The Government is defending a new subsidy scheme for low and middle income couple who build a new home, but the Labour Party says it will add to the housing crisis.
New Zealanders on the hunt for their first home could get a $20,000 boost as part of the HomeStart grant scheme which kicks in today.
The Government has budgeted $435 million for grants for first home buyers which it expects will help up to 90,000 New Zealanders into their first home over the next five years.
The scheme will also allow KiwiSaver members to access more of their funds to buy their first home.
But the Labour Party says the HomeStart policy fails to address the country's housing crisis and will simply pour fuel on the problem.
Leader Andrew Little said the Reserve Bank and Treasury had both raised concerns that the scheme risks driving house prices even higher.
"The change they are making is to assist in the building of new homes. There are still a whole heap of people for whom that is still out of reach and owning any house is still out of reach.
"If they apply the scheme for those who are buying existing homes they are going to put pressure on house price inflation and so they don't cure the problem that way."
Little says the scheme would not go far, especially in Auckland, where house prices were going up $1700 a week and shows the Government “simply does not understand the magnitude of the housing problem”.
"They declared happily two weeks ago that there is no housing crisis - there is if you are a first home buyer or even if you are a young couple building your first home. There is still a major problem."
Finance Minister Bill English said the scheme makes home ownership a realistic option for people, especially outside the Auckland market, who have quite low deposits.
Minister for Building and Housing Nick Smith says the Government could not control house prices but could help young buyers pull together a deposit for a home.
"Firstly, I would note that house price inflation under this Government has been significantly lower than what it was under Labour,” he said during question time yesterday.
Prime Minister John Key also defended the scheme saying the “significant increase” in grants available was a way of ensuring more Kiwis get into their first home and was consistent with what other countries were doing around the world.
"The Treasury don't like it because it is giving more money to first home buyers and they fundamentally at the core of that don't want to do that.
Other changes taking effect today include lower ACC levies for employers and the self-employed, changes to child support obligations, and an increase to paid parental leave to 16 weeks.
A version of this story was first published on radionz.co.nz.
