The Reserve Bank is now required to consider the impact on housing when making monetary and financial policy decisions, Grant Robertson announced today.

Changes have been made to the Bank’s Monetary Policy Committee’s remit requiring it to take into account government policy relating to more sustainable house prices, while working towards its objectives.

The problem of affordable and sustainable housing prices is a hot topic in Central Otago, as it is elsewhere in New Zealand. 

Earlier this year the Central Otago District Council voted in agreement that the Council has a role to play in affordable housing in the district. 

“The Committee retains autonomy over whether and how its decisions take account of potential housing consequences, but it will need to explain regularly how it has sought to assess the impacts on housing outcomes,” Grant Robertson said.

A direction has also been issued (under section 68B of the Reserve Bank Act) to the Reserve Bank requiring it to have regard to government policy on housing in relation to its financial policy functions.

“The Bank will have to take into account the Government’s objective to support more sustainable house prices, including by dampening investor demand for existing housing stock to help improve affordability for first-home buyers.

“The Reserve Bank’s objectives and mandate remains the same, which is to maintain price stability, support full employment and promote a sound and stable financial system.

The Minister has also asked the Reserve Bank to provide advice on debt-to-income ratios and interest only mortgages.

“I want to understand the extent to which interest-only mortgages (particularly to speculators) pose risks to financial stability, and whether restrictions should apply. Some jurisdictions, like Australia, have in the past applied restrictions on interest-only mortgages due to financial stability risks.

“Following the Bank’s request that the Government allow it to make use of tools such as debt-to-income ratio limits, I’ve asked for further advice on how the Bank might implement such tools. 

“I have made clear that in principle I would want these to apply only to investors. It’s important that any potential restrictions do not disproportionately affect first-home buyers and low-income borrowers.

“Today’s announcement is just the first step as the Government considers broader advice about how to cool the housing market.

“We know the rapid increases we have seen in recent months are not sustainable, which has meant many first-home buyers are struggling to access the market. We’ll be making further announcements in the coming weeks on other policy responses,” Grant Robertson said.

Meanwhile, the Government also added 1,000 more transitional housing places as promised under the Aotearoa New Zealand Homelessness Action Plan (HAP), launched one year ago.

Minister of Housing Megan Woods says the milestone supports the Government’s priority to ensure every New Zealander has warm, dry, secure housing.

“Transitional housing provides people with an immediate housing need, some of who have been living in overcrowded situations, with warm, dry, short-term accommodation and vital wrap around support services,” Megan Woods said.

“This support means people get regular checks on their wellbeing, and help to ensure they have access to food, welfare, and healthcare. Increasing transitional housing is part of the Government’s on-going work to prevent and reduce homelessness and support people to transition into long-term accommodation.

“The majority of new transitional housing places (605 out of 1,000) are for families with children. This builds on the Government’s additional commitment to reduce child poverty and improve the wellbeing of all young people. 

“The remaining transitional housing places will help to support singles or couples – particularly those with high and complex needs.

“Our Homelessness Action Plan proved vital to keep New Zealanders safe during our response to COVID-19 as we moved to get homeless people into safe, secure accommodation during the lockdown. 

“Community organisations we’d already engaged with through the Plan were able to hit the ground running when it came to getting those people housed, and provided with health and wellbeing support, and many of those people are still being supported in this way,” Megan Woods said.

Associate Housing Minister (Homelessness) Marama Davidson says this illustrates the importance of the relationships the Homelessness Action Plan is growing with community providers who have links into communities.

Meanwhile the Government continues to increase the overall supply of housing stock. Of the extra 1,000 transitional homes, 43% are newly constructed homes. New builds, like the 28 new transitional homes in Mangere, are important for growing the overall stock of housing available, as well as supporting the economy with jobs and apprenticeships.   Delivering new build housing is a priority for this Government and is a key focus of the recently released Public Housing Plan 2021-24.

“We are moving at pace to build more homes. Since this Government took office, we’ve added 4,579 new build public houses across New Zealand and 2,111 transitional housing places.  We are on track to deliver over 18,000 public and transitional housing places by 2024,” Megan Woods said.