A lease-to-buy option is being proposed for South Wairarapa
Mix of housing sizes needed
A housing solution that could help ease the crisis in the region, and perhaps nationally, has been handed to the South Wairarapa District Council.
First home buyers and people on low-to-average incomes would be the big winners if the scheme, designed to help buyers into as many as 500 new homes, took off.
An affordable lease-to-buy ‘Urban Village’ scheme tabled in a report to the council on Wednesday by law firm Weir and Associates set out how it could work.
The report noted the impact of covid and population growth on the shrinking pool of available rentals and homes to buy across the region.
“As is widely known and accepted, with population growth comes increased housing demand. The price point is accelerating and home ownership in NZ is dwindling dramatically as a result,” the report said.
“Middle-class New Zealanders such as nurses, teachers, firefighters, police officers and social workers along with other middle-class professionals are increasingly unable to buy homes in the cities and towns where they work.”
The scheme’s core would be the sale of long leasehold interests in land owned by the council and a joint-venture partner.
The development could have as many as 500 sections, but no less than 250.
Buyers would be able to build homes on the sections. Their only expenses would be building costs and rates, with annual lease costs managed at an affordable level.
After 15 or more years, lessees would have an option to buy the land as well.
“All houses would have to meet strict design guides so as to ensure the highest quality is maintained within the village. Covenants would be placed on the lessor to ensure standards of care are upheld,” the report said.
It noted land was often as high as 50 per cent of a property’s cost.
“The ability to eliminate this cost will introduce a new layer of housing affordability for people that would otherwise dismiss the dream of homeownership.”
The report recommended 99-year leases, rent reviews linked to CPI, and an option to buy the land at set intervals of five,10 or 15 years, to remove uncertainty about costs which often discouraged leasehold investment.
South Wairarapa mayor Alex Beijen thought the recommendation could work, although the detail would need to be fleshed out.
“The key is to have a simple and affordable way to own a home,” Beijen said.
“This would not be profit-driven. It would be a way of assisting low and medium income-earners into property ownership.”
Beijen said seeing his children struggling to find homes had made him more mindful of the issue.
He had previous involvement in an organisation that held leasehold land.
“It’s a solid idea. This is a potential solution,” he said.
“This could work across New Zealand, but I would like to trial it in South Wairarapa to help address the problem.”
He said with land and building costs rising rapidly, the problem had intensified, and councils had limited ability to solve it alone.
“Even releasing more land would not affect affordable housing,” he said.
Beijen said funding made available by the government could be used to help fund the scheme.
“This is a model that could be used in any community in New Zealand. It is one way of creating a reserve of land not attractive to developers.
“This is not about making money; it is about providing affordable housing for New Zealanders.”
Beijen said the key to the concept’s success was the ability of leaseholders to buy the freehold in the future.
He said the development would have a mix of houses sizes accurately reflecting housing, where homes often had only two occupants.
The lease-to-buy scheme would align with property rights and legislation.
Beijen said while it was still just a concept, he would like to take it to the government to make it a reality.
“It would be good if within a very short time-frame we were leasing sections to the public and they were starting to build affordable houses.”