Ele Ludemann: Better use for scarce $s

A reporter asked me what I thought of the policy announcement for First Home Grants as I walked out of the National Party conference.

I said I lived on a farm so it wouldn’t affect me and walked on before she could press me.

My answer was wrong. Every policy using taxpayers’ money affects everyone to a greater or lesser degree – even if it’s just that money spent on one policy isn’t available to be spent on another.

But I said that to avoid saying what I really thought – that the policy wasn’t a good idea.

Anything which increases the money available to buy a house without increasing the supply will push up prices.

This government has decided there’s better use for the money that would have gone on the grants:

The coalition Government is investing in social housing for New Zealanders who are most in need of a warm dry home, Housing Minister Chris Bishop says.

Budget 2024 will allocate $140 million in new funding for 1,500 new social housing places to be provided by Community Housing Providers (CHPs), not Kāinga Ora, thanks to savings found by ending the First Home Grant.

“Funding for new social housing places under the previous Government ends in June 2025. This is yet another unexpected situation that the coalition Government has had to confront,” Mr Bishop says.

“The Government’s new investment in 1,500 social housing places will start to become available from July 2025 onwards, giving the community housing sector much-needed certainty about the social housing pipeline, allowing them to plan for the future, and scale-up their build programmes.

“These new social housing places will only be allocated to CHPs, not Kāinga Ora. The Kāinga Ora independent review which reported back earlier this week shows that Kāinga Ora is not financially sustainable in its current form. Until the Government has received and approved the turnaround plan demanded of the refreshed board, no further funding will be budgeted for the organisation to deliver additional social housing places.

“Our community housing sector does an outstanding job of housing people in need. CHPs currently provide over 13,000 social houses around New Zealand and they have the capability, expertise and desire to grow further.

“Funding for the new social housing places can be delivered by ending the government’s First Home Grant, currently delivered by Kāinga Ora.

“The Government has made a deliberate choice to reprioritise low value expenditure to more important policy priorities. At a time when the waitlist for social housing is over 25,000 applicants, we have made the tough but necessary call to focus support on New Zealanders who need it most.

“The First Home Grant, which provides eligible first home buyers with a median of $5,000 towards a house deposit, is an expensive and inefficient way to support first home buyers.

“In 2010, when the grant was introduced, the lower quartile house price was $255,000, compared to $580,000 in April 2024. For first home buyers, this means the grant has gone from being nearly 10 per cent of a standard deposit in 2010, to just over 4 per cent of a standard deposit in 2024.

“Evidence shows the grant brings forward the purchase of a first home – but in most cases it does not make a difference to whether someone can buy a home or not.

“The answer to New Zealand’s housing crisis is not demand-side measures like the First Home Grant, but supply-side solutions contained in the Government’s Going for Housing Growth agenda. . .

First Home Grants wouldn’t be my priority in the best of times. It is certainly not the best use when debt is so high and the need for social housing so pressing.

Stopping the grants and giving the funding to CHPs rather than the debt-ridden and badly managed Kāinga Ora might not be popular but it is the right decision.

Ele Ludemann is a North Otago farmer and journalist, who blogs HERE - where this article was sourced.