Phil Heatley MP
National Party Housing Spokesman

12 February 2008

Shared equity rolled out yet again

National Party Housing spokesman Phil Heatley says Labour’s shared equity idea to combat record housing unaffordability has been announced at least a dozen times before.

“Talk about a retread policy, this one is so old it has whiskers on it.”

Mr Heatley says Labour has been working on its much talked about shared equity initiative since 2004. The idea has been trotted out every few months since.

“That didn’t stop the previous housing minister re-announcing the initiative a number of times, including in May last year when he heralded the ‘first steps’ towards a shared equity initiative.

“Helen Clark even said at one point that the shared equity initiative would be in place in 2006.” (See attached clipping)

Mr Heatley says $1.4 million was set aside in last year’s Budget for ‘modelling work’.

“We also know from answers to Financial Review questions (Question 134) that a two-year pilot is due to be announced in July.”

“So, after a more than four-year gestation period, what we will get is a two year pilot programme that may address housing affordability issues for a lucky few.

“Even the ‘new’ plan to make 500 homes available for first home buyers was announced by Chris Carter in October 2006**.

"Labour continues to miss the big picture.

“They refuse to make it easier for private landowners to subdivide their land, they won’t reform the RMA or significantly streamline the Building Act to reduce compliance costs, and they aren't addressing those two issues faced by many families struggling with increasingly overwhelming mortgages - low take-home pay and the second highest interest rates in the developed world.”

ENDS

Attached: Shared equity announcements – 2 pages.
** Chris Carter’s October 2006 Speech: http://www.beehive.govt.nz/speech/interventions+stimulate+affordable+housing+supply )

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Shared equity announcements

- 2004 - Chris Carter confirms via Parliamentary Question 10742 (2006) that the Government has been looking at shared equity schemes since 2004.

- 2005 - Labour promised to 'develop our own equity share scheme where HNZC provides an equity contribution’. This included a one page Equity Share backgrounder.

- 3 March 2005 - Steve Maharey tells The Press that Labour is likely to introduce a ‘shared equity' scheme.

- 22 August 2005 - Steve Maharey said 'Labour in government will introduce an Equity share scheme’.

- 22 January 2006 - Helen Clark states government would introduce a shared equity scheme in 2006. She said the government had flagged the scheme as an election promise and was committed to delivering it as a priority.

- June 2006 - Clayton Cosgrove states ‘we are currently developing’ a shared equity scheme.

- September 2006 - Chris Carter states the government considering introducing a NZ version of a shared equity scheme in next year's budget.

- January 2007 - Chris Carter again states government may introduce a shared equity programme.

- March 2007 - Chris Carter urges banks to consider shared equity schemes.

- May 2007 - $1.4million in the budget for a shared equity ‘model’.

- February 2008 – “In July this year we will launch a shared equity scheme” – Helen Clark

SUNDAY STAR TIMES, 22 JAN 2006, Edition a, Page 7.

Home-owning planunderfire

By: BAIN HELEN

THE GOVERNMENT will introduce an equity share programme this year to allow low-income earners to buy a stake in their homes, Prime Minister Helen Clark says.

But the opposition warns it could work against the Reserve Bank's efforts to dampen the housing market and borrowing. Clark said New Zealand had been examining the British government's share equity scheme and she spent an hour with British Deputy Prime Minister John Prescott this month discussing it.

Last year Prescott unveiled a programme allowing tenants to buy a stake in their homes at a discount so they could benefit from rising house prices, and later buy out the state's share in the home. Last month the scheme was extended to allow 80,000 homes to be built on public land by 2010. The state will retain a stake in the land while buyers pay for the "bricks and mortar".

Clark said New Zealand's Housing Corporation would take a share of equity in a property, and eventually buyers would buy out the state's share. The government had flagged the scheme as an election promise and was committed to delivering it as a priority, Clark said. Even if it was implemented this year, home buyers could probably not take up its benefits till next year at the earliest.

However, Clark's plans may run counter to warnings by Reserve Bank governor Alan Bollard against consumer spending funded by borrowing. He has warned strong household spending was a common factor in the widening current account deficit and rising inflation, blaming Kiwis borrowing unsustainably at high prices over the past five years.

The share equity scheme would allow more people to borrow to buy homes, because it would allow more people currently unable to save enough for a deposit to buy homes.

National finance spokesman John Key said while he backed shared equity schemes in principle, the one proposed by the government was sending mixed messages about spending.

"There is no doubt it would put further pressure on the housing market by creating more stimulus."

The Reserve Bank was attempting to dampen the housing market by deterring people from borrowing a large proportion of the value of their homes - "and this is effectively a more than 100% mortgage".

Key said he was "sympathetic to home ownership" as an important part of Kiwi culture, but it had to be measured against the economic impact.

National housing spokesman Phil Heatley said National supported Kiwis owning their homes, but this depended on them being able to service debt. "It would be bad news if the government encouraged people into a debt situation they were unable to handle."

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