- the government changing the program from “building” to “facilitating” the delivery of 100,000 affordable dwellings, meaning that NZ taxpayers would merely ‘underwrite’ many dwellings that would have been built anyway, thereby protecting developer margins;
- the government increasing the price threshold on a Kiwibuild 3 bedroom home to $650,000, which is unaffordable to more than half of Auckland households; and
- the government announcing a ridiculously high income cap of $180,000 for would-be Kiwibuild homeowners – a level that is more than twice the average household income – thus turning the program into “socialism for the rich”.
Today, Interest.co.nz reports that KiwiBuild homes are likely to be beyond the reach of many first home buyers:
…we compared the prices and income limits for KiwiBuild homes in Auckland, which has the most pressing housing affordability issues, with those that are used in interest.co.nz’s own Home Loan Affordability reports, which gave some interesting results.
The prices of KiwiBuild homes in Auckland must be no more than $500,000 for one bedroom or studio dwellings, $600,000 for two bedroom dwellings and $650,000 for dwellings with three or more bedrooms…
The income measure used in interest.co.nz’s Home Loan Affordability Report is based on the median take home pay for a couple that are both aged 25-29 and working full time.
In Auckland that would give them $1626 a week in their hand (combined pre-tax income of $102,800 a year)…
Couples earning the median income of $1626 a week that’s used in the Home Loan Affordability Reports would find buying a KiwiBuild home in Auckland a more daunting task.
They could do it if they had managed to save a 20% deposit, in which case the payments on a $520,000 mortgage on a three bedroom KiwiBuild home would eat up 37.8% of their take home pay, putting them under the 40% affordability threshold.
But if they had just a 5% deposit, the increased mortgage payments on a $650,000 three bedroom home would eat up 45% of their take home pay, while the mortgage payments on a two bedroom home purchased for $600,000 with a 5% deposit would eat up 41.5% of their take home pay.
So for the young, median income earners with a 5% deposit, the one bedroom or studio units priced at $500,000 are the only affordable option, with mortgage payments on those taking up 34.6% of their take home pay.
Of course if interest rates rise, as they will do one day, everything becomes even less affordable.
So by design, Kiwibuild is affordable only to higher income couples where both are working full-time. So basically, no change from the status quo.
Talk about an epic failure.