Housing Minister Chris Bishop has confirmed the Government will scrap the first home grant scheme, a subsidy of up to $10,000 that some first home buyers can access to put towards a first home deposit.

Bishop said axing the scheme was “expected to generate savings of $245 million over a four-year (2024-28) forecast period “with a minimal effect on home ownership rates”. The Government is directing $140m of that money to Community Housing Providers (CHPs), funding them to deliver 1500 new social housing places over the forecast period. The remaining money will be spent later as the housing places must be funded in the outyears.

“The Government’s new investment in 1500 social housing places will start to become available from July 2025 onwards, giving the community housing sector much-needed certainty about the social housing pipeline, allowing them to plan for the future, and scale-up their build programmes,” Bishop said.

Bishop said the funding would only go towards CHPs and not towards government developer and landlord Kāinga Ora. Bishop cited a recent review of Kāinga Ora as the basis of his decision.

“The Kāinga Ora independent review which reported back earlier this week shows that Kāinga Ora is not financially sustainable in its current form. Until the Government has received and approved the turnaround plan demanded of the refreshed board, no further funding will be budgeted for the organisation to deliver additional social housing places,” Bishop said.

“Our community housing sector does an outstanding job of housing people in need. CHPs currently provide over 13,000 social houses around New Zealand and they have the capability, expertise and desire to grow further.”

First-home grants offer buyers a maximum of $5000 for an existing home and $10,000 for a new home to go towards a first-home buyers’ deposit.

“The First Home Grant, which provides eligible first-home buyers with a median of $5000 towards a house deposit, is an expensive and inefficient way to support first-home buyers,” Bishop said.

“In 2010, when the grant was introduced, the lower-quartile house price was $255,000, compared to $580,000 in April 2024. For first-home buyers, this means the grant has gone from being nearly 10 per cent of a standard deposit in 2010, to just over 4 per cent of a standard deposit in 2024,” he said.

“Evidence shows the grant brings forward the purchase of a first home – but in most cases it does not make a difference to whether someone can buy a home or not.”

He said demand-side measures like these subsidies were not the answer to the housing crisis.

He said the Government would keep the first home loan scheme, which allows first-home buyers to purchase a home with a deposit as low as 5 per cent. The Government is also retaining the ability for KiwiSaver members to withdraw funds for a first-home deposit.

Bishop said Kāinga Ora is no longer accepting new applications for First Home Grants. They will still process applications that have already been received.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.