NICK COWDY / Residential Sales Consultant, Principal Agent
The government has announced its decision to scrap the First Home Grant scheme. This move, announced by Housing Minister Chris Bishop on Wednesday, 22 May 2024, will see applications for the grant cease immediately. Here’s what you need to know about this significant policy shift and its implications.
What is the First Home Grant?
The First Home Grant has been a cornerstone of New Zealand’s efforts to support first-time homebuyers. Under this scheme, eligible buyers could receive up to $5,000 for an existing home or $10,000 for a new build. To qualify, individual buyers needed to earn less than $95,000 annually, or $150,000 as a household. Additionally, there were price caps on the properties eligible for the grant, varying by region.
Since its inception, the scheme has helped many New Zealanders take their first steps onto the property ladder. In the last year alone, 12,000 people were approved for the grant. According to the Ministry of Housing and Urban Development (HUD), a total of 87,000 grants have been issued since June 2017.
Why is the Grant Being Scrapped?
Minister Chris Bishop explained that the decision to terminate the First Home Grant was driven by financial considerations and a strategic shift in housing policy. The government expects to save $245 million over the next four years (2024-28) by discontinuing the grant. Bishop emphasised that this move would have “minimal effect on home ownership rates.”
The government plans to redirect $140 million of these savings to fund 1,500 new social housing units starting in July next year. These will be delivered through Community Housing Providers rather than Kāinga Ora, following a critical review of the latter’s performance.
Impact on Current and Prospective Homebuyers
For those who have already applied for the First Home Grant, there is some relief. Bishop assured that Kāinga Ora would continue processing existing applications, and approvals already granted will remain valid for up to six months. However, no new applications will be accepted.
The government is retaining the First Home Loan scheme, which Bishop claims is a more effective tool for supporting first-home buyers. Unlike the grant, the loan scheme provides a pathway to homeownership without the direct financial outlay from the government.
The Bigger Picture: Housing Policy Shift
Bishop described the First Home Grant as “an expensive and inefficient way to support first home buyers,” noting its declining impact over the years. When first introduced in 2010, the grant covered about 10% of a standard home deposit; by 2024, this had fallen to just over 4%.
Critics argue that the grant has merely accelerated home purchases that would have happened anyway, rather than enabling new buyers to enter the market. The government believes that reallocating funds to social housing will provide greater value, especially with a social housing waitlist currently standing at 25,000 families.
The decision aligns with a broader strategy to address fundamental issues in the housing market. Bishop highlighted the need to increase land availability, encourage urban densification, and improve infrastructure settings to support sustainable growth.
A Controversial Decision
The move to scrap the First Home Grant has sparked mixed reactions. While some applaud the focus on social housing, others are concerned about the immediate impact on aspiring homeowners. The government acknowledges that the change will “cause some pain for some people” but insists it is the right decision to support New Zealand’s most vulnerable.
The decision to end the First Home Grant signifies a pivotal change in New Zealand’s approach to housing. While this may bring challenges for some prospective homebuyers, the government’s focus on increasing social housing aims to address deeper systemic issues. As these changes unfold, staying informed about new policies and alternative support options will be crucial for those looking to enter the property market.
