What does shared home ownership look like? The options explained

Shared home ownership is being touted as a solution for the growing numbers of people who can’t afford to buy a house – but what is it?

New Zealand home ownership rates are falling, leaving many people struggling to secure a place to call their own.

Shared home ownership models have emerged as one potential solution to this challenge, but according to a Deloitte study commissioned by Westpac NZ, many people don’t know what those options are.

Housing providers are already offering some shared home ownership options in New Zealand.

Shared home ownership involves a housing provider partnering with a first-home buyer by contributing equity or providing land, making the purchase more affordable through a reduced deposit and more manageable loan repayments.

This equity typically comes from local or central government, financial institutions, charitable organisations or philanthropic investors.

Those options include:

Shared equity

A third-party housing provider – usually the government, charitable organisation or iwi Māori – will give a buyer the shortfall they need for a home deposit.

This means buyers can get bank lending with a lower deposit of around 5-10%. The buyer and the equity provider then own the home together and share in any capital gain proportionately.

The shared equity options allow for the buyer to pay the provider’s portion back to them over time until they own the home outright.

Rent-to-own

This arrangement allows for a tenant to rent a property for a period, with the option of applying to purchase it for an agreed price at the end of that time.

This type of scheme can help people gradually transition from renting to owning their home.

Leasehold

This is where people buy just the house and not the land underneath it. There is usually a ground lease paid to the landowner.

Leaseholds do come with some risks, including complexity of the agreements and the potential for increases in those ground rents.

Papakāinga

Papakāinga refers to developments of a communal nature – usually three or more homes – on ancestral land owned by Māori. These can include leasehold, rent-to-own and shared equity arrangements. Permission from the Māori Land Court may also be needed in some instances.

Co-housing

Under this model, multiple families live within a wider complex, usually with their own home but shared facilities, such as gardens, garaging, and laundry space.

Co-ownership

This is where two or more people – usually friends or business associates – pool their resources to buy a property.

The buyers then own the property as tenants in common. Their shares in the property can be equal or unequal, depending on how much they have each contributed to the costs of buying it. Any gains made on the property are shared proportionately.

While these ownership models might offer more people a route to buying a home, they can come with downsides.

The Deloitte/Westpac NZ report found concerns over certainty in policy and funding was a common theme. Complexity in decision-making with multiple parties involved, and limited flexibility in transferring ownership were also identified as problems.

Economics commentator Bernard Hickey told 1News banks still find it difficult to lend to multiple people with a title that’s not clearly connecting a piece of land to an income earner.

Westpac NZ chief executive Catherine McGrath acknowledged that barrier.

"We're used to lending over more traditional housing models, so there's more that the banks can do."

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