Transcript: Consume This podcast, Episode 2 - The Bank of Mum and Dad (Part 2)

In this episode, Noel Bates and Bob Metcalfe share their efforts to help their children into a home. Brandon Vaaulu reveals his technique for getting ahead without the Bank of Mum and Dad. Plus, economist Shamubeel Eaqub takes a look at what we could do to make things easier for first-home buyers - and their parents!

Sophie Richardson: This is part two of our 'Bank Of Mum And Dad' mini-series. If you haven't heard the first episode head back to the 'Consume This' feed in your podcast app and start there.

Let's recap...

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Shamubeel Eaqub: The homeownership dream in New Zealand has been fading for a long time. The homeownership rate peaked in 1991. That's a long time ago. And it has been falling steadily since then.

Sophie Richardson: We conducted a national survey to estimate the size of the Bank of Mum and Dad. The results were shocking.

Shamubeel Eaqub: Look, I didn't know how big it was, but we knew it was big. It's gotten so hard for people to buy a home. The deposits are so massive that you can't really afford to save it yourself and who better to help you than mum and dad?

Sophie Richardson: We found that parents have provided $22 billion to support children into their first home, with an average contribution of $108,000.

Thomas Swain: My parents are very ordinary people. The only reason they could help is because their house went up in value. And the only reason the house went up in value is the same reason that I couldn't buy a house.

Sophie Richardson: That's Thomas Swain. Remember, his parents used their own home to guarantee his mortgage. A bit of a risky strategy that seems to have him stuck between a rock and a hard place.

Thomas Swain: And so then, you know, this kind of guilt sets in.

Sophie Richardson: He doesn't want house prices to keep rising.

Thomas Swain: Well, yeah, it's cool having a house, but it's not cool that everyone around me doesn't.

Sophie Richardson: But if he wants to hold on to his home, when his parents retire and the guarantee is removed... he needs them too.

Thomas Swain: I bought that house for $1 millon. In five years’ time it has to be worth $1.2 million to $1.25 million for me to be able to say, oh, look, there's enough equity in it that the deposit’s already in there, and therefore I can keep it.

Sophie Richardson: Our research found that parents acting as a guarantor – like Thomas' did – was surprisingly common. One-in-five put their own homes on the line to help their kids.

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Sophie Richardson: So we've heard from the children, but in this episode of Consume This with me, Sophie Richardson, it's time to hear from the bank.

Noel Bates: I'm firmly of the view that I owe my children a good upbringing and an education. And if I can help them get into their first house I should.

Bob Metcalfe: We don't like it, but we thought it was necessary. What's the expression? Swallow a dead rat.

Sophie Richardson: For those who don't have credit at the Bank of Mum and Dad, we'll be talking to Brandon Vaaulu about his unconventional, but increasingly common first step onto the ladder.

Brandon Vaaulu: Obviously, it opened up my avenues to be able to purchase in places that I probably wouldn't have even been able to afford to before either.

Sophie Richardson: As we discovered last episode, the reason so many parents are helping their children into homes is simple: the price of houses has totally decoupled from salaries. It's become incredibly hard to save up a deposit. This is even more acute when you're paying rent and saving at the same time.

Shamubeel Eaqub: House prices are 10 times the average household incomes. You know, the historic rate before the housing boom began was four times the household income.

Sophie Richardson: This is the economist and author Shamubeel Eaqub. He's a bit of a nerd when it comes to home ownership and economic inequality across Aotearoa.

Shamubeel Eaqub: Think about it this way: if your income was $100,000 of your household, then you were saving for a $400,000 house, which is an $80,000 deposit. Whereas now, you're trying to save for a $200,000 deposit. That's the difference, right?

Sophie Richardson: The price of a home went from expensive, but obtainable on an average salary to astronomical and out of reach for many of us.

Shamubeel Eaqub: Well, let me give you a bit of context. Before the second world war, New Zealand had relatively high inequality. And then we built the welfare state and all of that kind of stuff and inequality fell very sharply. And it's remained low until the reforms of the 1980s. And when those reforms happened, the promise was yes, there will be an initial shock that will hurt a lot of people. But as we embed these rules and regulations and free up the economy, inequality would fall.

But we didn't see that. Inequality rose, and it stayed at that level, and hasn't really improved for 30 years. And one of the biggest sources of inequality and poverty in New Zealand is housing. We haven't built enough homes. We have definitely not built enough public housing. We don't have enough rentals. We don't have enough of what we call the intermediate market.

So we've kind of failed on every front. The idea was that if we didn't build state housing, the market, the mythical market would build state housing for us. Now that's just not how reality works. It's really hard looking after poor, vulnerable, complex needs people.

So quite often, you know, the people who are living in state housing have very high and complex needs and not just poverty. And so there's always going to be a group of people in New Zealand; if we want to give them dignity, we need to give them housing. And the reality is we have chosen not to house these people. As of the last housing register, we have something like 25,000 households that qualify for state housing, but it is not available.

That's shocking, right? I mean, this is 25,000 families.

