Shared Ownership Housing Options Could Help Thousands More NZers Into Their Own Home

• New research shows home ownership rates have fallen below 60% and will fall below 50% by 2048 based on current trends.
• 152,000 lower- and middle-income Kiwi households could be eligible for affordable shared equity and leasehold pathways to help them into their own home.
• An estimated 10,000 extra shared equity and leasehold homes could be built within three years if immediate barriers were removed.
• Westpac NZ has set a target of at least $1 billion in lending to affordable housing solutions over the next three years.

Affordable shared home ownership options like shared equity and leasehold could help tens of thousands more New Zealanders into their own homes, but work is needed to help the sector scale up, according to new research released by Westpac NZ.

Affordable shared equity and leasehold arrangements involve a third party – usually a community housing provider (CHP) – contributing equity or land towards a customer’s first home purchase, reducing the size of deposit needed and making loan repayments more affordable.

Released today, the Westpac NZ Shared Home Ownership Report finds home ownership has fallen from 75% in the early 1990s to less than 60% today and is on track to fall below 50% by 2048.

The report, authored by Deloitte, estimates that 152,000 lower-and-middle-income Kiwi households who are currently renting could be eligible for affordable shared equity and leasehold home ownership pathways. However, the report finds most aren’t aware of these options, and CHPs face barriers to scaling up their capacity to provide more homes.

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

Westpac NZ CEO Catherine McGrath says the bank is committed to supporting more New Zealanders into their first homes through the full range of options available.

“The number of shared equity and leasehold houses being offered by community housing providers is currently small, but the positive impact for families is large. This report shows that if key barriers are removed, these affordable options could help thousands more people get on the housing ladder.

“We already support community housing providers up and down New Zealand, but this report shows there are many areas that we, and the banking sector more widely, can improve, such as access to lending, consistent credit settings, and simplifying the process for the providers and home buyers.

“We’ve taken those insights on board and will also be sharing them with other banks, community housing providers and partners in Government.

“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.

“Home ownership brings with it a range of financial and social benefits. These include greater stability, stronger communities, a rent-free retirement and the opportunity to build intergenerational wealth.

“These benefits are being eroded as home ownership becomes less attainable, and we hear from many would-be first home buyers who feel overwhelmed by the challenges.

“Many things are being done right across the housing system to try and reverse the decline in home ownership – particularly Government moves around supply – but many of these will take time. In the meantime, we need to use all the tools we have to try and help the growing group of New Zealanders locked out of home ownership.

“For generations most of us have had a singular view of home ownership where we own 100% of a house and land. This report shows there are other more affordable routes that offer most of the same benefits, and that in most cases will provide superior long-term outcomes to renting.

“The report found shared equity and affordable leasehold options could play an increasing role, but many things will need to be tweaked for these options to be scaled up.”

The report makes four key recommendations to scale up the shared home ownership sector and support more first home purchases:

• Mindset: Encouraging more aspiring homeowners struggling to get into their own home to consider innovative ways of owning a home such as shared ownership. All players in the shared home ownership system can assist this by promoting awareness.
• Funding and risk settings: All stakeholders should work together to establish more reasonably priced funding streams to help the sector expand. This would likely involve a mix of funding from government, philanthropy, impact investment, finance from banks and new capital market instruments. The banking sector and regulators could also review risk settings for community housing development loans to more reliably reduce cost.
• Certainty: The Government could provide greater stability for the sector through a long-term national affordable housing strategy and greater certainty of long-term funding for shared ownership housing. It could also provide clearer guidance and rules for local authorities to make it easier for community housing development and management.
• Simplicity and standardisation: As much as possible, participants in the sector should simplify and standardise structures and documentation, whether that’s for financing a housing development, seeking government funding, or for seeking a mortgage.

Westpac is already working hard to support CHPs to get more first home buyers on to the ladder and has financed around 550 shared equity or leasehold purchases since the start of 2022.

In addition to existing initiatives to help CHPs scale up shared home ownership options, today the bank is announcing:

• A $1bn affordable housing lending target over the next three years to support a variety of social and affordable housing options, including shared equity and leasehold projects, through lending to scheme providers and home loans to homebuyers.
• Further integrating key information about shared home ownership pathways into our financial capability programmes and materials.
• A commitment to partnering with CHPs to share standardised shared equity and leasehold funding structures and legal agreements – already used successfully with several organisations - reducing complexity and the time taken to complete deals.
• A commitment to continuing to partner with Iwi Māori organisations to fund, build and provide homes on whenua Māori.
• While the bank already treats lending to CHPs as lower risk than commercial development loans, we are exploring how we can further optimise and standardise credit risk settings and work with the banking industry and government on potentially developing an agreed set of standards for the treatment of social infrastructure.

Ms McGrath says Westpac offers the widest range of home ownership pathways for first home buyers, including a range of low-deposit finance options.

“In April we launched our First Home Sooner programme, aimed at connecting first home buyers with our nationwide network of home loan experts who can help explore their options and make a plan to achieve their housing goals.

