Take Away the Land and What do you Have? – A Resurgence of Activity in the Building Industry.

Each time I bring up LEASEHOLD LAND as an alternative to making housing more affordable those with otherwise little to say come out of the woodwork to assure me such an initiative will not work. 

Knowing it has worked in the past, (St John’s) comes to mind, I sent a number of emails to various councils throughout the country for their comment.

All replied (apart from Auckland), which was expected as they have never bothered to in the past, but all of the others not only supported the idea but gave examples of how it has worked in their regions and in some areas it is still to this day working well.

Following is a reply from Helene Ritchie – Wellington City Councillor

“You will be aware I am sure that much of Newlands has been built on leasehold land-Manchester Unity land, and that this has enabled young couples then, some thirty or so years ago and since to have affordable housing.”

“I think leasehold land is a good way to ensure affordable housing-and we do need to find ways.”

If you take the land out of house and land packages and what do you have, AFFORDABLE HOUSING.

It seems we are hell bend on reinventing the wheel when we already have options that work but we still look for a better way. 

Sure there is nothing wrong with fine tuning, but to ignore something that has worked for years in favour of trying to find another option just doesn’t make any sense to me.

I am not advocating the government go out and purchase land and turn it into a reservation of low cost housing that is the last thing anyone needs or wants to see and I can’t think of anywhere in the world that concept has benefited anyone but there are alternatives worthy of consideration.

Government Subsidised Leasehold Land

Housing NZ have a large number of properties they are getting little or no return on so why not sell the (houses) to the tenants and lease the land to them for a nominal amount with the tenant having an option to purchase the land (for a set price at a nominated time in the future). This could result in pride of ownership and ease the burden on the costs of HNZ supplying and maintaining subsidised rental accommodation.

It is a futile exercise offering to sell houses to the tenants if the cost of ownership is not affordable. 

Sure the government will be still subsidising such a project but when one sits back and has a look at the big picture (and there is a lot to think about) it makes far more sense and not only just in financial terms.

Apartments

Councillors from Wellington and other regions also support apartment (or) high density  living as it has less impact on the infrastructure as apartments are generally close to public transport and in many cases central business districts.

Recently The Government in conjunction with Kiwibank and a few other lenders set up a package to help Maori build on their land as lenders in general are not keen on lending on land with multiple ownership entitlement.

As lenders are generally reluctant to loan on apartments (although for different reasons), it would be a huge assistance if the government offered to insure lending for first home buyer (as they have done for Maori) so they could purchase an apartment with a minimal deposit or even no deposit. In many cases, this would result in people paying less to own than they would to rent.

If this is the case (which it is) why are the lenders requiring at least 30% to 50% deposit on apartments. 

The quick answer is they were burnt by property investors, developers and others thinking they could make a quick buck.

I had been advising for the past three years or so to keep away from apartments but have recently changed my tune a little and can now see the upside.

Both of the above options shouldn’t necessarily be limited to first home buyers and should be available to any New Zealander that doesn’t meet main stream leader’s criteria.

I am not advocating that this type of living is for everyone and it is not a quick fix but if we are serious about make housing more affordable, and kick starting the building industry we do need to look at alternatives because what is on the table is not working.

Brian Dalley is a leading Property Consultant | former NZMBA Mortgage Broker, and Real Estate Agent.

Comments

[Tony White]

Surely this is an option for Kiwisaver Funds.
Government could smooth the way for companies like Landco to develop land and offer the subdivisions to Kiwisaver Funds which then lease back to people wanting to build. The land at Long Bay on the North Shore springs to mind.
With baby boomers looking for secure alternatives to finance companies (who in their right mind would invest in a finance company now?) an investment fund leasing land on a long term basis would likely succeed.
Land leased by a Kiwisaver Fund represents a long term secure income stream for retirement funds as well as capital gain for the future.
The issue is that we, as a nation, are looking for short term answers, whereas leasing land to build houses on is an investment in our long term future.