Housing

Housing is one of those issues which never goes away, whether it is in quality of design, affordability, regulation, access to finance, or the role of different providers including the private sector, central government, local government and the not-for-profit sector.

We have had a long interest in housing policy with a special emphasis on affordability. This has included various studies on social housing [links], on the special circumstances of Maori (which included a substantial piece of work for Te Puni Kokiri’s predecessor, Manatu Maori, on papakainga which concluded that there were serious defects in the then funding and regulatory environment), and on innovative structures for housing delivery including cooperatives and housing associations.

One of New Zealand's defining characteristics in the provision of social housing over many years has been for all intents and purposes a state monopoly on the use of subsidised funding. The New Zealand experience is quite a marked contrast with the growth of the housing association sector in England, or even Canada's relatively on and off support for cooperative housing.

Even local government has played a relatively limited role as the result of an agreement, some 40 or so years ago, that local government would focus on housing for the elderly, and central government on housing for families.

Even in today's relatively difficult environment, with housing affordability more difficult than for many years, there is still significant scope for alternative approaches to provision. MDL has scoped a number of different approaches, drawing on international experience. As one example we see scope for local government to encourage community-based housing trusts, an approach which we explored in a recent report for the Taupo District Council (link required). Proper structured there is a very real possibility trusts of this type could become self-sufficient.

We have also looked closely at different options for funding. One recent innovation which has been used extensively in England and to a lesser extent trialed in Western Australia and New Zealand is shared equity lending (a lender advances a fixed percentage of the cost of a house. No repayments are made during the term of the loan but on final repayment lender receives an agreed share of the growth in value of the property over the term of the loan).

The standard shared equity approach assumes that this form of lending is only feasible with the assistance of government subsidy. This has the immediate advantage of enabling someone to purchase a home, but with substantial ongoing drawbacks. The most serious is the inability, within government subsidised schemes, to sell, and purchase another property on a shared equity basis (virtually all government schemes are restricted to first homeowners). The practical effect can be to trap people as few households will be able to move from a shared equity ownership to stand-alone ownership easily.

MDL has reviewed research demonstrating that an alternative approach is available to shared equity which should make shared equity lending attractive to market-based investors, removing the need for government involvement, and eliminating the drawbacks of subsidy based shared equity lending.

For more information contact us.