Editorial: Equity-share move could turn renters into owners

How hard would it be, in the present state of the market, to convert the accommodation supplement into shared equity?

EDITORIAL

The news today that some houses at the high end of the market in Auckland are beginning to sell below their officially estimated capital value is a further sign that the residential property market is likely to remain flat for the time being and possibly start to fall across the board.

This is good news for the legions of young Kiwis who have been priced out of the market, though prices may be unlikely to fall far enough to come within their reach without some help. It is not so good news for those who have managed to borrow enough to buy a house at recent market rates and need it to retain its value.

On Wednesday the Salvation Army's social policy unit published a report containing four possible forms of help for the first group and which, with a little extra imagination, could help the second.

It calls one of its proposals "shared equity", meaning the state or a non-government organisation such as the Salvation Army could be a joint owner of the house with the person or couple buying it to live in. Shared equity already happens on a small scare in New Zealand with trusts helping older people buy a home with some cash left over to live on.

The other proposes are a right-to-buy scheme for state house tenants, a subsidised saving scheme and government leases of land for nurses, teachers, police officers and the like to build a house in the communities where they work. All of them, the Salvation Army concedes, would require substantial new outlays from the public purse but there is one of them that need not.

Shared equity might be provided from the substantial sums already paid from the public purse in rental subsidies and it is surprising the report, "From Housing to Homes", does not consider this. The accommodation supplement is a weekly grant to help the low paid and beneficiaries meet the costs of renting, boarding or owning a home. It is a considerable sum and for rental accommodation it goes into the pockets of landlords, helping to make rental property an attractive investment, especially in periods when the market is flat and there is less prospect of large capital gains.

How hard would it be, in the present state of the market, to convert the accommodation supplement into shared equity? For a family that looked likely to need the accommodation grant for many years, possibly the rest of the parents' life, it might be better for all concerned if the money was provided up front to enable the tenants to buy the house.

The parents would have a house to call their own, to renovate or decorate as they please, a stake in the community, an asset that used to be regarded as a Kiwi birthright and needs to become one again. The rental investor would be able to sell the house at close to its present value and avoid the risk the market may fall as rising interest rates in the US cause rates to rise in other countries, including New Zealand. Stockmarkets fell last week and remain jittery. All equity markets have reason to be nervous.

Taxpayers would surely prefer to subsidise the low paid into their own homes than continue to subsidise their landlords. The Government has no greater task than to restore home ownership to more Kiwis — more than will afford KiwiBuild homes — and capitalising rental subsidies could help.