The Government has announced a plan to temporarily underwrite the construction of private housing developments, which it says will support the construction industry during the economic downturn.
Interest rates remain high while building consent rates are low, meaning developers are struggling to pre-sell enough dwellings to secure finance for development.
Housing Minister Chris Bishop said the plan would lower the risk for developers and ensure houses were ready for buyers to enter the market as interest rates drop.
“In times of expensive borrowing, underwrites are an effective tool for supporting housing supply. This is because underwrites increase developers’ access to finance where they otherwise wouldn’t have been able to get it, and therefore wouldn’t have been able to deliver the houses,” he said.
Bishop said developers would need to be “credible”, meaning they needed to demonstrate a proven track record of successfully building or selling houses of a similar size and scale.
The development must have a minimum of 30 houses, and the developer must have ownership or use of the land, and all the required resource consents.
Building and Construction Minister Chris Penk said developers would also need to provide satisfactory evidence that underwrites were needed for the development to proceed within six to 12 months.
“The number of houses supported by the Residential Development Underwrite programme will depend on wider economic conditions, demand from developers, and the speed at which houses are built and sold — the faster projects are completed the more capacity will be recycled back in capacity for further underwrites,” he said.
Funding for the programme will come from unused funding from KiwiBuild and the BuildReady Development Pathway programmes.
The latter programme was one that also provided underwrites for affordable housing developers.
Labour’s housing spokesperson Kieran McAnulty said the scrapping of that programme, only for the Government to then introduce another underwrite programme, had created unnecessary uncertainty in the construction centre.
“Over the last few months thousands of construction workers have lost their job. Maintaining a government underwrite throughout this period would have helped some of them keep their jobs,” he said.
Registrations for the programme will open on October 7.
The Government said it would be targeted towards high population areas like Auckland, Hamilton, Tauranga, Wellington, and Christchurch, but would be available everywhere.
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