Key strategy to fix housing #2
Duplicate existing Government underwriting processes to leverage investment for collective housing
Forever Affordable Homes (FAH) has spent many hours in discussion with various players in the development space. The aim is to deliver a successful pilot housing project through a partnership. A draft partnership agreement has been prepared and distributed to potential partners. It outlines potential high level relationships and responsibilities. From this process, it is clear that there are many and willing potential participants in a pilot.
Players in the development space want to see risk distributed. Government as a partner demonstrates confidence in the approach. For a successful pilot project, that looks like the government taking on and holding some of the risk. This is best done through a Government held underwrite. As one would expect, the riskiest period is through the construction phase. As such FAH seeks government input in the form of underwriting developments. This means it would take over responsibility for the development should it be required. As a new method for housing which is still relatively new in Aotearoa, support is needed while it is being established.
Underwriting housing developments is not just relevant for the collective housing sector. RNZ recently published the following:
Community Housing Aotearoa chief executive Vic Crockford said another way the government could provide support was through underwriting developments.
"While community housing providers are getting houses built, a lack of access to upfront capital has become a significant constraining factor," she said.
"We've suggested a government underwrite - or guarantee - for community housing providers. This would help de-risk the process of securing finance for the provider and lower the cost of borrowing. This could also unlock more impact investment opportunities for the sector."
An underwrite applied more broadly to the collective housing sector would:
1. magnify investment
2. show confidence in proven models
3. enable an increase of housing supply, including affordable.
Forever Affordable Homes highlights how a government underwrite can enable more developments to be established and constructed. Once built and ready for occupancy, a transfer can occur to the Community Land Trust and Co-operative.
This is not a new approach, government underwrites are used for other types of housing projects. The underwrite process now needs to be made available to enable a broader array of housing developments, including forever affordable homes.
Implementing this important and necessary step will help create a collective housing sector (defined in our previous Blog) which can be self-sustaining in to the future. This is the second of five fixes identified by Forever Affordable Homes to support those working Kiwis who will never catch the property ladder and are unlikely to qualify for any government housing support. They are otherwise lifelong trapped renters.
