Housing Minister Phil Twyford says the Government will step in and sell KiwiBuild homes if developers are unable to unload them at an agreed upon price.
But he does not expect this to happen very often.
Speaking in the House on Tuesday, Twyford was asked by National’s Housing spokesman Judith Collins if he had been advised on the risks associated with the Government’s buying off the plans initiative.
This scheme was announced in May and is essentially an underwriting scheme, with taxpayers footing the underwriting bill.
He says that was assessed as part of a paper he took to Cabinet and the amount of risk “will depend on the particular contractual arrangements between each developer and the Crown.”
Collins asked the Minister what risk the Crown would take if the housing market fails.
The nature of the risk-sharing arrangement in the buying off the plans initiatives centres on the underwriting or buying off the plans itself, Twyford says.
“In that case, or in the case of the underwrite, if the developer is unable to sell the property at an agreed price, then the Crown will step in and buy that property at an agreed price and then on sell it to young Kiwi families.”
But speaking to Interest.co.nz, Twyford says this will be happening as “infrequently as possible.”
“This is about the Crown sharing risk prudently with developers and one of the reasons so many developments are not going ahead is that the developers are really struggling to get finance.”
He says KiwiBuild can bring its balance sheet to the table.
“We can underwrite or buy properties off the plan and our goal is to sell those properties as soon as possible on to young first home buyers.”
He doubled down on previous comments that the Government does not need any type of insurance to guard against this type of risk.
“I don’t think insurance is a substitute in this type of situation for an equity partner that is willing to back a scheme like KiwiBuild.”