Shared home ownership a ‘no-brainer’ for struggling buyers

Tuesday, 23 July 2024

Auckland high school teacher Corlene Greenwood had resigned herself to living in a tiny house for the rest of her life when she got a call from the NZ Housing Foundation.

That call in 2022 changed everything for Greenwood and her son, Lyric.

It informed her that her application to be part of the foundation’s shared home ownership scheme had been accepted, and there was a new three-bedroom house in Manukau available for her to buy.

Greenwood said the news was overwhelming, as six years before she had been “drowning” in debt, after a move to Dubai to save a deposit for a house had not worked out and she had been left with nothing.

She and her son then lived in a series of rental properties, all of which had issues, and which left her feeling constantly insecure about their housing, she said.

“Our situation improved when I purchased a tiny home, and we eventually found a good piece of land to live on in Kumeu.

“But my son is 6'4', and he hated it, and the daily cleaning routines with a tiny home were difficult, and quickly became something we would have preferred not to have to do.”

She first saw an ad for the NZ Housing Foundation and its shared equity schemes on Facebook in 2018, and although she thought it was too good to be true, she had applied.

“Initially, I was accepted but a new job put me over the single person income threshold, and that’s when I accepted I would never be a homeowner.

“But a government policy change in 2022 meant I became eligible again, and not long afterwards I got the call to say there was a house for us. From there, it moved super fast, with the sale taking about a week.”

To buy her home Greenwood entered into a shared equity arrangement facilitated by the NZ Housing Foundation, which provided the house.

She contributed a 5% deposit, the Te Tumu Kāinga charitable trust provided an equity contribution of 40%, and the rest of the purchase price was covered with a standard Westpac mortgage.

Over time she will increase her equity share and will eventually have 100% ownership of her home.

“People might be suspicious of such arrangements, but they should not be,” she said. “This is a very real way of helping you into home ownership, and I’d highly recommend it.

“We are no longer living in a constant state of housing anxiety, and my son and I have somewhere to call our own.

“We can have a pet, make the alterations that we want, the mortgage is significantly lower than market rent for a house like ours, and we have control of our finances. It’s a no-brainer.”

Shared home ownership schemes, such as the one that paved the way for Greenwood, could help tens of thousands more New Zealanders into their own homes, according to new research released by Westpac.

The bank commissioned Deloitte to look at declining home ownership rates and to explore the potential of shared home ownership schemes to make a positive difference.

Deloitte found home ownership had fallen from 75% in the early 1990s to less than 60% today, and was on track to fall below 50% by 2048.

It estimated that 152,000 lower-and-middle-income Kiwi households who were currently renting could be eligible for affordable shared home ownership schemes, such as shared equity and leasehold arrangements.

But the report also found that most people were not aware of those options and that community housing providers faced barriers to scaling up their capacity to provide more such homes.

Barriers included the availability of funding, credit conditions and the cost of debt, land and construction costs and the absence of a national affordable housing strategy.

If the immediate barriers were removed, an estimated 10,000 extra shared home ownership houses could be built within three years, the report said.

Westpac NZ chief executive Catherine McGrath said the benefits of home ownership, including greater stability, a rent-free retirement and the opportunity to build intergenerational wealth, were being eroded as it became less attainable.

Many would-be first home buyers felt overwhelmed by the challenges, and for many families the traditional 20% deposit home loan arrangement was not financially achievable, she said.

“For generations most people have had a singular view of home ownership where they owned 100% of a house and land.

“This report shows there are other more affordable routes that can bring home ownership within reach for these families and can be a potential stepping stone to eventually owning 100% of a home,” she said.

“If key barriers are removed, these affordable options could help thousands more people get on the housing ladder.”

McGrath said Westpac already supported community housing providers around the country, but the report showed there was more that it, and the banking sector more widely, could do.

Banks could improve access to lending, provide consistent credit settings, and simplify and standardise the process for the providers and home buyers, she said.

“As part of this work, Westpac is committing to a $1 billion lending target over the next three years to support the sector help more people into homes, and to support the people buying those homes.”

The $1b worth of finance would be available through lending to scheme providers, including iwi Māori organisations, and in loans to homebuyers, including through low-deposit options such as Kāinga Ora’s First Home Loan programme, and the bank’s own Family Springboard programme.

But not only did public awareness of the alternative options available need to be raised, there needed to be a shift in mindset about them, she said.

“That includes banks, who have to start thinking differently about how they chose to lend, and how they value assets. There are challenges, but just because it can be hard to start with, it doesn’t mean it shouldn’t be done.”

Community Housing Aotearoa deputy chief executive Chris Glaudel said community housing providers had offered shared ownership schemes for years, although at a small scale.

Declining home ownership rates meant much more was now needed, but the lack of awareness about what was possible was an issue, he said.

“Negative perceptions, particularly around leasehold arrangements, are also a problem. We’ve all heard the horror stories about situations where land rents go up massively, eroding the ability of people to pay, and the value of the home.”

But the leasehold arrangements offered through providers, such as the Queenstown Lakes Community Housing Trust, were of a different, affordable model, he said.

“It is great to have Westpac, one of the big banks, come out with a report documenting the issue, and what can be done, and to make that lending commitment to shared ownership.”

Glaudel said to really scale up shared home ownership schemes there needed to be consistent settings that all political parties got behind, and supported.

“We have allowed our housing market to become skewed towards investment, rather than remaining focused on houses as places to live and benefit from.

“But shared ownership offers an opportunity to assist thousands of households, who are currently locked out of ownership, into homes, and we need to ensure the pathways are open to do that.”

To address the barriers, the report recommended promoting awareness about alternative home ownership options, and establishing reasonably priced funding streams to help the sector expand.

It also recommended that the banking sector review risk settings for provider loans, and standardise processes, and that the Government introduce a national affordable housing strategy and provide greater certainty of long-term funding for shared ownership housing.