The Government has announced a housing package that will increase the supply of houses and remove incentives for speculators, to deliver a more sustainable housing market.
“This is a package of both urgent and long-term measures that will increase housing supply, relieve pressure on the market and make it easier for first-home buyers,” Jacinda Ardern said.
“The housing crisis is a problem decades in the making that will take time to turn around, but these measures will make a difference.
“There is no silver bullet, but combined all of these measures will start to make a difference,” Jacinda Ardern said.
$3.8 billion housing acceleration fund
Housing Minister Megan Woods said the Government is speeding up the pace and scale of house building with a $3.8 billion Housing Acceleration Fund.
“We estimate the Housing Acceleration Fund will help green light tens of thousands of house builds in the short to medium term.
“Investment in infrastructure has been identified as one of the key actions the Government can take to increase the supply of housing in the short term.
“This fund will jump-start housing developments by funding the necessary services, like roads and pipes to homes, which are currently holding up development.
“The Government will also assist Kāinga Ora to borrow an additional $2 billion that will assist in bringing a range of development forward through strategic land purchases,” Megan Woods said.
Extra support for first home buyers
First home buyers will also get more help to get into the housing market with increases to First Home Products’ income caps and changes to regional price caps.
In 2019 the Government changed the rules so people only need a 5% home deposit before they can apply for the help. Today that is being expanded to ensure more people are included. This expansion comes alongside the recent RBNZ Loan-to-Value Ratio changes announced that will see investors require a 40 percent deposit from May 1 2021.
“Income caps to get financial assistance will be lifted from $85,000 to $95,000 for single buyers, and from $130,000 to $150,000 for two or more buyers. The changes to the house price and income caps will take effect on 1 April 2021,” Megan Woods said.
Changes to regional price caps on new build and existing properties will also reflect the increased price of housing.
“This package of measures will help first home buyers into the market and boost activity and create jobs in the construction sector, as we recover from the impacts of COVID-19,” Megan Woods said.
A further package specifically targeted at Māori housing is being developed for Budget 2021.
Extension of bright-line test to 10 years
Grant Robertson said property investors now make up the biggest share of buyers in the market so it’s essential the Government takes steps to curb rampant speculation.
“Extending National’s bright-line test and removing interest deduction loopholes for investors will dampen speculative demand and tilt the balance towards first home buyers.
“The New Zealand housing market has become the least affordable in the OECD. Taking action is in everyone’s interests as continuing to allow unsustainable house price growth could lead to a negative hit to the whole economy.
“House price increases of the magnitude we have seen in recent months are not only harmful to affordability, they also present a risk to economic stability.
“Our plan also encourages investment in new builds. To support our goal of increasing supply, we will keep the bright-line test for new build investment properties at the current five years.
“This will give Kiwis a better chance at purchasing their first family home. I want to stress that the bright-line test does not and will not apply to the family home,” Grant Robertson said.
Removal of interest deductibility loophole
The tax system favours debt-driven residential property investment over more fully taxed and more productive investments. To reduce investor demand for these investments, the Government will remove the advantage investors have over first home buyers.
“Cabinet has agreed to remove the ability for property investors to offset their interest expenses against their rental income when they are calculating their tax,” David Parker said.
Ministers are also considering closing a loophole on interest-only loans to speculators. The Reserve Bank will report back to Ministers in May on this and any proposals around Debt to Income Ratios, particularly for investors.
Extension of apprenticeships boost
To ensure we have the people power required in the construction sector, the Government is extending the Apprenticeship Boost initiative by four months to further support trades and trades training.
It means employers who have apprentices starting over those extra four months can get some Apprenticeship Boost support as well, which could see more than 5,000 new apprentices able to benefit.
Since launching in August 2020, more than 10,000 employers have signed up and received almost $97 million in subsidies for more than 21,000 apprentices.