The Kiwi dream of owning a home has turned into a nightmare for some flood-affected first home buyers who bought in the past few years.
Now in negative equity, they are unable to live in their category three homes, owing the bank thousands of dollars because their property is now worth less than their mortgage.
Applications closed on Monday for properties to opt into Auckland Council’s categorisation scheme but less than half of flood-damaged properties have signed up.
Advocacy group ‘West Auckland is Flooding’ said homeowners in negative equity were hesitant to, for fear of getting slapped with a category three and having to sell up.
A West Auckland resident, who RNZ has agreed not to name, had not been back to her family home since the Auckland Anniversary floods 18 months ago.
“Everything was gone, everything in our house, we’ve been back to check the letterbox, that’s about it.”
It was classed as a category three by Auckland Council which meant it was unsafe to live in. They are now waiting on an official buyout offer from the council.
The council calculates its offers as 95% of the property’s market value as of 26 January 2023, before the anniversary floods and minus a 5% deposit.
But because they bought their property in January 2022, just a year earlier than the floods, the market has dipped. Taking the council buyout means the property is worth less than their mortgage.
She estimated they will owe the bank just under $100,000.
“It’s a crazy situation and I kind of want to say I refuse to accept it, but we’ve been backed into a corner we can’t refuse it because if we don’t accept the buyout, we won’t be able to get house insurance.”
The couple are in their 30s and first home buyers with a toddler.
She said they worked extremely hard to get on the property ladder and were now giving up on being able to own their own home again.
“To be left owing to the bank and having lost our deposit, there’s no way that we can ever own a property again ... I am going to try and not get emotional while talking about it.”
They wrote to the council explaining their circumstances to ask what could be done, but said they were told the decision was final.
After mulling over signing up to the categorisation programme, West Auckland is Flooding chairman Lyall Carter opted in last year and his home on Camphora Place was bought out.
West Auckland is Flooding chairman Lyall Carter. Photo / Kate Newton, RNZ
He estimated there were around 15 properties in urban West Auckland alone in negative equity.
Unable to live in their homes, with not enough time, Carter said young families have lost out.
“They weren’t planning to move in two years’ time. This was their home that they were gonna raise their family in.
“They had embedded themselves in the community, the force of nature, which was exacerbated by the lack of infrastructure and poor maintenance, has caused them to end up in this predicament.”
Tāmaki Makaurau Recovery Office acting group manager Craig Hobbs said he understood those frustrations, but the council was not in a position to address financial damage.
Hobbs said council had been working with the New Zealand Banking Association to see how they might be able to support people in negative equity, but it was case by case and homeowners should contact their bank to discuss options.
But with future flooding events likely, he was worried about the low number of properties that had signed up to the council’s programme.
“These storm events will occur more and more often therefore, it’s important that they, I guess, put that lack of trust aside, have the conversation with us and make an informed decision.
“The focus of council and the Government under this scheme is to make sure we’re doing the right thing by people that have been impacted and try and protect their wellbeing and their lives going forward.”
Hobbs said there was no guarantee the programme would be on offer again.
“This is a $2 billion investment from both the Crown and Auckland Council so taxpayers and ratepayers whether or not say, if we have another major storm event, that will be available to people who knows, so they could be left out in the cold.”
Applications for the categorisation programme closed on Monday but there would be opportunities for households to apply for special circumstances to be considered in the future.
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