Alliance Party finance spokesperson Professor Jim Flynn says the government has to think outside the square to prevent ordinary New Zealanders losing their houses during the economic crisis because they can’t afford their mortgage payments.
In the wake of the news that in August this year at least 50 families were forced into mortgagee sales of the family home, Professor Flynn says there is a simple solution.
“Rather than have people face mortgage sales, the government should buy the houses off the banks for their rateable value. The bank would be relieved of a ‘toxic’ asset and the government would get something in return for helping the bank.”
The home could then be rented back to the occupiers at perhaps 20% of their income. This would mean people could afford stay in the family home. They are spared the upheaval of trying to find alternative accommodation, which could mean overcrowding, children having to move schools and a loss of social support systems.
“All of these things put considerable stress on families and could end up requiring more taxpayers money than buying the original home. There would also be a saving in that one less family would need a rent subsidy.”
The greatest advantage would be that the the Government would instantly increase its stock of state housing.
Professor Flynn says the simplest way to avoid a subprime mortgage crisis is to have no subprime mortgages.
“Rather than have the lower third of income earners finance their homes through banks, put them in homes through state housing. There should also be a scheme so that workers can swap state houses and go from a area of high unemployment to an area where there is a job.”
Professor Flynn says there would need to be provisos to make sure that people who could afford their mortgages did not default to take advantage of the scheme.
“In general, it would need to be limited to properties of no more than the median house price for a particular city or town.”
In addition, the Alliance would like to see people able to negotiate to buy back their homes by paying an extra 5% or so of their income on top of their rent.
Similar schemes were in place up until the 1980’s and enabled many low to middle income earners to eventually own their own home. This provided financial independence and stability for families and an asset in later years.