Deloitte: shared equity schemes could arrest declining home ownership

Shared home equity schemes including leasehold and rent-to-own options, as well as third-party contributions towards a deposit, could help arrest the long-term decline in home ownership in New Zealand, according to a report by Deloitte commissioned by Westpac.

Tuesday, July 23rd 2024, 2:22PM

“For the growing group of New Zealanders struggling to get on the housing ladder, we have tested whether shared home ownership solutions could be the helping hand they need to get across the line and to what extent these solutions could be scaled up,” Deloitte says.

Existing shared equity schemes are currently relatively small but they have accelerated rapidly since the Ministry of Housing and Development's progressive home ownership fund in July 2020, it says.

“Since that time, more than 1,700 shared home ownership homes have been delivered compred to roughly 1,000 between 2007 and July 2020.”

The 15 housing sector participants Deloitte spoke to told it that constraints include availability of funding, credit conditions and the cost of debt, land and construction costs and the absence of a national affordable housing strategy, the accounting firm says.

A lack of financial capacity among prospective home owners, limited awareness of such options and uncertainty about central government policy are also constraining the growth of shared equity schemes, it says.

“These challenges are not unique to NZ. Housing unaffordability and the need for shared home ownership solutions are felt keenly in overseas markets such as Australia and the United Kingdom.

“While neither of those countries have yet fully cracked the code to shared home ownership, they are moving in the right direction and lessons can be drawn from their practices to scale up effective, sustainable and fair programmes in NZ.”

Deloitte applied a range of criteria to a customised Statistics NZ data set and identified 53,000 households which could be both eligible and sufficiently aware of shared home ownership pathways to take advantage of them.

“Unconstrained by the awareness factor, that figure could rise by a further 100,000 households.”

The NZ household economic survey put the number of households at 1,952,600 in 2023, up from 1,908,300 the previous year.

The report says home ownership has fallen to about 60% compared to nearly 75% in 1991 ad that it is projected to drop below 50% by 2048.

Tags: Deloitte