The Government has announced it will fund 1500 new social housing places but it comes with a $140 million cost and an immediate end to the popular First Home Grants.
It comes a day after Newshub revealed the Government would scrap the grant in next week's Budget.
Housing Minister Chris Bishop said Kāinga Ora from today will no longer accept new applications for First Home Grants. They will still process applications that have already been received. Applicants with existing approvals can still access the First Home Grant, and pre-approvals will still be valid for six months from the application approval date.
First-home grants are a government contribution to first-home buyers. Buyers can get up to $5000 for an existing home or $10,000 for a new build if they earn less than $95,000 as an individual buyer or $150,000 as a household. There are price caps for the houses you can buy according to regional prices.
The grant was introduced by National in 2010 when lower quartile house prices were less than half the cost in 2024. Bishop said the grant has gone from being nearly 10 percent of a standard deposit in 2010 to just over 4 percent in 2024.
Bishop said evidence shows the grant brings forward the purchase of a first home but in most cases, it does not make a difference to whether someone can buy a home or not.
"The First Home Grant, which provides eligible first home buyers with a median of $5000 towards a house deposit, is an expensive and inefficient way to support first home buyers," Bishop said.
"The answer to New Zealand's housing crisis is not demand-side measures like the First Home Grant, but supply-side solutions contained in the Government’s Going for Housing Growth agenda."
The Government is keeping the First Home Loan scheme, which is a low-deposit loan for eligible first-home buyers.
Discontinuing the First Home Grant is expected to generate savings of $245 million over a four-year (2024-28) forecast period with a "minimal effect on home-ownership rates", Bishop said.
The new investment in social housing places will become available from July 2025 onwards. They will be provided by Community Housing Providers (CHPs), not Kāinga Ora.
It comes after a review into Kāinga Ora released earlier this week found the agency was not financially sustainable in its current form.
"Until the Government has received and approved the turnaround plan demanded of the refreshed board, no further funding will be budgeted for the organisation to deliver additional social housing places," Bishop said.
"Our community housing sector does an outstanding job of housing people in need. CHPs currently provide over 13,000 social houses around New Zealand and they have the capability, expertise and desire to grow further."
He said the Government has made a deliberate choice to reprioritise low-value expenditure to more "important policy priorities".
"[The] waitlist for social housing is over 25,000 applicants, we have made the tough but necessary call to focus support on New Zealanders who need it most," Bishop said.
