Housing Minister Phil Twyford released the long-awaited KiwiBuild eligibility criteria on Tuesday, amidst accusations he has widened eligibility to stimulate popularity and avoid houses costing $650,000 being left unsold.

Data from Statistics NZ shows that the 100,000 proposed KiwiBuilds could roughly meet demand from first home buyers in the income brackets targeted by Twyford.

The most keenly awaited detail was the income thresholds, which dictate the maximum amounts households can earn to qualify for a KiwiBuild home.

These are set at $120,000 for a single-earner and $180,000 for a couple. Twyford said this means 92 percent of first home buyers will be eligible for a KiwiBuild home, with only eight percent of buyers earning above the threshold and therefore ineligible.

To many observers, the income thresholds look relatively high. In the case of double-income households, they capture roughly four of the top five deciles of income. Only ten percent of households residing in property they do not own earn more than $188,000.

We are the (top) 40 percent!

But while Twyford is responsible for setting the maximum income threshold it will be banks who set the effective minimum threshold by deciding whom they deem it appropriate to lend money.

Economist Gareth Kiernan of Infometrics says that the effective minimum income a bank will accept for a mortgage on a $650,000 home is $90,800, with a 10 percent deposit (KiwiBuild borrowers, as first home buyers, are exempt from the current 20 percent loan-to-value restrictions).

Data from Statistics NZ’s Household Incomes Survey shows there are just 79,100 two-person households with an income between $97,600 and $188,899 living in homes they do not currently own. These are three of the top four income deciles in New Zealand. A full 174,500 two-person households not currently in their own home will miss out.

If Twyford chose to strip out those earning $142,800 to $180,000, which roughly equates to the second highest decile of household incomes, he would reduce the cohort by a third to just 52,500 households, potentially leaving nearly half of his 100,000 proposed builds struggling to find buyers (although a number of single-person dwellings will also be built).

It is important to remember that not all of these households will be eligible. They may already own a home or have owned a home. They may also not want to purchase a home — or may want to purchase a home that isn’t KiwiBuild.

Single-person households are also eligible for KiwiBuild. Their price cap is $120,000.

Newsroom does not currently have data for how many of these households currently do not own housing, but the total number of single-person households earning between $80,200 and $117,699 is just 27,900.

Assuming none of these people own their own home, that would make roughly 107,000 households eligible for the 100,000 KiwiBuild homes that will be built over the next ten years.

Not enough houses, or too many?

This problem of oversupply was raised with Twyford in a briefing paper drafted by MBIE on 1 November 2017.

That document said that there may be “first home-buyers willing and able to purchase 100,000 KiwiBuild houses at the price points outlined in your manifesto”.

“This suggests the target cohort and/or price points may need to be revised or additional support for KiwiBuild first home buyers provided”.

But instead of going down, the price caps of KiwiBuild homes went up by a full $50,000.

MBIE’s modelling suggested a first home-buyer would need to be earning around $114,000 to purchase a stand-alone KiwiBuild house in Auckland. The household incomes survey shows 113,000 two-person households earning between $117,700 and $188,899

It also said that only 25,000 private rental households could afford to purchase a house at around $500,000, but not all of these would be attracted to KiwiBuild.

Opposition Finance Spokesperson Amy Adams said the high income caps show the Government’s inability to provide housing the lower end of the market means it will have to find demand for its flagship housing programme amongst high-earners.

“He’s had to widen the catchment pool for buyers right up to about the very top of income earners to make sure it’s not a complete flop,” Adams said.

“It’s an admission of failure that this is actually about supporting middle income and low income earners,” she said.

Kiernan told Newsroom that the upper income caps were “pretty meaningless” as there would be few households renting on an income of $180,000, meaning little demand would come from the higher income deciles.

“Even when you look at the top three deciles, how many of those households are going to be renting or have not purchased a property before?"

He said he was still doubtful KiwiBuild would find demand for its 100,000 homes as they would still be too expensive for low-income earners and most high-income earners already own housing.

Possibly shared equity

Housing Minister Phil Twyford was confident that there would be high demand for KiwiBuilds, especially in the early years of the programme. He told Newsroom that once fully implemented, the supply of KiwiBuild homes would meet demand.

But he cautioned that the policy be seen in the context of wider Government changes around housing.

“KiwiBuild has never been a welfare policy,” Twyford told Newsroom.

“It’s a middle-class aspirational home-ownership policy, designed to help people who, a decade ago would have quite rightly expected they’d have a chance at home ownership, but are now locked out of the market,” he said.

He said that work was currently under way on developing a shared-equity scheme that would help lower income households to afford KiwiBuild homes.

“That is the thing that will make the big difference for low-income households,” he said.