$35 million shared equity pilot funded in Budget 2008

Budget 2008 will fund a two year Shared Equity pilot to assist up to 700 households into starter homes, Housing Minister Maryan Street announced today.

The government is investing $35 million in capital into the pilot, which will be restricted to homes in regions with the highest house prices: Auckland, Wellington, Nelson, Christchurch and Queenstown.

“Many modest-income, first-home buyers in these areas have been shut out of home ownership as a result of unprecedented house price rises since 2002,“ Maryan Street said.

"Shared Equity is a new type of home ownership in New Zealand. The pilot provides an opportunity to test the demand for it, and the application of it, in markets.

“It is designed to complement existing government initiatives to assist modest first-home buyers, such as the Welcome Home Loan and KiwiSaver. It fits with broader government plans to increase the supply of affordable housing.”

Shared Equity will see the government provide an interest-free loan on a house of between 5 to 30 per cent of its value. This reduces the size of the conventional mortgage an eligible household takes, Maryan Street said.

“The scheme will be limited to those with a household income up to $85,000, who meet certain criteria. A maximum house price cap, which will vary across the targeted regions, will apply and this will move with the market.

“A minimum five per cent deposit will be required, ensuring households benefiting from the pilot have demonstrated a commitment to home ownership, and are making an investment in their home," Maryan Street said.

"The scheme has been tightly targeted specifically to assist a group of New Zealanders who have saved a deposit for a home, but who cannot get on the property ladder in the area where they live and work because starter home prices have moved too far ahead of the maximum mortgage they can afford.

 "These households would normally have expected to buy their first home by now, except for huge property increases in recent years. While the existing Welcome Home Loan is able to assist such households in rural and provincial areas, a different tool is needed in higher priced markets," she said.

The pilot scheme will be officially launched on 1 July 2008. It will be monitored and evaluated after two years, with further decisions taken on the use of Shared Equity at that time.

Key Elements of the Shared Equity Pilot Scheme

The scheme:

• Is available in: Auckland, Wellington, Nelson, Christchurch,Queenstown;
• Involves the provision of a government loan worth between five and 30 per cent of the value of the house (depending on the region);
• Imposes a price cap on eligible houses in each of the five regions;
• Is accessible to families with a household income of less than $85,000 (gross), who can sustain a mortgage;
• Is accessible to families with a deposit worth at least 5 per cent of the value of the home they wish to purchase, who could not otherwise afford a mortgage on a low-priced house;
• Requires people to live in the home they purchase;
• Is accessible to first-home or ‘second chance’ buyers (households who have owned a house previously but are in a similar position in terms of assets and incomes as first-home buyers).