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Research and Policy

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• Online version - New Zealand Housing Strategy
  • Online version - New Zealand Housing Strategy - Foreword
  • Building the Future
  • Programme of Action
  • Area 1 - Sustainable Housing Supply
  • Area 2 - Assistance and Affordability
  • Area 3 - Homeownership
  • Area 4 - Private Rental Sector
  • Area 5 - Housing Quality
  • Area 6 - Sector Capability
  • Area 7 - Meeting Diverse Needs
  • Appendices - Principles
  • Appendices - Glossary and Acronyms

Research and Policy

Area 3 - Homeownership

Government has a role in ensuring all people have secure housing.This may mean improving access to homeownership, or through homeownership enabling households to increase their equity and personal wealth over time.Government has a particular interest in the way savings and investment, including work-based savings schemes, can be linked to this.

The Government response to declining levels of home ownership will be expanded through programmes to help people to become and remain homeowners.The Government believes that asset ownership is important to enable people to participate fully in society in that it provides families with greater long-term security, control and independence.By encouraging asset accumulation for those households that might not otherwise be able to buy a house, the programmes will complement other elements of the Government's savings package.

The Changing Face of Homeownership

Homeownership rates are declining and private renting is growing.Census data reveals that between 1991 and 2001 the rate of homeownership in New Zealand fell from 74% to 68%.Rates have fallen for all levels of income, across all ethnic groups and most dramatically for the twenty and thirty-year-old age groups.There were 57,600 fewer owner-occupiers in those age groups in 2001 than in 1991.If these trends persist, the homeownership rate could possibly fall below 65% by 2011.This would mean that 80,000 fewer households would be homeowners than if the 2001 rate of homeownership applied.

The Household Expenditure Survey carried out by Statistics New Zealand reinforces the Census data, indicating a fall in home ownership levels from 74% in 1989 to 68% in 2001, and 65% in 2004.In the Auckland region the fall in recent years has been steeper, from 68% in 2001 to 62% by 2004.

A number of factors may be contributing to declining homeownership:

• changing labour market dynamics
• changing social dynamics, resulting in more fluid family arrangements
• increased competition between first home buyers and residential property investors
• house prices rising faster than household incomes, resulting in a diminishing supply of homes that first home buyers can afford
• increasing uptake of tertiary education and student loans, along with people having families later in life
• increased levels of consumer debt
• removal of specific assistance for entry into home ownership.

While New Zealand's homeownership level remains high by international standards, many groups with an interest in housing are conscious of the decline and what it might mean for the future.[i]Government agrees that homeownership has provided generations of New Zealanders with not just a roof over their head, but also:

• independence and a place of their own to call home
• a degree of tenure security difficult to find in the rental market
• a stable environment providing continuity of education and healthcare opportunities
• an investment they are familiar with and feel confidence in, which effectively provides a form of compulsory savings
• a better quality of life in retirement through mortgage-free ownership
• a sense of belonging and what it means to be a New Zealander.

The changing tenure mix also has implications beyond housing.There is a positive relationship, for example, between homeownership and the health and social wellbeing of people over 65 years of age.[ii]Mortgage-free ownership in later years of life also gives owners the option of drawing against equity in their property to supplement their income.

Other implications of tenure change relate to social cohesion and household wealth.Evidence suggests that homeowners feel a stronger sense of belonging, and make more of a contribution to the community in which they live.[iii]In most parts of the country, homeowners have seen their property values rise over the medium to long term, increasing their equity and personal wealth.

Some homeowners have used the growing equity in their homes to finance the purchase of second and subsequent properties as investments, effectively building assets with little or no cash outlay and laying a foundation for financial security in later life.The effects of this investment in residential property on house prices during an upturn in market activity are debated.One view is that it has led to over-investment in residential property (as opposed to other forms of investment) and squeezed out aspiring first-home buyers.

During 2005, the Centre for Housing Research Aotearoa New Zealand (CHRANZ) expects to release a scoping report Intergenerational and Interfamilial Transfers of Wealth and Housing that will provide direction for further research in this area.