Sophie Richardson: Yeah, he's right. That is shocking. There are two factors that are driving our housing shortage. The first is population growth. The second is a slow decline in average household size. That's number of people living in each home. It's not discussed much, but as each home contains fewer people, we need more homes to balance that out. And specifically, more smaller homes.

So less four-bedroom homes, more two-bedrooms. When it comes to housing supply, the market always tends to lag demand. Within our current framework building more isn't an easy task. Nor is it quick. But according to Shamubeel, we are finally heading in the right direction.

Shamubeel Eaqub: Ten years ago, you couldn't even call this a housing crisis.

You know, we would have fights, political fights about whether it was a crisis or a problem. When we had the latest set of reforms, when it comes to housing supply and density, there was bipartisan support across National and Labour to build more houses.

We probably have the biggest state house building programme we've had since the state housing programme began, but it's coming off the back of 30 years of neglect. So there is a lot of catching up to do. So, you know, I feel for the guys at Kāinga Ora because they've been given this huge task. And they can't win. Right? Because you can't, you simply cannot build that easily, because they don't have the expertise and experience of building, because they haven't done it for so long. So they're a bit stuck, but it is growing. Community housing providers are building more houses. It's slowly coming together, but it just needs so much more money and so much more urgency.

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Sophie Richardson: We asked Kāinga Ora, but they couldn't confirm this prior to recording. They suggested there may have been more building in the ’40s or ’50s. Some 60 years ago. Make of that what you will.

All of this will take time to trickle down through the system and even longer for it to affect home affordability. We're talking decades here. The Bank of Mum and Dad isn't going to be out of business anytime soon.

In part one we heard from Thomas Swain. His parents guaranteed his mortgage using their own equity. That's a strategy used by one-in-five Bank of Mum and Dad lenders. But by far, the most common type of assistance was loaning cash from savings. It's time to hear from the bank.

Noel Bates: Well, I'll take it from the start. So, I have two daughters and the youngest daughter had a marital breakup some five years ago. She had three small boys and she wasn't employed at the time. So she was in a pretty tough place.

Sophie Richardson: This is Noel Bates. He's a retired banker living in Hawke's Bay, and father of two daughters. The eldest lives in Australia where she bought a house without his assistance. We'll touch on that later, but this story’s about his youngest. She's based in the Wellington region.

Noel Bates: She got to a position where she'd reached an agreement with her former husband and had a settlement with him and had a lump of money, but it was something like $50,000 and not enough to buy a house with.

So she came to me and said, would I fund her into the balance to buy a house? And so I said, well, I will, but the way I want to do it is that actually I'll buy the house in my family trust, and I'll take the $50,000 off you as a loan into that trust. And I will actually own the house in the trust.

I'd like you to pay rent if you can, but pay as much as you can. That went quite well for a couple of years, and then she formed a new relationship with a chap who moved in. And then they started paying rent, which was absolutely delightful.

Sophie Richardson: So at this point, Noel has brought a house for his daughter to live in. He technically owns it, but they've agreed that the deposit she paid gives her access to all of the equity.

After her partner and his son moved in the house was just too small. It was time to cash in some of their equity and move on. Now, as you may have guessed, Noel isn't exactly short of a dollar.

He decided to keep the house and pay out his daughter's capital gains. Between that and her new partner’s savings they had a decent deposit. Around $200,000. That should have been enough to get them into a house.

Noel Bates: But they didn't have a good earnings situation and job situation, so they wouldn't have been able to borrow.

So they asked me if I would lend them the money as a loan. And I agreed to do that. But I agreed to do it on the basis that they own the house this time. I wouldn't own it. Now I'd put their money in as a deposit and I would loan them the money, but I wanted to do it on a formal basis. It would be covered by a full loan agreement and secured by a registered first mortgage over the property. And it will be on, um, sort of commercial terms. So they'd pay a market rate of interest, which was an average of the four largest banks. So we agreed to that.

It's gone quite well. They're in the house. Everyone's happy.

Sophie Richardson: This is undeniably the wealthy end of the Bank of Mum and Dad. Noel hasn't just provided assistance to help them access a mortgage, he’s provided the whole damn mortgage.

It might seem extreme – the preserve of the wealthy few – and it is: the house cost over $600,000. But the story throws up a couple of interesting points.

Noel is the Bank of Mum and Dad in the purest, most literal form. Unlike the other parents we spoke to, he loaned the whole amount, and has a registered mortgage over his daughter's property. That's the same setup as if they'd borrowed from any other bank.

Noel Bates: I just didn't want any misunderstandings. The registered first mortgage combined with a formal loan agreement means that there's no misunderstandings about any aspect of it. It's definitely a loan. And there's definitely interest to pay.

Yeah. I wanted the loan to be a serious thing. It's not just a daddy loan that they pay interest if they can afford it. There's a penalty rate of interest in there. Another 2%. I also wanted to make sure that they couldn't raise any more debt on the house. I've got a registered first mortgage there. Now, if anyone wants to put another mortgage on there, a subsequent loan, it'll rank as a second mortgage and I will find out about it. Which is good.

Sophie Richardson: Things can and do go wrong with interfamily lending. You might consider Noel's approach excessive, but having a formal agreement means that everyone knows where they stand should something go wrong.

