Why not just have the Govt build and own all the homes?

Kate Shuttleworth at NZ Herald reports:

The Green Party has announced ambitious plans for a shared-equity housing ownership model designed to help low-income families with dependent children into home ownership.

The plan was announced days after a report showing Auckland had among the most unaffordable housing in the world. The median price has reached $500,000 in the past few months.

Under the ’ progressive home ownership model, the Crown would build houses for up to $300,000 which families would live in, and eventually own if they chose to. The Crown would initially own all the equity in the house because families would not need to pay a deposit.

Families would make weekly payments, similar to rent, to cover the Crown’s investment cost – $200 a week on a $300,000 house at a government bond rate of 3.5 per cent. They would make additional weekly payments to buy equity in the property until it is owned outright.

The payments would be about $100 a week, but that figure would be flexible if circumstances changed.

Why don’t and the Greens go the whole hog, wave a wand, and declare free homes for everyone?

Let’s even assume that the Government can magically construct a house for $300,000 in Auckland. They can’t but play along.

The NZ Super Fund says the long-term risk-free fate of return for the Government is 5.1%. We’ll use 5.0%. What this means is that sticking $300,000 into a house has an opportunity cost to taxpayers of $15,000 a year. You charge rent of $200 a week and that is a $5,000 a year subsidy to the lucky Lotto winners whose names get pulled out of the ballot for a house. And it is a subsidy for life. Doesn’t matter how wealthy they become. The poor slob earning $30,000 a year will be subsidising the dinkie couple on $200,000 whose name got pulled out of the ballot. And far worse than that as chump taxpayers also pay for rates, maintenance ad the likes.

Why would you buy equity in the house? You’d be mad to. Take their example of $100 a week. Over a year you pay $5,200. This is 1.7% of the $300,000 equity. So the weekly rent would drop from $200 to $196.53. That means you have paid $180 less rent. You’ll get more than that if you put the $5,000 into even government bonds.

The Labour policy is shonky.. The Greens policy is nutty. Combining them together will mean the Government taking on over $3 billion of extra debt a year.  And all this money would not go to the poorest familes, or families most in need. It would be like Lotto. They will draw names out of a hat, as demand will of course exceed supply. Yes that is Labour’s official policy – to determine these taxpayer subsidised houses on the basis of a random draw. And to make it worse, the Greens will make those lucky Lotto winners a winner for life – subsidised rents for ever and ever – no matter how much you earn.

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