This shift redirects funds to create approximately 1,500 new social housing units through external organisations rather than Kāinga Ora, the state housing agency. While existing applications for the grants will be processed, no new applications will be accepted immediately.
Housing Minister Chris Bishop defended the move, explaining that the reallocation of funds addresses the urgent need for social housing, with a waitlist of over 25,000 applicants. The 2024 Budget will allocate $140 million to this initiative, using money previously designated for the First Home Grants. Bishop described the grants as an inefficient means of assisting first-time buyers, noting the average grant provided was around $5,000.
Lesley Harris, director of the First Home Buyers Club, expressed deep disappointment, calling the decision a significant blow for many potential homeowners. She pointed out that it already takes nearly nine years for an average first-time buyer to save for a house deposit. Without the grants, many will face extended saving periods, potentially adding an extra year or two. This setback could deter some from entering the housing market altogether, as the additional $10,000 to $20,000 required can be a decisive factor for many couples.
The First Home Loan scheme, which allows buyers to secure a home with just a 5 per cent deposit, and the provision to access KiwiSaver funds for deposits, will remain intact. However, these measures alone may not be sufficient to compensate for the loss of the grants. Harris emphasised that the removal of the grants makes the already arduous journey to homeownership even tougher for many Kiwis.
Labour MP Kieran McAnulty expressed regret over the announcement, acknowledging it as a broken promise that has hurt many prospective homeowners. He highlighted that the decision contradicts previous assurances made by Christopher Luxon, further delaying homeownership prospects. McAnulty pointed out that as house prices rise faster than wages and savings, the time needed to save for a deposit will only increase. He stressed the importance of the grants in helping people cross the final hurdle of homeownership, noting that the elimination of this support will have a significant negative impact.
In defence of the policy change, Bishop stated that the government is prioritising more critical needs over low-value expenditures. He argued that focusing on social housing would provide more significant support to those in dire need. However, Labour leader Chris Hipkins criticised the move, accusing the government of favouring property investors over first-time buyers. He contended that the decision undermines the dream of homeownership for many New Zealanders while providing substantial tax cuts to landlords.
The debate continues as stakeholders weigh the benefits of increased social housing against the challenges faced by first-time homebuyers. The government’s reallocation of resources reflects a broader policy shift, emphasising the need to address immediate social housing demands while sparking concerns about long-term impacts on homeownership accessibility.
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