Nick Smith defends ‘affordable’ homes
The Building and Housing Minister is defending the use of the word “affordable” for around 200 new Auckland homes. Nick Smith has announced a third of the 1000 apartments and townhouses being fast-tracked in the suburb of Hobsonville will be affordably priced. However, that price bracket has now ballooned from $485,000 to $550,000.
Mr Smith told TVNZ’s Q&A programme the properties are within reach. “If you’re on an average income in Auckland, and you’re a member of KiwiSaver for five years, you would have built up $35,000. The Government’s home start scheme gives you $20,000, that means you’ve got $55,000,” he says. “The Government’s welcome home loan scheme means they only need a 10 percent deposit.”
300 odd units “affordable” units will not even scratch the Auckland housing crisis, but never mind that. Those prices are not affordable to the average Kiwi. Let’s assume Smith’s best case, a deposit of $55,000 and a purchase price of $485,000. That’s a mortgage of $430,000.
The median income of an employed person is $863 after tax (median is more useful than mean which is inflated by huge top-end salaries). That’s $1,726 a fortnight.
Using the Sorted mortgage calculator a mortgage of $430,000 at 6% over a 30 year term has fortnightly payments of $1,189. That leaves $537 a fortnight, or $268.50 a week to live on. In this scenario mortgage repayments are 69% of net income. A figure of 40% is sometimes considered affordable in NZ, that’s high by international standards.
You can find a similar set of calculations by 3 News here.
Nick Smith reckons houses are affordable if they are “affordable to someone”. But even under the best assumptions an average house in NZ or one of Smith’s “affordable” houses in Auckland is not remotely affordable for the average paid worker. It takes more than one median income (secure for the next 30 years yeah right) to buy a house.