Govt Launches Residential Development Underwrite to Support Housing Market Recovery

New Programme Aims to Boost Construction Amid Economic Downturn, Providing Crucial Support for Developers.

The Government has announced a new Residential Development Underwrite (RDU) programme to support the residential construction market during the economic recovery. Housing Minister Chris Bishop and Building and Construction Minister Chris Penk confirmed the initiative, designed to provide financial assurance to developers and maintain housing supply amid challenging market conditions.

“We know the residential development sector is vulnerable to economic downturns. With building projects typically taking 18 months or more, it takes time for the sector to rebound as economic conditions improve,” said Minister Bishop. “This programme will help credible developers access financing they otherwise wouldn’t be able to secure, ensuring that houses can be built now and ready for buyers as the economy improves and interest rates drop.”

How the RDU Programme Works

The Residential Development Underwrite is targeted at developments facing financing challenges due to high interest rates and lower-than-usual building consent rates. Underwrites give developers the assurance they need to access loans by guaranteeing that the Government will buy unsold houses after a set period, which allows banks to confidently lend funds for construction.

“This programme comes at the right time because interest rates remain high, and building consent numbers are down,” Bishop said. “Underwrites are an effective way to keep the construction sector moving by enabling developers to get the funding needed to keep building homes.”

The RDU will apply to housing developments with at least 30 homes, prioritizing those in high-population areas like Auckland, Hamilton, Tauranga, Wellington, and Christchurch, though the programme will be available nationwide. For a project to qualify, developers must demonstrate a proven track record of building and selling similar-sized projects, have land ownership or rights, and hold all necessary resource consents. In addition, developers must provide evidence that underwrites are necessary to proceed within 6-12 months, such as proof of failed pre-sales or conditional finance approval.

Importance of the Programme During Economic Recovery

Building and Construction Minister Chris Penk noted that while there are positive signs of optimism returning to the housing market, the underwrite programme offers crucial support during tough economic times. “The mood on the ground is improving, but the underwrite will provide much-needed confidence to the sector as it navigates these challenges,” Penk said.

The success of the programme will depend on several factors, including the wider economic environment, demand from developers, and the pace of construction and sales. The faster developments are completed, the quicker underwrite capacity can be recycled into supporting new projects.

Eligibility and Next Steps

The Ministry of Housing and Urban Development will oversee the selection of eligible development projects, ensuring that only those meeting the criteria apply. Developers must present a recent market valuation, provide evidence of their marketing efforts, and show that the necessary workforce is available to complete the development. The programme will have no price caps or restrictions on eligible buyers, meaning homes can be sold at market rates.

Over the next few weeks, Ministry officials will consult with developers, banks, and lenders to ensure smooth implementation of the programme. Registrations for the underwrite open at 10 a.m. on Monday, 7 October, with further details, including eligibility criteria, available on the Ministry's website.

Broader Housing Strategy

The RDU is part of the Government’s broader strategy to address New Zealand’s ongoing housing crisis. Minister Bishop emphasized that the underwrite complements other efforts, such as the Government’s Going for Housing Growth policy, which aims to increase housing supply by enabling cities to grow both vertically and horizontally. In addition, the Government is working on sensible amendments to the Residential Tenancies Act to further support the housing sector.

Funding for the RDU programme will be redirected from unused allocations under the now-closed Kiwibuild and BuildReady Development Pathway initiatives.

“The new underwriting programme is just one piece of our bold plan to address the housing crisis. We are committed to ensuring that New Zealanders have access to affordable housing, while also supporting developers and keeping the construction sector active,” Bishop said.

With the Government’s ongoing focus on housing infrastructure, the RDU programme is expected to provide a crucial bridge for developers during this period of economic recovery, ensuring that housing supply continues to meet demand.