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A Boost for Housing

Categories View all posts in Property
Post date Post author Pierre Wong

In a significant move to address the housing crisis in New Zealand, the government has introduced a new Residential Development Underwrite Scheme aimed at accelerating the construction of homes across the nation. As demand for housing continues the supply of housing is struggling to keep pace. This initiative seeks to bridge the gap and provide much-needed support to developers.

Lenders typically require developers to achieve a certain level of pre-sales before providing financing. Recently, many developers have struggled to meet this requirement, leading to a decline in new housing developments at a time when New Zealand needs more residential homes.

The Residential Development Underwrite Scheme offers a safety net for developers by guaranteeing a certain level of income or covering potential shortfalls during the development phase. In the event a developer is unable to reach a certain level of sales, the government will commit to buying enough houses to help a developer meet the bank’s presale requirement to begin construction. The government will only go through with the purchase if the developer is unable to find another buyer in the future. If the government is required to purchase the underwritten dwellings, the government will on-sell them as affordable or social housing.

Eligibility Criteria

An application can be made by a developer, provided that the developer:

  • is an established residential developer with a proven track record of successfully building and selling houses of a similar size and scale;
  • has ownership or use of the land (or an option to do so) and have all required resource consents for residential housing;
  • provides satisfactory evidence underwrites are needed for the development to proceed within 6 – 12 months (for example, evidence that reasonable attempts have been made to market the development, finance approval is conditional on securing presales, and there are workers/subcontractors available); and
  • agrees to provide a recent market valuation from a registered valuer.

The development must also have a minimum of 30 houses.

The scheme is targeted to densely populated areas such as Auckland, Hamilton, Tauranga, Wellington and Christchurch, but will be available everywhere.

Applications can be made by developers through Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development’s website.

Once submitted, an application will be assessed by the Ministry of Housing Development. A detailed assessment framework can be viewed here.

The New Zealand government’s Residential Development Underwrite Scheme represents a proactive approach to tackling the housing crisis. As the scheme unfolds, it holds the potential to reshape the landscape of residential housing in New Zealand.

If you require any further information, or assistance with preparing an application, please contact the dedicated property team at Henderson Reeves.