First-home buyers with a household income of less than $80,600 a year could be gifted as much as $20,000 to buy state homes unwanted by the Government.
The Government has unveiled its FirstHome policy aimed at helping buyers earning equal to or less than the the national average - $53,000 for one person or $80,600 for two or more people - into their first home.
Under the policy - which has already been attacked as "poorly thought out" by the Greens - first-home buyers will be gifted the 10 per cent deposit, up to a maximum of $20,000, and given first crack at state houses to be sold by the Government at market rates.
Those buyers will still be entitled to other assistance such as KiwiSaver and Welcome Home Loan subsidies if they are eligible.
Housing Minister Nick Smith announced the policy on the day new Reserve Bank lending restrictions, which are forecast to lock thousands of first-home buyers out of the market by requiring them to save bigger deposits, kick in.
The policy would get people into homes and free up capital to invest in new state houses in high-demand areas such as Christchurch and Auckland, he said.
The policy does not include homes in the highest demand areas including Wellington, Auckland and Christchurch.
The first 41 homes - stretched between Otorohanga and Invercargill - will be ready for sale on Monday Their average market valuation is $120,000.
A hundred properties will be available in the first year, with about 400 available for sale over the next three years.
Based on the average price of $120,000 and a 10 per cent deposit, this would cost the Government $6 million over four years, though Smith said the cost would be relatively neutral.
"Housing New Zealand advises that with the high holding costs of these properties with council rates, vandalism and upkeep, the cost of the FirstHome grants will largely be offset," he said.
The release would be staggered to avoid flooding the market. Most of the houses for sale were empty and in areas where there was little demand for them because of their size and location, Smith said.
Labour's Housing spokesman Phil Twyford said there was no housing crisis in the areas where the state houses were being sold.
"What the country needs is 10,000 new affordable homes built every year in areas where there is a housing crisis," he said.
The announcement was a "desperate attempt" to deflect attention away from the Reserve Bank's lending limits, which were a direct result of National's mishandling of the housing crisis, he said.
Green Party co-leader Metiria Turei said 58 families are on the waiting list for state houses in Nelson, Blenheim and the West Coast where some homes will be sold under the scheme.
"After five years in denial, FirstHome is at least an attempt to help young families buy their first home but it's selling houses that the Government can't spare and using an expensive, poorly-targeted subsidy," she said.
The Greens had examined deposit subsidies when designing their own housing package, but found that they were expensive and helped a relatively small number of people into home ownership, Turei said.
"National's scheme would cost the taxpayer $6m to help just 500 families. That's a poor use of public money."
A proposed progressive-ownership model - where families paid a basic "rent" to cover the Crown's capital cost in the house and made additional payments to fit their budget to buy equity until they owned the house outright - was more cost-effective, she said.
State houses can already be bought by tenants under the Tenant Ownership Scheme which has resulted in 117 state homes being sold since September 2009. The new policy does not extend to current tenants.
The properties will be reserved for three months before being released onto the open market.
What are the eligibility criteria?
- Buyers must be 18 or older and a New Zealand citizen or permanent resident.
- They must be a first-home buyer who does not own property or land, although those who have previously owned homes could be eligible in certain circumstances.
- They must plan to live in the house for three years.
- Have a gross income of $53,000 or less per person or a combined household income of $80,600.
- © Fairfax NZ News