Can't afford a home? The government could become your ‘partner’ as New Zealand considers a major shift in first-home policy

For many young New Zealanders, owning a home was once a life goal that a few years of hard work could put within reach. Today, however, the combined pressures of house prices, interest rates and living costs are making it increasingly difficult to get on the property ladder.

Against this backdrop, New Zealand First (NZ First) has floated a housing proposal that has sparked considerable discussion: if young families cannot afford a home, the government could become their ‘partner’.

This is more than an election slogan; it is a policy approach currently under consideration.

According to a recent report by financial news outlet Interest.co.nz, NZ First is exploring a government home-buying scheme called the ‘Co-investment Model’, under which the government would jointly own properties with eligible first-home buyers. Deputy leader Shane Jones says the model could offer first-home buyers more favourable financing terms than commercial banks currently provide, lower barriers to home ownership, and potentially become a key part of the party's manifesto for this year's general election.

If implemented, the policy would change how first-home buyers are supported and could become one of New Zealand's most groundbreaking housing policy initiatives in recent years.

From ‘helping you buy a home’ to ‘buying a home with you’

New Zealand governments have introduced various forms of first-home support over the past decade or so.

Allowing first-home buyers to withdraw KiwiSaver savings, the former First Home Grant, and the First Home Loan that still operates today all essentially help buyers overcome deposit shortfalls or difficulties securing a mortgage.

These policies share one feature: the government provides assistance, but the home remains entirely owned by the buyer.

NZ First's proposed model takes a different approach.

Under the proposal outlined so far, the government would move beyond providing loan support to investing directly in home purchases and sharing ownership with eligible families.

For a simple example, suppose a home costs NZ$1,000,000 and the family cannot fund the entire purchase on its own. The government could cover a proportion of the purchase cost and jointly own the home with the family. As the family's income rises, it could gradually buy out the government's share. If the home were sold in future, the government would receive a share of the sale proceeds in proportion to its ownership stake.

In other words, the government would become a co-investor in the home, rather than simply helping the buyer obtain a loan.

Shane Jones believes a key reason the proposal could work is that the government's financing costs are much lower than those of commercial institutions. If the government used its credit advantage to co-invest with first-home buyers, it could theoretically help them secure lower financing costs. This is the underlying reason for his suggestion that ‘mortgage rates could be lower than those offered by Australian-owned banks’.

This would undoubtedly be a new approach to housing policy in New Zealand.

Why propose this now?

The plan has not, in fact, appeared out of nowhere.

NZ First deputy leader Shane Jones revealed that the party had explored a similar model between 2014 and 2017, although it did not reach the implementation stage. Its revival is closely linked to the pressures facing today's housing market.

First, the barriers to buying a first home remain high.

Although house prices have undergone a correction over the past few years, the pressures on many young families have not eased significantly. Mortgage rates are expected to gradually fall in future, but large deposits, strict lending assessments and rising living costs continue to deter many first-home buyers.

Second, growing numbers of young people are anxious about their future.

In an interview, Shane Jones said plainly that more people within the party were concerned New Zealand could lose a generation of young people because of housing difficulties.

‘If young people never see any prospect of owning their own home, they may choose to leave New Zealand for countries with higher incomes and more opportunities.’

This is no idle warning. Australia has continued to attract large numbers of young New Zealanders to work and settle there in recent years, and housing affordability is one of the key reasons many consider moving.

In this context, housing is no longer simply a property issue. It also affects migration, economic development and national competitiveness.

Meanwhile, with the general election approaching, political parties have begun a fresh round of competition over housing policy.

National, Labour and NZ First all recognise one reality: whether young people can afford a home has become an important issue influencing voters' choices. As such, this is more than a housing policy; it is also a major appeal to voters' everyday concerns in this year's election.

Of course, no housing market reform will receive universal applause.

Supporters of NZ First's government co-ownership proposal believe it could open a new door for many young families long shut out of the property market. Sceptics, however, worry that an inadequately designed scheme could create new market problems.

