In brief
- Progressive Home Ownership (PHO) is a Government scheme to provide pathways to home ownership for people in financial need.
- While the whole scheme is underperforming, to the extent the program has targeted Māori, it has been the least effective.
- Critics say there is too much bureaucracy and red tape. Perhaps making it easier to build homes is a better solution.
What is Progressive Home Ownership?
Launched in 2021, the Government’s $400 million Progressive Home Ownership (PHO) Fund offers three “pathways” to home ownership.
Applicants are lower- to medium-income and are unlikely to be able to purchase a home without assistance.
Along with families with children, the Government notes housing affordability is an acute problem for Pacific and Māori people. These are the three priority groups targeted by the scheme.
Three pathways to home ownership
Kāinga Ora’s First Home Partner program is a pathway that helps applicants “bridge the gap if your deposit and home loan aren’t quite enough to buy a new home”. It provides interest-free loans for up to 20 years to fund deposits.
Applicants secure a conventional mortgage through a bank, albeit with a lower deposit. Kāinga Ora then takes an equity stake. Applicants then buy out Kāinga Ora over time.
Other pathways are aimed at those needing more financial assistance.
For instance, “approved PHO providers” such as Habitat for Humanity New Zealand and the Salvation Army are provided with funds to buy homes. Those homes are then used to place “individuals, families and whānau in a rent-to-buy, shared equity or leasehold arrangement.”
The Te Au Taketake pathway is meant to provide “dedicated funding for iwi and Māori organisations to develop or expand their PHO programmes, supporting better housing outcomes for whānau Māori.” However, this has not proved to be an effective channel. As of May 2023, no households have been established through this route.
The Herald reports that Māori housing officials have called for all three pathways to prioritise Māori results to make up for these poor outcomes. But Minister of Housing Megan Woods has rejected this idea saying the program wasn’t intended to work that way.
Why isn’t such a generous program reaching its target?
Targets were originally set to have 1,500 to 4,000 homes purchased by 2024, but so far just over 500 households are involved. Fewer than 50 of those households are Māori.
National Party housing spokesperson Chris Bishop called the scheme “a failure” and blamed red tape and bureaucracy.
The Herald report says that administration costs are over $22,000 for each household. And this scheme has cost the Crown over $100m in concessionary interest, so far, because there’s no interest charged on the money loaned to the PHO providers.
The Government says inflation is driving up costs and it has scrambled to make a slew of changes to widen the net of applicants to get targets back on track.
For instance, the income cap of $150,000 has been “broadened” if you’re “larger whānau”, defined as “any eligible whānau of at least six people who normally live together” and are applying for this funding.
This change is intended to make it “flexible” in the Te Au Taketake pathway by enabling providers’ to deliver PHO schemes where up to fifty percent of households earn more than the standard income caps.
Is there a better approach to facilitating home ownership?
Supporters say that PHO is a better option for families than state housing, but perhaps a different approach would be more effective. Oliver Hartwich of New Zealand Initiative suggests the Government could change zoning laws and generally make it easier to build houses.
Bishop says National proposes to make getting mortgages easier.
