Labour hopes new community underwrite scheme will incentivise more housing

Labour is proposing a community housing underwrite scheme, which it hopes will incentivise more housing.

If elected, Labour would raise the Crown guarantee for Community Housing Funding Agency (CHFA) Social Bonds - essentially reducing the cost of finance for community housing providers, by telling investors the government will guarantee their loans if the agency cannot repay them.

Labour's housing spokesperson Kieran McAnulty said the guarantee was similar to that currently provided to banks, and would only be called on in the unlikely event of a default.

"What we've announced today is a simple, pragmatic change that will make a material difference to the sector, and ultimately lead to more social houses being built at no cost to the government."

CHFA was launched by social enterprise Community Finance in 2024, as a way of pooling finance requirements for community housing providers (CHPs) to provide cheaper debt.

"There was an expectation at that time that the government could make a simple commitment to guarantee the bonds that the agency issues to improve the credit rating, and therefore further reduce the cost to the community housing sector, but the government didn't do it. They gave a guarantee to the banks, but not to the funding agency," McAnulty said.

The government does currently have a bank loan guarantee scheme in place, with the Crown guaranteeing 80 percent of loans provided to eligible CHPs by five participating banks.

The existing scheme could support up to $900 million in new lending.

The scheme is available until June 2027, and McAnulty indicated Labour would be happy to commit to extending it.

CHFA has an A+ credit rating, and has faciliated $530 million of funds nationwide.

McAnulty said combined with further reductions in CHFA lending margins, the guarantee was expected to improve CHFA's credit rating to AAA, and cut borrowing costs by around half a percentage point.

It was estimated for every eleven homes built, the scheme would pay for a twelfth.

Labour has budgeted $950 million for the guarantee, which would come into effect from its first Budget, should it get into government.

Lowering the risk would mean investors face lower returns, but McAnulty said investors were "attracted" to the prospect that their investment could lead to houses for people in need.

"They've already seen half a billion dollars through the agency as a result of the cost being reduced. That cost will reduce further, and we are confident that investors will continue to support it through that scheme."

He indicated Labour would have further policies in the housing space in the run-up to the election, including something for Kāinga Ora, as well as further announcements for the community housing sector, and ways to assist people purchasing their first home.

At the Community Housing Aotearoa Conference in Auckland, housing minister Chris Bishop said the government had already taken actions to lower barriers to financing for CHPs.

"CHFA is already helping CHPs access finance. They have advanced $530m of funds nationwide and financed 34 community and affordable housing providers. This frees up resources to deliver more homes, faster, and for less."

He said with the banks, CHPs were paying about 8.5 percent interest rates, but CHFA was enabling refinancing at a fixed rate of 4 percent for three to five years.