In a statement this afternoon, Housing Minister Chris Bishop said $140 million would be allocated in the Budget as new funding for 1500 new social housing places to be provided by Community Housing Providers (CHPs), not Kāinga Ora, which the government said was not financially sustainable in its current form.
The funding would be made possible by ending the First Home Grant, which had been delivered by Kāinga Ora.
Discontinuing the grant was expected to recoup $245 million, Bishop said, and applications would end from today.
The scheme offered help for first-home buyers who use their KiwiSaver funds to buy a property. It paid out grants of $5000 for an existing home, or $10,000 for a new build, to first-home buyers whose income is less than $95,000, or $150,000 as a household.
The contributions to new home owners were worth about $60 million a year - but the coalition is reviewing all housing support initiatives.
The government would retain the ability for KiwiSaver members to withdraw funds for a first home house deposit.
However, Bishop said the focus was now on investing in social housing for New Zealanders most in need of a warm, dry home.
"Kāinga Ora is no longer accepting new applications for First Home Grants. They will still process applications that have already been received," he said.
"The government has made a deliberate choice to reprioritise low value expenditure to more important policy priorities.
"At a time when the waitlist for social housing is over 25,000 applicants, we have made the tough but necessary call to focus support on New Zealanders who need it most."
Bishop believed 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.
Bishop said it was expected to have "minimal effect on home ownership rates".
Kāinga Ora would no longer accepting new applications for First Home Grants, Bishop said, but would still process applications already received.
"Applicants with existing approvals can still access the First Home Grant, and pre-approvals will still be valid for six-months from the application approval date.”
Priorities all wrong, says Labour
Labour leader Chris Hipkins earlier said the government talked of funding social housing, while criticising Labour's spending on the same.
The amount paid out in the first-home grants scheme was not a huge sum like "they're giving billions of dollars of tax cuts to landlords", he told RNZ's Morning Report programme today.
"Their priorities here are all wrong."
The tax deductions for landlords would cost the government $2.9 billion in lost revenue over the next four years.
Hipkins said it seemed like the government wanted "to smash the dream of home ownership for an entire generation of New Zealanders".
The grant had helped Kiwis into their first home, he said. "They're paying their own mortgage and building up an asset for themselves."
Labour's housing spokesperson Kieran McAnulty earlier said scrapping the grants would be a cynical move.
"It will mean that there are people that would have been able to buy a home, and now they can't. There's sort of a social contract with people when you announce a plan to assist them to do something so crucial and so significant in their life like buy a home, that you don't fiddle with it."
Removing the grants, while also restoring interest deductibility for landlords, would make things even harder for renters to get on the property ladder, he said.
