STUFF.CO.NZ: Developer sets up scheme to help Auckland first home buyers
A novel solution to financing a house purchase is shaking up the market in Auckland, writes Maria Slade.
A private property developer has set up a scheme to help struggling home buyers into Auckland's crazy housing market. Ockham Residential has launched a shared equity scheme whereby owner-occupiers of its apartments can get an interest-free, 10-year loan equal to 15 per cent of the purchase price.
The setup saves the homebuyer a chunk of their housing costs, allowing them to get into a property they otherwise might not have been able to afford, Ockham co-owner Mark Todd said. Ockham aims to sell up to a third of the 33 apartments in its latest development, The Daisy in the city's Mt Eden district, on this basis.
The developer has established the scheme in conjunction with its education-based charity, the Ockham Foundation. "We can only offer this because effectively part of each project is built by a charitable foundation," Todd said.
Scott Figenshow, director of Community Housing Aotearoa which represents the social housing sector, said there were a number of existing shared equity schemes run by not-for-profit organisations, but one set up by a developer was less common. A buyer purchasing an apartment for $600,000 for example, with a 25 per cent deposit, would usually have to take out a mortgage for the other 75 per cent or $450,000. But if they take part in the new scheme, they only borrow $360,000 because Ockham puts in the other $90,000. This saves the owner 20 per cent on their mortgage servicing costs over the life of the 10-year loan.
Ockham gains if the apartment increases in value, as the buyer must pay back the 15 per cent at whatever the property is worth at the time of repayment. Other rules mean they can repay the loan at any time within the decade in amounts of no less than a third, and borrowers must live in the property for seven of the 10 years.
The one and two bedroom Daisy apartments are up to 56sqm in size and range in price from $410,000 to $660,000. The site is a Special Housing Area (SHA) and construction is due to start in April. Ockham also plans to offer its shared equity scheme in another SHA it is developing on former Auckland Council land next to Avondale Racecourse.
The Ockham Foundation is not a housing charity, but an education-focused entity that aims to build a school. The shared equity scheme is a means of helping to fund that, Todd said. He and his business partner, Houston-based former investment banker Ben Preston, set up the foundation because "we're both really annoyed about the narrowness of the public discourse", he said. "Ultimately we would like to set up an education based institute that supports students to think independently, creatively, and also to foster a sense of social justice among students," he said.
Ironically the housing market was an area where the full range of solutions was not being pursued, he said. "Its cost relative to income has doubled in the last 10 years and everyone's holding their hands up going, 'can't do anything about it'. You imagine if the literacy or numeracy rates halved over a 10-year period, there'd be a public outcry."
The idea is that Ockham Residential and the Ockham Foundation jointly build the developments, and the 15 per cent shared equity is held by the foundation. That asset, released over 10 years, would help the foundation fund a school. The novel structure had not been easy to set up and Ockham had spent around $100,000 in legal fees, Todd said.
Figenshow said the New Zealand regulatory environment hadn't kept pace with new solutions to the housing crisis. This had been seen when the Queenstown Lakes Community Housing Trust, which offers a shared equity scheme, lost its charitable status in 2011. "We have an environment of significant housing need across the continuum, parties have responded with innovation, and our regulatory system has been slow to adequately handle that innovation," he said. Scaling up initiatives such as shared equity schemes was always a matter of funding, and it was something the country should be encouraging through robust structures, he said. "We need to be operating more housing choices ."