Affordable Rental Programme
- You might be facing one of the following challenges:
- You want a safe, secure, stable home for you and your family
- No deposit for a house. Making it even harder, you may have credit card and other debts.
- No spare cash — too many weeks in the month!
- An income or credit history on which the banks won't give mortgage finance.
- You desperately want your own home, but have no way of making it a reality.
- Renting feels like money down the drain and you are paying a high percentage of your household income in rental costs.
- You occupy a new home built by Homes for People, paying the equivalent of a fair market rent.
- Over a five-year period, Homes for People provides financial planning support so you can clear your debts and save a deposit.
- You are in KiwiSaver and after the qualifying period can use your savings towards the deposit for the house.
- Assuming the property increases in value, above the original cost, you’ll get a portion of this increase (normally 25%) to combine with your savings and use as a deposit to buy your home.
- After five years, instead of paying rent, you could have similar-sized, or even lower, mortgage payments – but now you’re buying your own home.
Affordable Rental FAQ
ENTRY QUALIFICATIONHow do we qualify?
To qualify for Affordable Rental you need to be:
- A first time home buyer, and
- Have a good credit record, and
- Have a regular combined household income, i.e.: Palmerston North - between $45 000 and $85 000 per annum, and
- Have the ability to afford and pay a market rent. This would vary depending on the number of bedrooms and the location of the house.
What if I’m on low pay?
All you need is a joint household income of more than $45,000 to apply.
We’ve had credit problems in the past?
This may not be a problem. We’ll review your circumstances, and you’ll get expert financial advice to help clear your debts.
Is there anything else I need to do?
A home ownership education programme will be a requirement and is to be completed before or shortly after taking occupancy of the property.
How do I apply for the Affordable Rental scheme?
Check our Step by Step Guide for our basic criteria. Then complete a Registration of Interest Form.
What independent advice should I take?
You may wish to talk to a solicitor, financial advisor or family friend. Feel free to ask them to talk to us.
5 YEAR OCCUPATION
How does the 5-year Occupation Agreement work?
The Occupation Agreement provides the same rights as a Residential Tenancy Agreement but with the added benefits of owning.
A Bond is required to be paid at the commencement date of the Occupation Agreement. This will be equal to 3 weeks' rent and will be lodged with Tenancy Services. The bond is refunded at the end of the agreement, or when you buy the property, provided the property has been looked after and all weekly payments have been made.
It gives you an absolute right to occupy the home for up to 5 years provided payments are made and the property is looked after.
Can I sub-let the house to someone else?
No… As with a Residential Tenancy Agreement, you cannot sublet the property to anyone else or make structural changes without the prior approval of Homes for People.
However, once you purchase the home outright you can do as you wish.
How is the cost of the weekly payments assessed?
The weekly payments will be equivalent to a market rent for the property and are set for 5 years. There will not be large increases - in fact payments may only increase by up to 3% a year. In Palmerston North the average weekly cost is in the range of $250 to $330 per week. The costs per week in other parts of New Zealand will vary.
Who maintains our home while we rent?
Homes for People will pay land rates, insurance and structural maintenance. You will pay electricity, telephone, water, contents insurance and day-to-day up-keep of the property, i.e.: mowing the lawns. We expect you to look after the home as if it were your own.
What if we move before the 5 years is up?
You will terminate your Occupancy Agreement and have no rights to purchase the home. You will have paid market rent for the home while you have been the occupant.
How big are the houses and are they new?
The properties will generally be new, or near new, one or two bedroomed homes, often as units. A few homes will be for larger households and on their own sections. They will generally be either brick and/or weatherboard construction, include a car-parking space or carport, concrete driveway, fencing and clothesline. The houses will also have floor coverings and curtains.
Can I make changes to the house being built?
No - The design and plans for the houses are determined by the builder. You are not able to amend the design or plans.
THE PURCHASE PROCESS
When can I buy the house?
You choose when to buy - you have the right to purchase the property at the end of the 5-year period or anytime within it. You can put down your roots, raise children, plant a garden and become part of the local community. Then when you are in a position to raise the money you can buy the house.
But what if I still don't have the money for a deposit when I am ready to buy?
We will help with the deposit by giving you 25% equity in the increased value of the property. However, if you do terminate your tenancy or vacate the house at any time before you buy the house, you do not get a share of the growth in market value of the property.
What is Equity?
The equity is the difference between the original cost of the property and the current market value. For example, if a property that cost $220,000 increased by $40,000 over five years to $260,000, then the equity is the increase, i.e.: the $40,000.
So, if the example above was in our scheme, you would receive 25% of the $40,000 equity. Your equity would be $10,000.
Who owns the other equity in the increased value of the property?
Homes for People owns the other 75%; we share the equity increase with you. This means Homes for People receives $30,000 (75% of the equity).
Do you give me equity in cash for the deposit?
No - your equity is deducted from the purchase price of the house as if it was a deposit.
How are the property valuations worked out?
On commencement of the 5-year occupation, assessments are made as per the example below:
Valuation of property on commencement $220,000
Original cost of property $220,000
Market rent assessment per week $280-$320
Weekly payment (fixed for up to 5 years) $300
When you are ready to purchase the house the purchase price is calculated as per the example below:
Valuation of property (independent valuation) $260,000
Occupant has deposit as own equity $10,000
(being 25% of difference in value over the original cost)
Occupant buys an equity share in the property at valuation less the equity deposit. (The amount the Occupant can buy is determined by the mortgage they can afford and their savings for a deposit). In this example the Occupant can purchase $210,000 of the house. This amount is based on a mortgage of $195,000 and a deposit of $15,000 from their savings and their KiwiSaver: $210,000
Therefore, the household can afford to purchase a share of their home equating to 84%, being equal to ($210,000/($260,000-$10,000)). The other 16% is owned by Homes for People. The household can purchase this 16% share from Homes for People at any time in the future at the then current market price: 84% of the property is purchased by the Occupant/Household.
Who values the property?
An independent registered valuer will assess the current market value of the property and a copy of the valuation will be provided to you. On commencement of the occupancy, the original cost of the property will always be less than the valuation, thus some equity is available to you from the day you take occupancy, allowing also for growth in future.
What if the value of our house goes down after 5 years?
You'll have the option of continuing to rent, until market values rise again. You won't have lost any money, because you have paid only the equivalent of market rent in the meantime.
Can Homes for People provide mortgage finance?
No, Homes for People does not provide mortgage finance.
Will Homes for People help us to find a mortgage?
Yes, we will assist with introductions to Banks if required, but to eventually buy the property outright, you will need to arrange your own mortgage from a bank or other financial institutions.
What if we can't afford the mortgage payments after 5 years?
This shouldn't happen. You'll be paying market rents and as the value of the home increases over time you'll accumulate the deposit that will enable you to raise a mortgage. Also, you'll be able to put the money you used to pay other debts into your mortgage.
Who maintains our home after we convert to a mortgage?
All maintenance from this point on will be your responsibility.
What if I sell the house after we have purchased it?
That's entirely your choice; there is the requirement to offer the property back to Homes for People to purchase it at the market price. This gives Homes for People the ability to purchase the house from you, and then offer it to another working household who may be trapped in the rental market. Please also note that you will not be eligible for our affordable housing programmes in the future.