Subj : Jack Tame: First Home Grant didn't fix what's wrong with housing
To   : All
From : News
Date : Fri May 24 2024 01:24 pm

Analysis: Boosting supply is the real solution for first home buyers, writes
Q+A presenter Jack Tame.

Politics is a game of choices, and debating is won by whoever best frames the
debate.

Housing Minister Chris Bishop is adept in both departments, as demonstrated
by the Government's confirmation the First Home Grant scheme is to be
scrapped.

As a policy, the First Home Grant didn't make much sense.

The problem with New Zealand's housing market is not that first home buyers
are a few grand short of a sufficient deposit. It's that houses are totally
unaffordable across the board.

This might not seem like much of a distinction. But ask yourself this: did
giving first home buyers a few thousand dollars contribute meaningfully to
the supply of more houses?

The answer is no, which means that plumping up deposits on the supply side of
the equation probably contributed more to house price inflation, rather than
affordability.

Understandably though, the policy had its supporters. People like free money,
and 87,000 have accessed the grant in the last seven years.

Would it have really been the difference between buying a first home and
renting forever? For some, perhaps.

But given the maximum grant awarded was $10,000 per applicant, the more
likely outcome is it simply sped up the time in which people got deposits
together.

A shrewd move

Bishop framed his decision to scrap the First Home Grant as one borne of
tough choices and a dire economy.

The money will be used instead, he explained, to fund 1500 new social houses
through community providers.

A government could, of course, choose to do both things - keep the First Home
Grant in place and provide funding for more social houses.

But for a coalition that at times risks being criticised as a bit mean, it
was a shrewd piece of communication to parse it on binary terms, favouring
more social houses over subsidies for the middle class.

First home buyers skew young, and this decision is unlikely to have any
significant short-term political ramifications for Bishop and his Cabinet
colleagues.

But in announcing the changes, the housing minister emphasised his real
priority in the portfolio.

Bishop has promised to massively increase the overall housing supply with a
range of policies he says would transform New Zealand's housing market.

Successive governments have promised to solve the housing crisis, and so far,
they have had limited impact.

As I've lamented on numerous occasions, record numbers of New Zealanders are
leaving our shores and it's incumbent on the Government to improve domestic
conditions to give our young people a reason to come back.

If Bishop can fulfil his ambition and hugely increase housing supply, it'll
do far more to help first home buyers than a few grand towards a deposit
might have ever achieved.

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