Developers given financial support to build more houses

The Government has unveiled a temporary support program to help the residential construction sector remain resilient during the downturn.

The Residential Development Underwrite (RDU) will provide underwriting support to developers with a proven track record, so they can secure the finance they need to start work on housing projects that are consented, costed and ready to begin.

It is expected that developments in the main centres of Auckland, Hamilton, Tauranga, Wellington and Christchurch will best meet the RDU objectives, although developments in other locations that meet the criteria may also be considered. There will be no price caps or eligible buyer restrictions.

The RDU aims to maintain capacity in the sector and support the completion of developments for when buyers return to the market. 

Housing Minister Chris Bishop said the lead time for building houses was typically 18 months or more, so it took at least that long for the residential development sector to gear back up as market conditions improved.

“In times of expensive borrowing, underwrites are an effective tool for supporting housing supply. This is because underwrites increase developers’ access to finance where they otherwise wouldn't have been able to get it, and therefore wouldn't have been able to deliver the houses. The timing is right for this kind of support, because interest rates are still high and building consent rates low,” he said.

Construction Minister Chris Penk said developments needed to have at least 30 houses to receive RDU approval.

“The developer must have a proven track record of successfully building and selling houses of a similar size and scale, have ownership or use of the land (or an option to do so) and have all the required resource consents for residential housing,” he said.

“In addition to providing a recent market valuation from a registered valuer, the developer must also be able to provide satisfactory evidence that underwrites are needed for the development to proceed within 6-12 months – for example, evidence that reasonable attempts have been made to market the development, that finance approval is conditional on pre-sales, and that the required workforce is available.”