Budget 2022: Cap on First Home Loan scheme scrapped

PHOTO: First home buyers. FILE

Budget 2022 puts in place an affordable housing fund, a new programme the Government said is designed to meet people’s rental costs if they can’t get access to public housing.

“The $350 million fund will leverage partnerships with investors, philanthropic organisations, developers, and the affordable housing sector to expand the range of housing options for people whose needs are not currently being met by the market,” Housing Minister Megan Woods said.

The first stage of the fund would offer $50m worth of grant funding to not-for-profit organisations to deliver affordable rental housing in Auckland, Tauranga, Rotorua, Napier/Hastings, Wellington and Nelson/Tasman.

The $350m is taken from the residential development response fund announced in 2020. It was meant to support the construction sector through the initial pandemic lockdown but ended up not being used. Of the total, $294m would go into grants and underwrites, $6m for administration and the remaining $50m for low-interest grants.

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In April, the Green Party had called on the Government to freeze rents until stronger rent controls were in place.

Greens co-leaders James Shaw and Marama Davidson said it would help rebalance the rental market in favour of renters.

According to Trade Me’s March rental price index, the amount of rent tenants pay has risen by roughly 7% in the past year to the end of March and now sits at around $575 a week.

First home buyers

There will no longer be caps on First Home Loans, which are designed to help first home buyers with their deposits, from May 19 this year.

Woods said it would allow first home buyers a greater choice of homes.

Caps on First Home Grants have also been increased in most major cities, including Auckland, Hamilton, Tauranga, Wellington, Christchurch and Queenstown. These changes would kick in from June 1, 2022.

Woods said it would mean the caps would better align with lower-quartile market values for new and existing properties.

“We estimate that these changes, along with other changes to the eligibility criteria, will help thousands more first home buyers, with funding available for approximately 7000 extra first home grants and 2500 extra first home loans available each year,” she said.

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The changes come after research released last month by Consumer NZ found more and more young people are relying on having parents that can lend them the money towards their first homes.

House prices dramatically increased over the pandemic. However, experts surveyed by the Reserve Bank have predicted that house prices are likely to drop slightly in most major cities this year.

Woods said house price and income caps would now be reviewed every six months to make sure they remained up to date.

The 12 experts surveyed in this month’s Finder RBNZ Official Cash Rate Survey said Auckland, Hamilton, Tauranga, Wellington, Christchurch and Dunedin will see no rise in house prices, with most places seeing a reduction.

The Kāinga Whenua loan cap would also be increased from $200,000 to $500,000 from June 1, 2022.

Woods said it would give people building, moving or buying a home on whenua Māori more choices.

Another $1 billion of total operating funding would be allocated to support increasing the stock of public and transitional housing.

An additional $75 million of total operating funding will go towards the homelessness action plan and $355 million of total operating funding will fund changes in the emergency housing system to deliver improved housing outcomes.