Kiwis have always had a love affair with owning their own home. In a Stuff article published last year, Trade Me property sales director Gavin Lloyd says there are two main reasons for that: “the enduring quarter-acre dream and the promise of big returns.”
Yet as we get older, home ownership is becoming less and less guaranteed. According to statistics from the Office for Seniors, home ownership is steadily declining for kiwis aged 50 – 64, with only 68% of that demographic owning their own home (compared to 74% in 2001). An equally worrying trend is the increasing number of older New Zealanders who still have mortgages – 13.9% in 2018, twice as many as in 2004.
The increased cost of living and rising rate of inflation means that renting is becoming harder too – especially if people are relying on NZ Super as their main source of income. The banks, too, are cracking down on current lending because of changes to the Credit Contracts and Consumers Finance Act, meaning younger people are struggling to get onto the property market – which is only going to
So where does that leave us? Perhaps, the Housing Foundation’s HomeSaver rent-to-own scheme could be provide a model for the future.
The Housing Foundation’s HomeSaver scheme
According to MoneyHub, the aim of the rent-to own HomeSaver scheme is “to benefit the tenant and set them up for long-term financial success through discounted homeownership.” The main
Here is an overview of how the HomeSaver model works:
Those who meet the criteria opt into a 5-year Occupation Agreement.
This provides the same rights as a Residential Tenancy Agreement but the key difference is that you will have the option of purchasing the home after you’ve been renting it for five years.
The Occupation Agreement gives you an absolute right to occupy the home for up to five years. This means if you keep up with rental payments and want to stay year-after-year (up to five years in total), you won’t have the risk of being given notice by the landlord. Importantly, it’s not a contract to purchase – it’s only an ‘option’. If you find that after the rental term the home isn’t for you, or your personal circumstances change, you can move out of the property as you would do with any rental.
The rent you pay is likely to be below market rate.
After five years, you will have the option to purchase the home.
You can use your Kiwisaver to go towards a deposit and you’ll get a cash boost 25% of any increase in the property’s value. So, if the value of your property grows by $200,000 when it comes time for you to buy, you would get $50,000 paid to you by way of a house deposit contribution.
Currently this scheme is only available to first home buyers, but perhaps it’s a model that should be made available to more kiwis (particularly older people) in the future? While there are drawbacks to the scheme too (having to pay for repairs and maintenance while you’re renting and having to maintain the same financial situation over the five years for example) it could certainly provide one solution to the impending housing crisis.