone deliberately vandalising your rental. Just look at the public fights HNZ has had trying to evict its worst tenants

In fact, if there’s any “re-balancing” needed, it’s in favour of the property owner. Giving a tenant 90 days' notice because they’re not paying rent on time in full and vandalising the property in the meantime,only unfairly discriminates against the property owner’s rights, breaks the lawful “contract” and compromises the property owner. And the Greens only want to exacerbate this problem for property owners?

The Greens will alter the law affecting property owner rights and commercial business leasing/rental agreements to give renters more “power”?

Let’s not stand downwind of their “ideas”, and please don’t ever vote for them!

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Freddie and Fannie weren't compelled to sell mortgages to low-income earners. It was a hair-brained idea from the Bush administration. The subprime mortgages came about because of lowered lending standards and higher-risk mortgage products.

Know your stuff before you call someone a watermelon. Richard head.

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You can always tell a leftie troll... you just can't tell them much.

From Wiki...
The Federal National Mortgage Association (FNMA; OTCQB: FNMA), commonly known as Fannie Mae, was founded in 1938 during the Great Depression as part of the New Deal. It is a government-sponsored enterprise (GSE), though it has been a publicly traded company since 1968.[2] The corporation's purpose is to expand the secondary mortgage market by securitizing mortgages in the form of mortgage-backed securities (MBS),[3] allowing lenders to reinvest their assets into more lending and in effect increasing the number of lenders in the mortgage market by reducing the reliance on thrifts.[4

Know your stuff watermelon, troll. Richard head indeed...

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More "dog whistle" politics. Just blow and watch the idiot labs come running for the free lunch.

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The US had a policy of assisting people into bankruptcy - I mean, into affordable housing. That ended well. Yeah, right!

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The watermelon party - green on the outside, but red in the middle.

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Urban sprawl here we come. No facilities, no infrastructure, no services. Lovely.
Landlord / tenant imbalance? It's all the tenants way at present, with many able to do a runner owing a few thousand here and there by the time Tenancy Tribunal pulls finger. So why would a landlord jump in to more shackles?

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Oh, the poor landlord, all shackled.

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This scheme would give the Greens a strong incentive to run conventional fiscal policy to avoid the sovereign interest yield increases that would follow ratings downgrades, that would likely follow from their other tax-and-spend high-inflation policies.

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All sounds very wonderful, but let's be honest. Paying it back at the rate suggested, allowing for R&M and modernising every 10 years, replacing the family vehicles, holidays, layoffs, etc, most would struggle to pay off the property. And on sale before they own outright they get back their equity investment. What about the capital gain? Is this determined? I think if there was $700-900 million unallocated in the Budget each year and no capital investment was to happen we would be bettter spending it on health, education, etc, rather than trying to instill that all NZers must own property. The full $900 million will only build 3000 homes. 33 years to build the 100,000 is suggested. Is this the new "Think Big"?

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No, it's not the "Think Big" it's "Think Votes", with populist rhetoric that sounds amazingly good to those with their hands out.

Trouble is, when something sounds too good to be true it's gonna cost the long-suffering taxpayer even more.

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The long-suffering taxpayer is the low-income earner. The people who this is meant to help.

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Ridiculous.
These Schemes are already available in New Zealand
and have been so for a decade and they all fail because Muggins - the owner (us the taxpayer) ends up footing the bill. Reason: to qualify for the scheme you must be financially unsound.
The answer the Greens should be looking for is how to get everyone's wages up by opening up opportunity via removing barriers for enterprise in New Zealand to grow.

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Turei, ex-McGillicuddy Serious Party. That pretty much sums her up. In the US, the government sponsored cheap housing for low- and middle-income earners via Fannie Mae and Freddie Mac. And they didn't work to the tune of a lazy $800bn debt to the government, with the likelihood that $360bn won't be recoverable.

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Rather than trying to raise people's incomes in the real world, the Greens want them to depend on the state - more Greens voters, paid for by the rest of us. Labour and the Greens are flawed parties. If people become less dependent on the state, they lose their voter base.

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So true, Craig. The Greens and Labour also have a long-term vested interest in keeping a 20% failure rate of school leavers.

It plays and feeds nicely into their voter base, plus is a "do nothing" sop to the educational sector unions that shelter under-performing teachers and who also don't want performance benchmarks on these teachers/fee paying members.

If the Greens and Labour really cared about the future of NZ and school leavers, they would insist on continuous improvement across the entire education sector with all stakeholders, for all stakeholders. But that would erode union fee memberships, and they can't have that, so Labour and the Greens prostitute the future well being and future prospects of innocent children to fit their twisted, ideological view on how the world should work.

It should be a hanging offense, really.

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Why do non-Labour and Green supporters resort to violence to solve problems? Why should everything be an offence?

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...because prostituting an innocent child's future prospects in life for a failed ideology, featherbedding and sheltering inept, stale teachers to maintain union membership fees, at the cost of attempting to achieve better educational outcomes for all - in my opinion. is akin to sedition / state treason deliberately inflicted upon NZ Inc and is a form of political corruption when those inflicting the damage do so willingly to fit the political end game they are playing.

Children's futures are too important to tossed around like a political football as these parasitic unions attempt to justify their existance.

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If people are not prepared to help themselves, why does the Govt think they have to? If someone wants to own a house the only way is to save, pay a deposit, then pay it off. What the Govt needs to do is modernise the old State Advances scheme, match someone's savings for first home owners $ for $ then, based on their saving performance, measure the amount saved as a % of their earnings and provide loan money at an interest rate accordingly.
If someone saved 30% of their earnings they get a lower interest rate than someone who save 15%. That would put some incentive into the savings and even the job application process, and would cost less than the Father Christmas help those that wont help themselves vote seeking schemes.
Be honest and ask yourself, how have all NZ's existing home owners done it? By working hard and saving carefully, sacrificing some entertainment money and a little foward planning.

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Getting deposits from Mum and Dad in most of the cases I know of.

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Brilliant and wait for it. So person goes in and after 6 months pleads poverty and and then we have to subsidise their rental payback because their wages are too low!
Now, more interestingly, let's say the house is $300,000 and in 20 years is worth $600,000 when sold. Does the Green Party policy include capital gains tax to be paid buy the new owner or the government when the sale is finally completed?

How can you subsidise people into houses then have a policy on capital gains tax. Incredible.

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Wow stunning. In 2001 I started off in an entry level IT job earning 24K a year. A partner was on $36K. We managed to get our own home.

How about this for a first home plan.

1) get a job
2) save a little
3) start at the bottom of the property market

For our first home we worked our jobs during day and renovated from 7pm to 10pm most nights for six months.

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Shane: You don't say what city or town you live in. If it's Auckland then you either already had a pile of cash or some bank gave you a 99% mortgage...and you eat stale bread from the dumpster at Pak and Save.

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I've also noticed there's a massive difference in affordability between those who got into the property market back in 2000-01 or earlier and those trying to get in now (or post 2007-08).

Still requires hard work and savings, and is achievable, but not for everyone. I guess the question that needs to be asked is: "Should everyone expect to own their own home?"

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