New Zealand's love affair with home ownership
Hon Chris Bishop's tradeoff between first-home grants and social housing is a smart one.
For many New Zealanders, not owning a home seems unthinkable and, for some, even a breach of their human rights, which I think is a stretch and unreasonable. Homeownership has long been viewed as a path to financial security, which is one way to financial security but not the only one. And going as far as saying the government owes you a path to home ownership seems unrealistic, especially with the population growth expected.
So, the government's recent decision to scrap the First Home Grants scheme seems like a fair and reasonable tradeoff, and it’s a welcomed shift away from policies that promote home ownership at all costs.
The announcement by Housing Minister Chris Bishop was surprising, ending a program that provided up to $10,000 to eligible first-home buyers. The grants, which cost around $60 million per year, were aimed at helping Kiwis get a foot on the property ladder. Instead of the First Home Grants, the government will invest $140 million to fund 1,500 new social housing places through community housing providers rather than the struggling Kāinga Ora agency. This makes perfect sense; as someone who thinks that government can’t and shouldn’t try to fix all the problems, this seems like a sensible, clear and reasonable tradeoff.
I agree with this new policy
The idea that everyone should aspire to own their own home is deeply ingrained in New Zealand's culture and psyche. But this entitlement to home ownership is not universal. Many countries have robust rental markets where long-term renting is the norm rather than the exception. New Zealand has a ways to go before the right policy environment is created to foster a healthier relationship between renting and owning, but scrapping the first home grant is a step in the right direction.
New Zealand laws for renters are reasonable
New Zealand has a reasonable level of protection for renters, such as limits on rent increases (rent can only be increased every 12 months), protection from unlawful termination, right to habitable dwellings, and access to dispute resolution. At times, the narrative is that landlords can evict people overnight, which is illegal and unlikely. In order to evict tenants outside of the statutory 90 days or 63 days, depending on the case, a tenant must have overdue rent payments, display anti-social behavior, family violence, or violence against the landlord, which are reasonable reasons to end a contract. For example, the Affordable Rental Pathway Fund is a way that New Zealand is making strides in strengthening the rental market and making it a viable option for more people across the production pipeline: developers, landowners (state or private), and renters.
Countries that encourage renting over ownership
Germany, Austria, and Switzerland have stronger policies that encourage renting over home ownership. These include strong tenant protections, rent controls, tax policies that don't favour owners, and government support for affordable rental housing through subsidies and housing cooperatives. Canada and Australia have similar renting protection laws to New Zealand, but they vary province to province, which is different from New Zealand, which is more centralized.
There is still room for improvement in New Zealand because, even though we have made some efforts to improve conditions for renters, such as the recent tenancy law reforms in 2020, the overall policy environment still heavily promotes home ownership. Tax deductions for mortgage interest, the lack of a comprehensive rental supply strategy, and the lingering cultural stigma around renting all contribute to this bias.
For example, framing renters as victims is unhelpful and inaccurate. It promotes a narrative of division, winners and losers, and does not promote a constructive debate. Renting is a decent and sensible way of living; it’s a way forward, but if we keep treating renters as victims and homeowners as villains, we are never going to end this weird home policy spiral.
The government's decision to cut the First Home Grants is a pragmatic move in the face of New Zealand's housing crisis. With a social housing waitlist of over 25,000 applicants, directing funds towards increasing the supply of affordable rentals is arguably a more pressing need than subsidizing home ownership for a relatively small number of buyers each year.
Housing and social cohesion
Public housing is essential for providing stability and security to those who cannot afford to own homes. Agencies such as the Treasury, StatsNZ, the Ministry of Housing and Urban Development, and research entities like Motu acknowledge the importance of public housing in fostering social cohesion-related themes to some extent. Despite an increase in public housing development by nearly 6% since 2015, the supply still falls short of meeting the growing demand.
Security of Tenure
One of the most critical aspects of housing that contributes to people's well-being is the security of tenure. Security of tenure ensures that residents are not at risk of being evicted overnight and that they can live in a neighborhood that aligns with their values and culture. This stability is crucial for fostering a sense of belonging and well-being, regardless of whether the home is owned or rented.
Housing policy can be a cornerstone for social cohesion in New Zealand. Currently, the connections the government makes between housing policy and social cohesion are tenuous, but let us assume for now that there is a strong correlation. By focusing on increasing the supply of public housing, enhancing security of tenure, and engaging communities in the housing development process, New Zealand can create a more inclusive and cohesive society. Ensuring that everyone has access to stable and secure housing, whether owned or rented, is essential for the well-being and social cohesion of the nation. That should be the focus, more than the desire to support everyone owning a home; those are two fundamentally different political outcomes.
Ultimately, scrapping the First Home Grants can help start a debate on whose responsibility it is to provide home ownership to New Zealanders and if ownership is the only path to financial security, a sense of belonging and wellbeing. Is it time to move away from the entrenched belief that everyone should aspire to own their own home? And does the government have a role to play in this? Or should the government continue prioritising policies that make homeownership more accessible, even if it means diverting resources from other housing needs that only the government can solve, like being the landlord of a robust social and community housing model?
The government's decision suggests a willingness to challenge long-held assumptions about housing policy in New Zealand. Minister Bishop stated, "The answer to New Zealand's housing crisis is not demand-side measures like the First Home Grant, but supply-side solutions." Whether this approach will successfully address the country's housing woes remains to be seen. Still, it represents a significant shift in thinking about the role of home ownership in New Zealand's future, a tradeoff I am willing to support.
See ya next Tuesday! Ka kite ano