Government thinking radically on home front

The Government says it is willing to consider radical ideas to help new home-buyers, including tax-free trust funds for new babies that would be "locked in" until they turn 18.

Housing Minister Steve Maharey and Finance Minister Michael Cullen met yesterday for, in Mr Maharey's words, "the last throes going into the Budget of considering our home-ownership strategy".

He said options for no-deposit mortgages, discounted house prices, subsidised savings such as trust funds for new babies, and leased land to help key professionals buy houses - all suggested in a Salvation Army report yesterday - were all "interesting ideas" for consideration.

He ruled out only one Salvation Army proposal - giving state house tenants the right to buy their homes at discounted prices.

The report by the army's social policy and parliamentary unit suggests that New Zealand could copy a scheme launched by British Prime Minister Tony Blair to open a "child trust fund" savings account for every baby born since September 1, 2002.

The British Government pays 250 ($660) into each account when a baby is born, or double that for low-income families eligible for a full child tax credit.

Family and friends can deposit up to 1200 ($3170) a year into the account. Interest earned is tax-free and does not affect the family's eligibility for family benefit and tax credits. There is no restriction on what young people can do with the money when they turn 18.

In New Zealand, the Salvation Army suggests that the Government could deposit $500 into a fund for each baby, then allow it to earn tax-free interest at 0.5 per cent above market rates, with no fees, until the baby's 18th birthday.

The army's social policy unit director, Major Campbell Roberts, said the Government might be ready to catch "a bit of a wave towards asset accumulation".

As well as the Blair Government's scheme, US President George W. Bush has made the "ownership society" the focus of his second term, proposing to shift funding for retirement pensions and health insurance away from taxes and into tax-free individual savings accounts.

A New Zealand Institute think-tank report due on April 6 will propose matching state contributions for long-term savings and a Blair-style children's saving initiative.

It is already working with South Island iwi Ngai Tahu on a scheme paying up to $600 into accounts for young people until they need the money for education or a house.

In contrast to the US, where home ownership has risen from 63.8 per cent in 1989 to 69.2 per cent last year, home ownership in New Zealand has dropped from 73.8 per cent to 67.8 per cent of households.

Dr Cullen has signalled that his sixth Budget, due on May 19, will provide "cost-effective ways of assisting home ownership amongst New Zealanders who would otherwise struggle to get these important first runs on the savings board".

The Salvation Army says home ownership is a key to giving children security and long-term links with doctors, teachers and others who can help give them a good start in life.

It proposes four options:

* Shared ownership, where the Government or a charity sells a house to a low-income buyer with no deposit at less than the full market price.

* Selling state houses to their tenants at a discount, with bigger discounts for tenants who have lived in the house for longer.

* Subsidising long-term savings by, for example, matching people's savings or providing tax breaks for accounts "locked in" for at least five years before being used to buy a house.

* Leasing state land to "key workers" such as police officers, teachers and nurses, so that they would need to borrow money only to pay for their houses, not the land as well.

The housing issue

The problem:

* Home ownership down from 73.8 per cent in 1991 to 67.8 per cent in 2001. Salvation Army solutions:

* Shared ownership - selling houses to low-income buyers at an initial discount.

* Selling state houses to their tenants at a discount.

* Subsidised savings, such as funds locked in from birth to 18.

* Leasing land to key workers.

Family forced out time after time

Epeneza and Colin Fonoti are getting used to being cast out of their home as Auckland house prices rise further and further beyond their reach.

The Manukau couple and their five children, aged from 10 to 18, had to move three times in two months last year after the houses they rented were sold.

The second time, the leasing company that rented a four-bedroom Clendon house to them for $280 a week denied that the house had been sold right up to the point when another family walked in.

"This family just walked in all around the inside of the house," Mrs Fonoti said. "I said, 'What are you doing here?' They said, 'We are the ones buying the house'."

The Fonotis had to move to a three-bedroom house in Weymouth paying $310 a week. Mrs Fonoti gets only expenses as a volunteer social worker for the Salvation Army, and Mr Fonoti earns only $40,000 a year working from 7.30am to 8pm as a welder.

"After we pay the bills, all we are left with in the week is $39-$40," Mrs Fonoti said.

The family has applied to buy a house through the New Zealand Housing Foundation, a charitable trust supported by the Tindall Foundation which allows families to rent a home for up to five years, then use part of the increased value of the property as a notional deposit to help buy.