Could it really lower the barriers to buying a home?

Based on the information released so far, the policy's greatest advantage lies in making full use of the government's lower financing costs.

Shane Jones notes that government borrowing costs are generally lower than those of commercial institutions. Co-investment by the government and home buyers could therefore, in theory, offer first-home buyers more favourable financing terms than commercial banks and ease the burden of monthly repayments.

For many young families, the real difficulty is not paying a mortgage but overcoming the initial hurdle of a large deposit. Many pay hundreds or even upwards of a thousand dollars in rent each week, yet remain unable to enter the market because they cannot save enough for a deposit. If the government covered part of the purchase cost, money previously paid to a landlord could instead gradually build the family's own assets.

This is a point Shane Jones has consistently emphasised.

He believes these funds would be better used to build a family's ownership stake in a home than to pay rent indefinitely.

International experience shows that similar ‘shared equity’ models are not a new concept. The United Kingdom, Australia and parts of Canada have introduced various forms of government co-investment or shared equity schemes to help first-home buyers enter the market. Outcomes have varied, however, offering lessons New Zealand could learn from.

The biggest question: could it push house prices up again?

Yet as support for the policy grows, the concerns are also becoming more apparent.

Shane Jones himself acknowledges that a poorly designed co-ownership model could have unintended side effects.

The most immediate concern is house prices.

If developers know the government is willing to co-invest in home purchases, might they raise their prices further?

If government support brings more buyers into the market, could this increase demand and drive another rise in house prices?

This is also a key reason Treasury has previously been cautious about similar proposals.

NZ First is understood to have tried to advance a similar scheme in earlier years, but Treasury considered that long-term government ownership of substantial stakes in residential property would increase financial management costs and potentially expose the government's balance sheet to greater risk.

In other words, the government would have to commit funding and share in the gains and risks arising from rising or falling house prices.

Many other details also remain unresolved.

For example, what proportion of the property would the government own?

How soon could a family buy back the government's share?

Who would bear the loss if house prices fell?

How would the proceeds be divided if a family sold the home early?

There are currently no clear answers to these questions.

Shane Jones also acknowledges that the party is still working through the scheme's financial modelling. Details such as eligibility, income limits and the qualifying house-price range have yet to be finalised.

What would it mean for Chinese first-home buyers?

The policy is also worth watching for many Chinese families living in New Zealand.

In recent years, growing numbers of young Chinese people have stayed in New Zealand on work visas, as residents or as citizens. Many are now looking to buy their first home.

If the policy is eventually implemented, eligible first-home buyers could apply for this kind of support regardless of ethnicity.

At present, however, the policy appears more likely to target families buying their first home, with eligibility thresholds for income, assets and property prices, so not everyone would benefit.

For existing property owners, the policy's market impact would also be worth watching.

Helping more young people enter the market could increase property transactions. But stimulating demand too quickly could also push house prices up again, undermining the policy's original goal of improving affordability. Its success would therefore depend heavily on how it was implemented, rather than on the concept alone.

Observations and reflections

Whether or not this policy becomes reality, it sends a clear signal: faced with a housing affordability problem that has persisted for years, New Zealand's political parties are beginning to explore approaches beyond conventional thinking.

Previously, government support for first-home buyers mainly took the form of deposit grants and loan guarantees. The discussion has now shifted to whether the government should invest directly in home purchases, sharing costs and risks with young families. This shows that housing has long been about more than the property market: it also concerns young people's futures, migration and the country's overall capacity to develop and compete.

Of course, co-ownership is no cure-all. Future discussion will need to focus on balancing help for young people to achieve home ownership with avoiding market imbalances, protecting taxpayers' interests, and ensuring support reaches those who need it.

With a few months remaining before the November general election, housing policy is likely to remain a central battleground for political parties. For the countless young families still renting and working hard to save a deposit, what matters is not who offers the most appealing slogan, but which policy can make owning a home more than a distant dream.