Homeownership Assistance
During consultation, there was widespread support for the Government to help people to buy their own homes.For some people, the decision to rent rather than buy is a deliberate choice and fits well with their lifestyle and priorities, but the consultation confirmed that homeownership remains a strong aspiration for many.Government believes that it has an important role to play in this area.

The Kiwi dream to own one's own home has evolved from the three-bedroom home on a quarter-acre section to everything from inner-city apartments and units in retirement communities, to lifestyle blocks, marae-based living and large homes for extended families.

Concern was expressed that homeownership is becoming harder to achieve for people trying to buy their first home, especially in the main cities, where mortgage deposit and/or repayment requirements are often something of a moving target.With lower quartile prices ranging from $192,000 in Manukau to $326,000 in Auckland City, buying a home in even the lower priced parts of Auckland is unaffordable for many households on modest incomes (2004 prices).At these levels, only 14% of Auckland households in the $44,000 to $55,000 income bracket can afford to service a 95% mortgage on an entry-level home.[iv] As rents tend to follow house prices, they have also risen, leaving less money for saving or investment.

Consultation found that while the aspirations of Māori and Pacific people to own their home remain strong, these aspirations are becoming harder to realise especially as a high proportion live in urban areas where housing pressure is the most intense.Between 1991 and 2001, the rates of home ownership among Māori and Pacific people declined more quickly than for other people.

There was widespread support for introducing innovative home ownership programmes.These included developing partnerships with the third sector, and rent-to-buy, shared equity and sweat equity schemes.[v]

The Government introduced the Mortgage Insurance Scheme as a small-scale home ownership assistance pilot in September 2003.The pilot has been successful in assisting households into home ownership who would have otherwise remained renting.

Other innovative home ownership schemes that will be considered include the potential for home equity schemes such as the scheme developed as a partnership between Housing New Zealand Corporation and the New Zealand Housing Foundation.

The Home Equity Programme facilitates the transition from renting to owning by enabling households to rent a property and buy it at any time during the five years after the commencement of the occupancy.The participant receives a 75% share of the equity growth in the property at the time they seek to buy it.The New Zealand Housing Foundation has to date (March 2005) built four houses inSouth Auckland under the Home Equity Programme and signed tenancy agreements with four families.

The New Zealand Housing Foundation sources participants for the scheme through its community networks.These households need to satisfy broad eligibility criteria set by Housing New Zealand Corporation.Participants have fixed term tenancies for five years.The client pays a market rent for the property and has security of tenure for five years.

Staging and Priorities
In the short to medium term, homeownership will be a particular focus under the Strategy.Homeownership fits well with the Government's interest in enabling households to increase their equity and personal wealth over time and encouraging a savings culture.

The set of homeownership initiatives includes research into the causes and implications of declining homeownership levels, and initiatives to help aspiring homeowners.In the short term, the emphasis will be on:

• expanding the Mortgage Insurance Scheme
• exploring innovative homeownership programmes including deposit assistance as part of Government's Work-Based Savings Scheme, and home equity schemes
• developing and implementing education programmes to support decision-making and sustainable homeownership.

In the medium to long term, emphasis will be given to:

• developing homeownership products to meet the needs of particular groups.
• Government initiatives to support New Zealanders' home ownership aspirations follow.

Government's home ownership work programme also includes the following initiative.

[i]Building the Future: Towards a New Zealand Housing Strategy set out the range of possible reasons for declining homeownership rates, and the risks and benefits of homeownership, pp. 37-38.

[ii]Ferguson, D et al 2001, Living Standards of Older New Zealanders: A Summary, Ministry of Social Development, Wellington.

[iii]Skilling, D 2004, It's not just about the money: the benefits of asset homeownership, The New Zealand Institute, Auckland, p. 19.

[iv]The data in this section are drawn from Housing New Zealand 2004, Local Measures of the Ability of Working Households to Become Homeowners In New Zealand, p 30, and Housing New Zealand Corporation analysis of Quotable Value New Zealand and Census data.

[v]Gravitas Research and Strategy Limited 2004, Building the Future: Towards a New Zealand Housing Strategy, analysis of public meetings and submissions received on discussion document, prepared for Housing New Zealand Corporation, p. 39.