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Kiwis offered affordable pathways to home ownership

Rebecca George and Jennings Koteka in their new home thanks to the Housing Foundation.

While politicians attempt to tackle the housing crisis, up and down New Zealand an action-focused trust is helping kiwis into brand new homes that they will one day call their own.

The Housing Foundation is a not-for-profit trust with a strong track record, having worked with 36 communities and delivered more than 750 new, stable and secure homes across New Zealand in the past 10 years.

Its properties sit in the large gap between social rental housing (government and local councils) and private housing that is rented or owned.

Foundation general manager, Paul Gilberd, says New Zealand home ownership is now lower than the 1950s and especially among Maori and Pasifika.

Systemic failure

“The decline began to gain pace in the early 1990s with the changes associated with Rogernomics. We now see widespread evidence of systemic failure in the housing market, especially for those people who do not own their own home, ” Paul says.

He said that the post-war government housing programme via the former State Advances Corporation allowed people to borrow money at 3 per cent. It was tremendously successful and gave people the leg up they needed into owning their own homes.

But in the past 30 years many changes have occurred and market forces largely prevail in the housing market – for both owned and rented properties.

“Unfortunately, the market does not, and will not, deliver affordable housing outcomes.

“We now have hundreds of thousands of families and households in the New Zealand market who can and do work, who pay their taxes and who cannot afford to rent or buy a home,” he says.

The Housing Foundation, in collaboration with iwi and local community housing providers, aims to deliver affordable homes through the Housing Pathways programme for low income working households.

We turn hope into home ownership through our two effective products – Affordable Rent to Buy and Shared Ownership.”

With Affordable Rent to Buy a family commits to a five-year rental on a new house built by the Foundation. After five years they have the right to buy the house (or at least a 55 per cent share of it). At the conclusion of the five-year rental period, the family earns the right to 25 per cent of the increase in the property’s value, which they can apply to their deposit as they move into ownership tenure.

This Housing Foundation complex uses the “mixed tenure blind community” form of ownership for 295 homes built as part of the consortium at Weymouth, South Auckland.

Rents one third of incomes

Rents are set at an affordable rate, that is they are limited to one-third of income which is the global standard promoted by the United Nations, the USA and Canada.

With shared ownership the family’s deposit and mortgage (with payments of no more than one third of income) buys a majority slice (55 per cent or more) of the value of a new home. The Housing Foundation (or another provider of interest-free long-term capital) owns the balance. The family and foundation own the property using the “tenants in common” legal form of ownership and the aim is that over 10-15 years the family will buy out the Foundation’s share.

Paul says it has been “extraordinarily successful” all over the country from the Far North to Christchurch. The foundation has built 750 homes and assisted hundreds of families in this way and there has not been one mortgagee sale.

“We step in where we can with our partners and act like the bank of mum and dad, especially for those families who are not lucky enough to already have the resources to support others into pathways towards independent home ownership. As they can afford to pay us back they do. Then we recycle that money and use it for another family in another home.”

A Housing Foundation community at Whau Crescent in Avondale, Auckland, holds a street party.

Sharing their housing journeys

Many of their clients have shared their housing journeys on the foundation website.

One household is Rebecca and Jennings, their children and Rebecca’s father moved into their new home in West Auckland’s Henderson after renting for 13 years.

Jennings Koteka and his daughter in their new home in West Auckland’s Henderson thanks to the Housing Foundation.

Pasifika families have the lowest home ownership rates and have suffered significantly in the decline of the past 30 years.

“We are from the Cook Islands. But thanks to Housing Foundation we aren’t one of those statistics,” Rebecca and Jennings say.

“Housing Foundation is transparent and honest. The people on the ground are good at connecting with the families. Your processes already in place are easy and understandable.  I didn’t believe that this was an option.

“Now we are giving our money for our future.  It puts us in a really good position to think about the future financially. If you dream big, you can work towards your goal.”

Not all smooth sailing

But it hasn’t been all smooth sailing with the shared ownership concept. The foundation struggled for many years to get the concept of shared ownership accepted by lawyers and banks. The idea of shared ownership has been working in places like Britain for decades but because it was something new here in New Zealand it was very difficult, Paul says. All but one of the major institutional banks now work with families and provide shared home ownership loans to them for the Housing Foundation product.

While many kiwis are helped into homes by “the bank of mum and dad”, there were many for whom the first step on the property ladder was too far out of reach.

Paul says the foundation’s products are a “deliberate attempt” to bridge the gap and help people lift themselves out of a trap.

We are the only people who really deliver these pathway products at scale and we can’t do enough. The problem is continuing to grow at a speed we simply cannot keep up with.”

Paul says anything government does towards providing more housing is good but he wishes the current Government would borrow overseas at available interest rates as low as 2.8 percent.

While the Government plans to increase public housing by 1600 units a year, it was good news for social and emergency housing but not enough to address a system that is broken, he says.

Gap ‘way too big’

Many people were working hard to get out of rental housing “but the gap is way too big”.

The most they could often afford was $300,000 to $400,000 but the Kiwibuild affordable housing was around $600,000 and unaffordable, he says.

That group, a type of working poor, comprised the intermediate market.

In Auckland there are more than 120,000 households in that category, which shows the system is broken, he says.

If we keep focusing on the ambulance at the bottom of the cliff and never provide those families with a stairway to lift themselves up, they have no option but to stay there. This sums up our broken housing system.”

A further complication of the Kiwibuild programme is that homes have only two or three bedrooms and were of little use to extended families with three generations under the same roof.

In many urban centres, many people on low incomes were living three families to a house and paying 40 to 60 percent of their incomes on rent.

“These families and their children are our future as a nation. We need to ask ourselves as kiwis if it is fair that hard working taxpaying families cannot afford to rent or buy a home,” Paul says.

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