Setting Tāmaki families on a path to independence
In the latest of a Newsroom series, Steve Deane looks at a novel form of shared equity which will help some families to bridge Auckland's housing affordability gap and own a new home in the big Tamaki regeneration project.
Hine-A-Rangi Perry and Willy Savieti peer through the fencing at what will soon be their new home in the Tāmaki Regeneration Company’s flagship Fenchurch development in Glen Innes. The gib still needs to be fixed and painted and the fittings installed, but they can see now that their dream of home ownership is tantalisingly close.
In early 2019, they will move into their two-bedroom town house – a move that will have come both considerably earlier and a bit later than they’d hoped.
The couple had a five-year plan to get out of debt, save a deposit and claw their way onto an Auckland housing ladder on which it has become increasingly tough to secure a foothold.
In 2016, that plan accelerated rapidly when, by chance, Hine noticed a poster for a financial literacy course on the wall of the TRC’s Panmure offices.
For Hine and Willy, the six-week Pathway to Housing Independence (PHI) programme would provide a route to the New Zealand Housing Foundation’s shared ownership scheme – a product designed as a bridge over an otherwise impassable chasm from renting a home to buying one.
The mechanism is simple enough: The Housing Foundation puts up the cash – to buy a chunk of Willy and Hine’s home, bringing the deposit and mortgage payments required down to a level they can afford. To qualify, applicants must have a Tāmaki connection and their income must be under $100,000 – and they must buy back the Housing Foundation’s stake in their home within 15 years.
It’s a daunting prospect, but they’re up for the challenge. And, with shared ownership schemes such as the Housing Foundation’s and another offered by TRC, (which is very closely based on the Housing Foundation’s model), vastly over-subscribed, Hine and Willy know they are among the fortunate few.
“We are so, so lucky,” says Willy. “It opened the door for us.”
There is no doubt, says Hine, that the help of the Housing Foundation - which works with dedicated staff at most of the major banks to help clients negotiate the loan approval process – is the difference between owning a house in Auckland or not.
“It’s awesome. For us to get this… we both work full time and we have pretty healthy Kiwisavers. But, even with a first home (HomeStart) grant, we still wouldn’t be able to buy a house in Auckland.
“Our lives are here. The schools are here. Sports are here. Our friends are here. The closest place we could have afforded to buy a house would have been Huntly.”
Helping the people of Tāmaki - many thousands of whom are social housing tenants - to remain in the area during and after what is a massive project to regenerate the area is central to the TRC’s philosophy, chief executive John Holyoake says.
“We want the community to stay intact,” Holyoake says. “If people get displaced from social housing and there is no stepping stone for them they quite often have to move out of the area. But they are Tāmaki. And we’ve got a commitment that if you currently live in Tāmaki we are going to do everything we can to let you stay in Tāmaki.”
While TRC is committed to regenerating the area in a way that will avoid displacing the population, it also wants to create positive social outcomes such as raising employment and income levels, decreasing the dependency on social housing and increasing the level of home ownership.
"What the TRC is trying to do is not just about owning the home but changing cycles"
- Geoff Fariu, NZ Housing Foundation
TRC offers its own shared ownership scheme, and also partners the Housing Foundation to deliver affordable rent initiatives designed to help bridge the gaps between social housing and open market rentals, and between rental and home ownership – as well as the PHI programme that set Hine and Willy on the path to home ownership.
“When most people talk about affordable housing it is ‘how do you get a cheaper house that you are buying in the market?” says Holyoake. “That’s not what it is about for us. For us it is about making sure there is a suite of different products available for different people depending on where they are in their life.”
TRC, for instance, is piloting an “affordable rental” programme using 30 of its social houses. The scheme allows residents who raise their income to a level that would typically require them to move out of social house to instead remain in the property while they pay down debt and increase their savings.
The 10 families so far on the trial have reduced debt by an average of 17 percent, reported a 9-10 per cent increase in savings and a 5-7 percent increase in income.
The Housing Foundation also offers an affordable rent scheme in Tāmaki, with the aim of incentivising and enabling renters to become mortgage ready.
The Housing Foundation scheme sets the rent of families who move into one of its new build homes at 30 percent of the family income for a period of five years, in return for the occupants sticking strictly to a financial plan to reduce debt and begin saving. After five years the family is able to purchase the house using the Housing Foundation’s Shared Ownership scheme. While they must pay the market rate for the house, the Housing Foundation gifts back to them 25 per cent in the form of a deposit any appreciation in the value of their home that occurred while they were renting the property.
These initiatives are designed to help move people along a “housing continuum” that has emergency social housing at one end and full private ownership at the other. The middle ground is occupied by stages including affordable rentals, market rentals and shared ownership.
“We talk about the continuum all the time, and how we can move people along it,” says Holyoake.
“Products like affordable rental give people the breathing space to get things in order before they transition into the next stage.”
So far, 250 Tāmaki families have taken part in the PHI, with many making dramatic progress. That may have taken them a giant step closer to home ownership, however Auckland’s heated housing market still presents a significant barrier.
“The programme allowed families to get mortgage ready and understand how the housing continuum works,” says the Housing Foundation’s Geoff Fariu. “The question left on the table was ‘what can you buy with $450k?”
With the average price of a two-bedroom home in Tāmaki $650,000, the answer is: not much.
The reality is that even schemes such as KiwiBuild will produce homes well out of the reach of many of Tāmaki ’s people. For the home ownership dreams of people like Hine and Willy and 40 more families who have graduated from PHI programme and received pre-approval for a mortgage, the shared ownership schemes offered by the Housing Foundation and TRC are a lifeline.
Those families, however, are very much a lucky few.
“We haven’t got enough of this in Tāmaki,” says Holyoake. “That’s a challenge for us.”
The Housing Foundation has been running its shared ownership scheme in Auckland and Christchurch for over a decade, helping over 300 households and assisting 120 families to fully own their home. However, it is by nature capital intensive, and requires a large degree of benevolence as the capital deployed doesn’t produce a return until the house is owned in full by the household.
TRC’s scheme is dependent on government policy – however it is simple enough in execution.
“It’s quite easy for us, this model, because we own the land,” says Holyoake. “So, we don’t actually throw any cash at it, we leave the value in the land. It is more like a deferred payment. We just get it back later.
“But we have limited resources so we can only do a number of these. It needs to be scaled. It needs to be scaled for Tāmaki and it needs to be scaled for New Zealand.”
TRC has 42 whanau ready to move into shared ownership properties – but there has been a snag. Building the homes has taken longer than hoped, meaning some families have had to go through the pre-approval process twice.
Hine and Willy were among them. It was stressful, they say, but worth it. In a week’s time they will marry. Then early in 2019 they will move into their own home – both earlier and a little later than expected.
“We want to do it for our kids,” says Hine. “So that when we do leave there is something for our kids – they are not starting from scratch.”
The Housing Foundation estimates between 120,000 to 150,000 families across Auckland are stuck in rental accommodation with little prospect of owning their own home.
What’s happening in Tāmaki is a drop in that ocean, but it is an important start.
“What the TRC is trying to do is not just about owning the home but changing cycles,” says Fariu.
“One family that is going into one of the Housing Foundation homes actually said she was breaking four generations of poverty. By owning that house, her newborn son is not going to know that poverty and owning a home will be normal for him.”
This article was produced with the assistance of the Tāmaki Regeneration Company.
Earlier stories include:
Part one: Huge Tāmaki project starts to bear fruit
Part three: Inside the new Tamaki
Part four: Finding four jobs a week