Labour used to call this privatisation

RNZ reports:

Labour is promising to help public housing tenants buy their own homes, putting $100 a week towards their deposits under a new rent-to-buy scheme.

Under the election policy, working tenants in Kāinga Ora homes and participating community housing properties would be able to build up a deposit while paying rent.

They would receive a $100 weekly credit, adding up to $5200 a year, with the money held in a trust account.

I think helping state tenants become homeowners is a great idea in principle.

However I do recall that when National governments had policies to encourage tenants to buy their homes, Labour called it privatisation!!

This specific policy though is not going to achieve much, if anything. A reader has pointed out the following:

Financially it’s nuts and more expensive than just renting.  But then there is rates, insurance, maintenance etc to pay. 

As KO will guarantee the mortgage (few KO tenants would qualify for a mortgage) where does the tenant obtain a mortgage?  Oh of course, KO will provide. 

Therefore KO will blow out their debt ceiling once again because they have said they will build three more units for each one sold 

Let’s say a KO unit is worth say:

KO Unit cost:     $500,000

Deposit:              $50,000

Mortgage           $ 450,000

Interest say 6%

Term say 25 years

Monthly repayment P&I

Per month $2,900

Total interest over 25 years is $419,807 

Let’s say the rent is $500 a week but a mortgage is $669 a week so the tenant is already $199 a week worse off and he has to pay rates and insurance plus maintenance which even conservatively would add a further $125 a week to the mortgage 

Who in their right mind would buy a KO unit and pay an extra $324 a week more than the rent?

It’s another  nut job Labour plan