(Bloomberg) -- New Zealand’s government wants the Reserve Bank to consider how its rules may be preventing community housing providers from accessing finance at the best rates, Housing Minister Chris Bishop said.
“The Reserve Bank is currently considering options to review standardized risk weights,” Bishop said Tuesday in Wellington. “The Minister of Finance will be setting an expectation that this work prioritizes the treatment of community housing providers.”
Bishop said both ministers and the sector are concerned that current RBNZ risk weightings penalize these providers, which are not-for-profit organizations that build houses and rent them to low-income tenants. The government wants to create a level playing field so the community sector can provide social housing in competition with state-owned Kāinga Ora.
Community providers “often struggle to access finance that fairly reflects underlying risk for building social houses, while Kāinga Ora can access borrowing by the government,” Bishop said.
Currently the RBNZ requires the nation’s banks to treat lending to community housing providers and housing cooperatives as being similar to a corporate loan. The banks must assign more capital against those loans, so therefore the interest rates those providers pay are higher than a normal residential loan.
Bishop announced a number of other steps to remove barriers for community providers, including being able to allow upfront payments when contracts are agreed and credit enhancement intervention for some providers. The government will also consider providing guarantees and establishing an intermediary to provide financing efficiencies, he said.
“Over time these changes will help us achieve contestability between providers and Kāinga Ora for delivering new social housing places and will help deliver better value for money as well,” Bishop said. “In social housing, better value for money means we’re able to deliver more social homes and house more people in need.”
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