Creating Opportunities for Kiwis to Own Homes
At Seed Capital for The Commons, we believe homeownership should be a realistic goal for all.
Our proposed solution is simple yet novel: providing interest-free loans to help New Zealanders purchase homes.
This model makes homeownership affordable for most New Zealanders born after 1 January 2000
How Would It Work?
The NZ Government gives eligible New Zealanders an Interest-free loans of $225,000* toward the purchase of a house in New Zealand.
This allows a home to be bought at around three times the household's income - the definition of affordable.
New Zealand would over time become a nation that has been able to pursue business ideas, look after a sick family member, support an important cause or simply feed their family - and have a place to call home.
*The loan value is half of the difference between the current median house price and three times the median household income.
What Makes Our Solution Different:
Amount of loan: The amount that is lent reflects the extent to which the housing market is unaffordable.
Purpose of loan: The loan can only be drawn to buy residential property in NZ. The property would need to be capable of having a first mortgage registered against it.
Zero Interest: The idea is to make the cost of housing affordable - not to exchange paying interest to the banks with paying interest to the government.
Repayments: Repayments are required if no house is owned in New Zealand, the borrower dies or moves their tax residency offshore.
Loan write down: After 15 years, the loan begins to be forgiven at $175^ per week. After 25 years the whole loan is written off.
There are some changes that need to happen if that is to be affordable
As currently designed
Superannuation: anybody born after 1 January 2000 would not qualify for National Superannuation. The change is reasonable as Kiwi Saver is expected to be the main source of retirement income and Seed Capital is, in effect, an advance payment of super.
Tax residency: anybody with a loan is taxable on their worldwide income as a New Zealand resident. It will not be possible to borrow cheap money in NZ and then go and earn money in a tax haven.
Working for families: No parent born after 1 January 2000 would qualify for working for families. The change is reasonable as the fundamental need for income support is removed with affordable housing.
Accommodation allowances: A careful recalibration of accommodation benefits for people born from 2000 will be undertaken to ensure the Government is not subsidising employers or incentivising unemployment.
