The government has confirmed it plans to scrap the First Home Grants scheme, with applications ending from Wednesday.
This would recoup about $245 million over four years.
It has also announced $140 million in new funding for 1500 new social housing places from July next year, to be provided through Community Housing Providers rather than Kāinga Ora.
Housing Minister Chris Bishop announced the moves this afternoon at a media briefing called with just half an hour's notice.
"Kāinga Ora is no longer accepting new applications for First Home Grants. They will still process applications that have already been received," he said.
"If you've gone through the system and you've been approved for a first home grant or you've been pre-approved or you've currently got approval, and you're going out there and looking for your first home - that can last up to six months, all of that will be honoured."
Housing Minister Chris Bishop confirms the government is scrapping First Home Grants, and spending a similar amount of money on new social housing places. Photo: RNZ / Samuel Rillstone
He confirmed the government was retaining the First Home Loan scheme, saying the evidence they had seen was it was a more effective way of supporting first home buyers.
He listed the Salvation Army, Emerge Aotearoa and CORT as some providers that could be contracted to provide the social housing places, and said that would be managed through a process run by the Ministry of Housing and Urban Development.
He said the government was filling a hole for social housing places left as a "fiscal cliff" by the previous government.
"We are now filling that hole that Labour left us and that gives them some pipeline certainty.
He said the First Home Grant was an "expensive and inefficient way to support first home buyers" and had gone from covering about 10 percent of a standard deposit when it was introduced in 2010, to just over 4 percent of a standard deposit in 2024.
"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.
He said the government would be happy to provide that evidence.
"The First Home Grant is a programme that ultimately we think - in comparison to social housing places - is lower value expenditure at a time when the social housing waitlist has 25,000 families on it and we have a big demand for New Zealanders in need.
"We have had to make the tough, but I think the right, decision to discontinue the first home grant and reprioritise that money to social housing places."
"The first home grant is a programme that ultimately, we think in comparison to social housing places is lower value expenditure at a time when the social housing waitlist has 25,000 families on it and we have a big demand for New Zealanders in need.
He said it was expected to have "minimal effect on home ownership rates".
He acknowledged the change would "cause some pain for some people, but we are doing the right thing to support our most vulnerable New Zealanders".
"If we're honest about it, the first home grant started as a demand side measure to try and help some people into first home ownership when the wider system was not being fixed.
"We need to open up land at the edge of our cities, we need to densify in our cities - and I've made a decision around that in the last couple of weeks ... we need to fix our infrastructure settings and we need to incentivise councils."
Bishop said Kāinga Ora would not be provided with further funding to provide social housing places until a turnaround plan had been signed off by the government in the wake of the independent review carried out by Sir Bill English.
In Parliament in 2021, National's then-Housing spokesperson Nicola Willis - now the finance minister - framed the scheme as one of National's success stories and urged its expansion.
'Shattering the dream of home ownership': Other parties react
Labour leader Chris Hipkins said the government was "shattering the dream of home ownership for an entire generation of New Zealanders".
"Whilst giving $2.9 billion of tax cuts to landlords, they're cutting one of the schemes a lot of New Zealanders rely on to get that deposit together to buy their first home."
He said National could scale up the First Home Grant scheme and increasing social housing places with the money being spent on those tax cuts.
"They're tilting the playing field in favour of wealthy landlords who can afford to buy multiple properties and get tax breaks, and be rewarded with tax breaks for that, whilst a generation of New Zealanders won't be able to buy their own home.
"Sure we need to increase the supply of housing, but in the meantime I'm not willing to shut an entire generation out of the ability to even get a deposit together to buy a house."
Green Party co-leader Chlöe Swarbrick similarly pointed to tax deductibility changes and the bright line test.
"There are decisions that can be made to implement values and evidence-based policy to meaningfully bring house prices down," she said.
"What the government has knowingly done and as has been reflected in the financial sustainability report from the Reserve Bank, is that its decisions around tax deductibility and the brightline test will only bid up the cost of housing in this country, putting it further out of reach for first-home buyers."
ACT leader David Seymour campaigned on removing the scheme and said first home grants did not solve the problem of a shortage of housing.
"Unfortunately this government is under real pressure," he said.
"The first home grant does not solve the problem of a shortage of housing, all it does is help some people while the shortage of housing remains for everybody else. The only solution to a shortage of housing is to build more homes.
"That will be a blow for people, but we also have a government inheriting very tough fiscal times and we actually cannot do everything that we're supposed to do."
Te Pāti Māori co-leader Rawiri Waititi said many Māori were living in intergenerational homes, and he thought the scrapping of the grants was poor policy.
"Our people are already struggling to get into homes, Māori make up 50 percent of the social housing waiting list," he said.
"It's very, very difficult for people to get into homes and to live the Kiwi dream of owning a home, so I think that is a very very poor policy and to rob Peter to pay Paul type Budget I think that's something for Aotearoa to think about. This is what you voted for."
Labour's housing spokesperson Kieran McAnulty earlier said removing the grants, while also restoring interest deductibility for landlords, would make things even harder for renters to get on the ladder.