Personal debt putting rent-to-own homes out of reach

Do we still have a housing dream in Aotearoa?

Around 25% of people we speak to at Money Sweetspot want a financial reset to either get, or stay on the property ladder.

But that dream can feel out of reach, for many reasons:

1. It's estimated to take between 9 and 11 years to save enough for a deposit
2. The average household income of a first home buyer is $152,700 which is 15% higher than the New Zealand average
3. Interest rates have remained high meaning the average mortgage repayment increasing by nearly 30%
4. Introduction of debt to income ratios as an additional measure to ensure that mortgages aren't putting families under undue stress- especially when interest rates rise
5. Inflation continues to hit our pockets, and whilst it's reduced from 7.2% in December 2022 to 4.5% from the highs last year, the hard truth is that paying for the necessities costs more right now.

It can all feel rather depressing. But, there is hope.

Housing innovation is happening all around Aotearoa. Innovative products, services, solutions, communities, surrounded by courageous and heart lead humans.

Habitat for Humanity are one such organisation. They offer rent to own and progressive home ownership pathways. The charity has helped more than 500 whānau into their own homes in the last 30 years.

But fewer people were meeting the criteria to take them up because personal debt levels were soaring, its northern branch chief executive Conrad LaPointe said.

"[In] people who are applying for our housing, we are seeing just record debt levels, [which] is curtailing people's ability to access the programmes - to the point where ... over 80 percent of our applicants ... have personal debts of over $50,000."

Unfortunately, Conrad is right and it echo's what we're seeing at Money Sweetspot. We had been able to  approve between 35 percent and 45 percent of applications; helping to keep home ownership dreams alive. But that number had dropped to 9 percent in 2024, said co-founder and chief executive Sasha Lockley.

"It's really upsetting," she said. "High levels of debt is a barrier to entry for better housing, first home owners, a better financial situation for families."

How do we keep the dream alive?

It's complicated. It's full of tension. And takes effort at an individual, community, business, and national level.

At an individual level, there is only so much that you and I can do. Here are a few tips to get us started though:

1. Plan for the unpredictable. Don't build your finances like they'll be perfect. Build one that is human and allows for mistakes and changes.
2. Consider the definition of home and housing for you and for your family. It doesn't have to be the pictures that we see in the news. Find a path that works for you.
3. Understand the rules of the financial game. Seek out advice and support. You're not alone.

Sasha says It's all in the babysteps we take each and every day. That's what can keep dreams alive.

Check out the full story here

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