Labour announces rent-to-buy scheme for public housing tenants

Labour is promising, if elected, to make it easier for public housing tenants to buy their homes.

Announcing the plans in Auckland on Tuesday, Labour’s housing spokesman Kieran McAnulty said the policy was “a game-changer and a life-changer”.

The policy introduces a new rent-to-buy scheme that allows public housing tenants to save for a house deposit. Under the scheme, $100 a week will be credited towards a house deposit, with the funds held in a trust account.

The scheme would help people save $5200 a year, Labour says, and allow tenants to accumulate enough to put a deposit down on a home.

Labour said it would allow these same tenants to make use of an expanded First Home Loan scheme to buy their houses.

Under the First Home Loan Scheme, buyers can take out mortgages with a 5% deposit. The loans are offered by ordinary banks but are underwritten by Kāinga Ora.

Labour plans to expand the First Home Loan scheme by raising the income cap to $300,000 for a household – matching a policy National announced earlier in the election campaign.

“For a $700,000 home, a 5% deposit is $35,000, compared with $140,000 for a 20% deposit,” McAnulty said.

“That’s a huge difference for people trying to get their foot on the property ladder.”

Public housing tenants will have the option to buy the home they are living in, although Labour cannot guarantee that all houses will be for sale. Labour said that for each house sold, three more would be built in its place.

McAnulty said about 1100 tenants in the public housing system were paying market rent and he thought these people were probably capable of buying their own home.

“What we know is that people paying rent can, on the whole, usually pay a mortgage – it’s just saving for the deposit [that is difficult].

“What we’ve said is that if they can meet those financial requirements, Kāinga Ora will work alongside them so they can build up that 5% deposit.”

McAnulty said funding for the scheme was incorporated into Labour’s plans for the Kāinga Ora build programme. He said the building of additional houses to make up for any sold was a key part of the policy.

“If you look at schemes overseas where they have allowed people to buy their own homes, council housing in the UK for example, under [Margaret] Thatcher and others, the big mistake they made was that they didn’t have a ratio of builds to sales.

“At a three-to-one ratio, we will always expand, the number of Kāinga Ora homes will never go backwards.”

Public housing tenants can already potentially buy their homes from Kāinga Ora. However, the new policy would expand that programme and introduce a rent-to-buy pathway.

Some community housing providers offer a similar route to home ownership.

Labour announced the policy as it attempted to reset its campaign after a rocky week in which the party was dogged by photographs of its likely coalition partners campaigning with members of gangs.

On Friday, Kerrin Leoni resigned as a Labour candidate when video emerged of her campaigning with gangs – something she had previously denied.

McAnulty said he was “out and about over the weekend” and the gang issue “came up once”.

By contrast, McAnulty said he had “lost count” of the number of times cost of living issues had come up.