“In the last 12 months we’ve supported nearly 6,000 first home purchases, many of them through low-deposit options such as Kāinga Ora’s First Home Loan programme, new builds with as little as 10% deposit required, or Westpac’s Family Springboard offering that allows customers to use equity in the family home towards their deposit.

“While housing affordability is an ongoing challenge, we’re working hard to give people the tools they need to work towards buying their own home and the hope and confidence they can get there.

“We know there’s more we can do to address declining home ownership rates, which is why we’ve made these commitments today. We look forward to working collaboratively where possible with other funders, housing providers and policy makers to help get more people into their own homes.”

Shared Home ownership key facts and Q+A

Report findings:

• 152,000 New Zealand households could be eligible for a shared home ownership pathway.
• Of those households only around a third, or 53,000, are aware of their options.
• If immediate barriers to scaling up are removed, housing providers could build 10,000 new shared home ownership houses within three years.

What is shared home ownership?
These are arrangements such as shared equity, leasehold or rent to buy in which a third party – usually a CHP – contributes equity or land towards a customer’s first home purchase, reducing the size of the deposit they need and the size of repayments.

In the case of shared equity, the customer then pays the provider back their portion of equity at a manageable rate over time until they own the home outright. In the case of leasehold, the customer pays ground rent, set at an affordable level, to the housing provider.

Why is Westpac focused on it?
A key barrier for first home buyers is saving for the traditional 20% deposit to qualify for a home loan. Shared equity and leasehold arrangements can help buyers qualify for lending with as little as 5–10% deposit and a smaller loan to service, bringing home ownership and the benefits it provides closer within reach.

Does the bank treat shared equity and leasehold customers differently? 
No, they are subject to the usual lending criteria and we would usually provide them with a standard residential home loan, including our special interest rates.

Who are the third parties supporting shared home ownership?
A range of housing providers already offer shared home ownership pathways, including charitable trusts and Iwi Māori groups. More information can be found through the Community Housing Aotearoa website. Westpac provides loans to many of these providers to build new homes for community housing or shared home ownership.

How did you calculate who’s eligible for shared home ownership options?
We commissioned Deloitte to estimate the number of eligible customers based on the total number of current non-homeowners, their household income and the ability to service loan repayments. Full details of the methodology can be found in the appendix of the report.

Isn’t it better to own your home outright rather than relying on third party support?
For many families, the traditional 20% deposit + home loan arrangement isn’t financially achievable. Shared home ownership can bring homeownership within reach for these families and can be a potential stepping stone to eventually owning 100% of the home.

Aren’t there risks associated with leasehold arrangements?
Under some leasehold schemes, homeowners can face spiralling ground rent costs when the value of the land their home sits upon appreciates. Westpac partners with leasehold housing providers who offer long-term lease agreements, set their ground rent at an affordable level and cap any rent increases in line with inflation. These are usually CHPs.

Are there formal shared equity arrangements to help parents get their children into their own homes?
Some parents choose to help their children into home ownership by contributing a lump sum towards their deposit, which the children then pay back over time. Westpac’s Family Springboard offering isn’t shared equity, but it does provide a formal structure for parents to help their children into a home with as little as 5% deposit by using equity in their own home to guarantee a portion of the children’s lending.

How many shared home ownership deals has Westpac completed to date?
We’ve supported around 550 first home purchases through shared equity and leasehold arrangements.

How does Kāinga Ora’s First Home Partner fit within the shared home ownership ecosystem?
First Home Partner is a shared equity scheme that has helped nearly 1,200 first home buyers purchase a home since its inception in 2022. However, the scheme is over-subscribed and not currently accepting new applications.

What are some of the recent developments you’ve been involved with?

· We’ve provided $6.97m to 21 households through the Queenstown Lakes Community Housing Trust’s Secure Home housing programme. In 2022, Westpac was the first major bank to sign up to this leasehold programme, which was developed by the QLCHT and has since been replicated by other providers throughout the country.

· Supporting Bridge Housing Charitable Trust to bring 22 new affordable two-bedroom townhouses to the market in Te Awamutu.

· Helping Ōtautahi Community Housing Trust to provide five leasehold properties in Christchurch.

What about Kāinga Ora’s First Home Loans?
The First Home Loan offering is a lender’s mortgage insurance scheme that allows first home buyers to purchase a home with as little as 5% deposit by having their mortgage underwritten by Kāinga Ora. It’s not shared home ownership, however it has proven popular route to home ownership – we’ve helped nearly 1,300 first home buyers onto the ladder through this option in the last 12 months. Westpac and Kiwibank are the only main banks offering First Home Loans.

What is included in Westpac’s $1b affordable housing target?
This includes lending to customers purchasing a home through a shared ownership model, lending to community housing providers to build and provide affordable and social housing (ownership and rental) and lending to low equity customers to purchase a home using the First Home Loans scheme.

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