Banks on long journey to finance more home-building on whenua Māori

Sunday, 19 May 2024

Ngati Whatua Orakei has built homes on whenua Māori, but even that well-resourced iwi found sourcing bank finance an onerous process.

Māori banking leaders have told the Commerce Commission of a decade of progress towards better banking Māori iwi, hapu and whānua.

But the heads of Māori banking from Kiwibank, ANZ, Westpac, ASB and Bank of New Zealand (BNZ), who spoke at the commission’s conference on banking competition, acknowledged it remained challenging for iwi, hapu and whānau to get bank finance to build much-needed homes on collectively-owned whenua Māori.

In its draft report on retail banking, released in March, the commission found many Māori were satisfied with their access to banking.

However, that was not a universal experience, and perceptions lingered that banks were biased against Māori, did not have enough Māori leaders and staff, and did not understand Māori cultural and whānau dynamics.

It also said Māori living in rural areas faced difficulties accessing banking services because banks had shut so many rural branches and ATMs.

And while housing was a key priority for iwi, hapu and whānau Māori, the commission heard even well-organised and capitalised iwi found it hard to get funding for development from banks.

There was a clash of views on the pathway to banks doing better, with the heads of Māori advisory at the big five banks stressing progress was being made, while campaigners for banking reform said Māori needed to to own a bank to get Māori equitable access to finance.

Teaho Pihama, Kiwibank head of Māori advisory, said: “Lending on Māori land is perceived to be complex. The perception is that we don’t understand what it actually means, what Māori land is, and in essence what the process is to extract value from whenua Māori is.”

Kiwibank had become better at serving whānau Māori in towns and cities through its co-own loans allowing multiple generations of the same family to take a mortgage to buy a home.

But when it came to communally-owned land, banks struggled, the commission hear.

Pihama said Kiwibank had been building its “cultural intelligence”, and was no longer leaving it to Māori organisations and government to try to find solutions to bank difficulties in financing development on the 5% of land across Aotearoa that is communally-owned whenua Māori, he said.

Teaho Pihama, Kiwibank head of Māori Advisory.

The commission heard government attempts to increase access to bank development funding for the building of homes on whenua Māori, like the Kāinga Ora Kāinga Whenua scheme with Kiwibank, had not achieved much scale.

Some of the problem lay with banks’ processes, the commission heard, but there were also very real complexities for banks trying to approve lending to build homes on whenua Māori.

Whenua Māori was often owned by in common by a large number of people, holding it as Kaitiaki for future generations. But with so many owners, it could be hard for those trying to develop homes to achieve consensus among the multiple owners. Even contacting all the kaitiaki could be a logistical challenge.

The commission heard that altogether, there were around a million owners of the 5% of land in New Zealand that was whenua Māori.

Many kaitiaki refuse to risk the land as security for loans, so developing homes could require long-term leases to be put in place on whenua Māori, which required approval from Te Kooti Whenua Māori the Māori Land Court. Anti-money laundering laws were also onerous for financing involving multiple owners of whenua Māori.

Ngāti Whatua Ōrākei is developing housing in a modern papakāinga on its land in Auckland Tamaki Makaurau.

Too often rural homes also cost more to build than they were worth once completed, which was a problem for lending banks, the commission was told.

But Scott Backman, chief executive of Ngāti Whātua Ōrakei Whai Rawa, told the commission how even well-resourced, well-capitalised iwi organisations faced a tough time arranging bank funding to build homes.

At the start of the year, BNZ finalised a new lending model with Ngāti Whātua Ōrākei to enable hapū members of Ngāti Whātua Ōrākei to get home loans to buy 24 new whānau homes then being built on Hawaiki St, Ōrākei in Tāmaki Makaurau Auckland.

Under the new model, hapū members who met BNZ’s normal home lending criteria would be able to get BNZ home loans to buy the homes, but the iwi had agreed to step in to buy any mortgages that fell into distress in the event of one of the borrowers failing to make their repayments.

But Backman said: “It was probably about a year after we had first had initial discussions with the banks around what we were trying to achieve.”

A lot of resource had to be put into getting the financing, he said.

“We have the resources and capabilities,” he said.

“I’m not to sure how that goes for other iwi around the country, but it would definitely be a challenge.”

In shareholder reports the Australian-owned banks have highlighted similar strategies to simplify banking to lift profitability, digitising processes, closing uneconomic branches, and reducing the number of products and services they offer.

But the commission heard that effectively banking underserved Māori, and financing development on whenua Māori, required a much more partnership-based approach.

It’s 184 years since the first bank in New Zealand was opened in the same year the Treaty of Waitangi was signed. This photo shows a stained glass window in the Maori Arts and Crafts Institute at Rotorua.

David Harrison, ANZ head of Māori relationships, said: “We believe that if we are going to build a more socially-inclusive society, we need to invest in the idea that this nation was built on the promise of mutual prosperity.”

He said banks had come a long way in the last decade, but it could not just be left to Māori and banks. There had to be a coordinated approach between government and industry, he said.

The first bank was opened in New Zealand in 1840, the year the Treaty of Waitangi was signed, but banks have been slow to develop lending for building on whenua Māori.

The Commerce Commission is conducting a market study into retail banking, looking for ways to boost competition. Part of that includes looking for ways to get better access to banking and lending for Māori.

Anthony Ririnui, ASB manager for Māori Banking Services, said ASB had had the ability to lend on whenua Māori since 2014.

“It is an important part of our function to ensure we can enable our community, our whānau to live on our ancestral land,” he said.

“I’m proud to say we do that at ASB, and it is something we have invested in, and do look at improving.”

“Access to finance is a key challenge to building on whenua Māori,” Stacey Beer, lead commercial adviser Te Kahui Māori Housing at The Ministry of Housing and Development Te Tūāpapa Kura Kāinga told the commission.

‘We acknowledge that there is a capability issue, there’s a cultural competence issue,’ says Fonteyn Moses-Te Kani, Westpac’s head of Māori, Iwi, Inclusion and Diversity.

She noted that building houses in general was not easy, even if it was not on whenua Māori.

After criticism of the Kāinga Whenua scheme, which can lend up to $500,000 for the construction or purchase price of a house on Whenua Māori, changes were being developed to the scheme. Kāinga Ora insures Kiwibank against losses on Kāinga Whenua loans, and Kiwibank takes security over the home, but not the land.

She said only Kiwibank had joined the scheme, and other banks had chosen not to “for their own reasons”.

Fonteyn Moses-Te Kani, Westpac’s head of Māori, Iwi, Inclusion and Diversity, said Māori achieved great things, when they had access to finance.

“They want our support, to provide access to funds to enable them to live their dreams, to live on their land of choice, in their community of choice,” she said.

She said Westpac partnered with Kāinga Ora to offer shared equity mortgages to get whānau into homes. Over time, whānau pay back the Kāinga Ora shared equity stake to own the homes in their own right.

“Now what what we are seeing is most of the people are paying off their equity right now,” she said.