The government has introduced a new support programme aimed at stabilising the residential construction market during the country’s economic recovery.
Announced by Housing Minister Chris Bishop and Building and Construction Minister Chris Penk, the Residential Development Underwrite (RDU) program is designed to assist developers in securing the financing needed to continue building homes despite high interest rates and sluggish market conditions.
“We recognise that the residential development sector is particularly vulnerable to economic downturns,” Bishop said. “The lead time for building homes is typically 18 months or more, meaning it takes time for the sector to ramp back up as market conditions improve.”
The RDU will act as a financial safety net for developers by providing underwrites, enabling them to access loans they might otherwise not secure. This approach allows projects to move forward, ensuring that homes will be available for buyers “when the market rebounds” and borrowing costs decrease.
“The timing is right for this kind of support because interest rates remain high and building consent rates are low,” Bishop added. “The Residential Development Underwrite will help ensure that credible developers can continue their projects and that homes will be ready when buyers re-enter the market.”
Penk emphasised the importance of the initiative for bolstering confidence within the construction sector during a challenging economic period. “While there are signs of optimism, the new underwrite will provide critical support for the building and construction industry,” he said.
To qualify for the RDU programme, a development project must include a minimum of 30 homes and meet a series of criteria.
Developers must demonstrate a successful track record, have secured the necessary land and consents, and show evidence that the underwrite is essential for the project to proceed within 6 to 12 months. There are no price caps or restrictions on eligible buyers, and the programme is primarily focused on high-population areas such as Auckland, Hamilton, Tauranga, Wellington, and Christchurch.
“The number of homes supported through this initiative will depend on market conditions and how quickly projects are completed,” Penk explained. “The faster homes are built and sold, the more capacity we’ll have to underwrite additional developments.”
Funding for the RDU will be sourced from unused allocations from the now-closed Kiwibuild and BuildReady Development Pathway programs. The Ministry of Housing and Urban Development will begin engaging with developers, banks, and lenders to ensure that only eligible projects apply, with registrations opening on Monday, October 7.
“This underwrite is just one part of our broader efforts to tackle the housing crisis,” Bishop said. “We’re making progress on other fronts too, such as our ‘Going for Housing Growth’ policy, which aims to expand housing supply by enabling cities to grow both upward and outward.”
For more information about the Residential Development Underwrite program, including criteria and upcoming webinars for developers, interested parties can visit the Ministry of Housing and Urban Development’s website.
Image credit: Breno Assis
So a perk for well heeled developers, this will not bring down house prices. Australia is rife with lobbyist developers, prices there remain high in main centres.