Noel Bates: I've seen a situation where a friend of mine did the opposite. He just loaned his son some money as a deposit for a house. The son and his wife got into financial difficulty soon after. So they sold that house and then lived off the small equity they had, plus the loan from my friend. That was a pretty sad situation, so I wanted to avoid that.

Sophie Richardson: There's another reason for formalizing the agreement. Noel has two children. Families are complicated, and this is where the Bank of Mum and Dad can become a bit fraught.

Our research has found that more than a third of parents provide different levels of support to different children, primarily driven by need. In Noel's case, he hasn't provided any support to his other daughter. She doesn't need it. But how does she feel seeing her sister get all his help?

Noel Bates: Well, on the face of it, she is curious, at least that her sister is getting some benefits.

So I have assured her great lengths that the younger daughter is not getting any benefit. She's paying a market rate of interest on the loan, and any of the other benefits that accrued to my daughter prior to the purchase of the home. That's the say, when I was subsidizing the rental for them. Eventually, when I croak and my assets are divvied up, the fact that the younger daughter may have received some benefits will be accounted for in this sort of divvy-up of my assets.

Sophie Richardson: Noel's strategy is to support each child in the ways they need. He's happy to let it all even out when he's dead. That's another reason why for him having a formal agreement is so important. There's no cause for interfamily disagreements when it's all written down in black and white.

If you go to lend money, every expert we spoke to gave the same advice: get it documented. Even if you don't think it's necessary, it will protect you if the situation changes in the future. But there are still lots of parents out there putting themselves at risk.

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Bob Metcalfe: The fact that we don't have a formal plan is a little worrying, but he's a pretty ethical sort of guy.

Sophie Richardson: This is Bob Metcalfe. He lives in Stokes Valley with his wife and son.

Bob Metcalfe: I mean, obviously there are some people, as you say, who've got a hundred thousand lying around who could just give it away without any problems. But we weren't in that situation.

Sophie Richardson: So Bob and his wife have taken a much more complicated approach than Noel. They haven't gifted or loaned Mike the money. They haven't provided a mortgage guarantee either. They came up with a different plan.

Bob Metcalfe: Well, we suggested that we find a place with either enough section to build a flat out the back or with a flat already. We would sell our place. We would buy the new place. He would put in his money. We would co-own with him.

Sophie Richardson: You heard that right. Bob and his wife decided to sell their home, and, with Mike, jointly purchase a new large one. The idea was to get a place with an attached granny flat for Mike. That way he could have his own space whilst starting to build up some equity.

This was a drastic step. They'd lived in their current home for 32 years. But honestly, Bob felt like it was Mike's only chance.

Bob Metcalfe: We grew up at a time when everyone bought a house. Our first house was $27,000.

It seemed a little unfair that he basically couldn't do it. We wanted him to be independent, have some equity. He saved up a tremendous amount of money. His social life was not brilliant, he was busy saving. He worked all sorts of awful shifts and holidays so that he could get the extra money.

He was saving somewhere around about $30,000 a year or more. I actually don't know how much he earns, but I doubt if it's more than about $60,000 a year. And we thought, well, he's saving like mad and he's getting nowhere.

Sophie Richardson: Initially, Mike wasn't all that thrilled with his parents' plan. But Bob convinced him.

Bob Metcalfe: Well, he didn't want us to sacrifice for him, I guess. You know, he said you shouldn't have to do this. And I said we've discussed it. We're not kids, you know, we're not going into this on the spur of the moment. We think it's important.

Sophie Richardson: They spent almost a year looking for a house that met their requirements, eventually settling on a place in Stokes Valley. Mike put his savings into the deposit and his parents added the proceeds of their house sale. But that wasn't quite enough...

Bob and his wife also had to put in all of the retirement savings.

Bob Metcalfe: We essentially have no retirement savings left. My wife is still working, she's putting in an extra year. But we're now in a place, he's in a place, and we're where we want to be, in a way.

Sophie Richardson: Mike owns one-third of the house, which he's paying off. Bob and his wife own the other two-thirds, but they don't have any sort of formal agreement. They just trust Mike to make his repayments and do the right thing. Which, since they moved in in December, he has been. It's a very different approach to Noel and his strict documentation.

In the previous episode, we discovered that one-in-ten Bank of Mum and Dad parents have put themselves into financial stress to help the children. So, does Bob consider himself one of them?

Bob Metcalfe: Difficult question. Objectively, we are at more financial risk, I guess, if something terrible happens. But we're no worse off than many people. We've got enough money to cover emergencies, but there's not much jam on it.

We don't like it, but we thought it was necessary – what's the expression? – to swallow a dead rat.

Sophie Richardson: That dead rat gnawed away at his retirement savings.

That's the thing about this situation: massive house prices don't just affect the first home buyers. Retirement is exactly the time that Bob and his wife should have been able to kick back and enjoy the proceeds of their hard work. Instead they've had to pump all of their savings into helping Mike.

Bob Metcalfe: Yeah. I think, together with the pension, there's enough to keep us roughly okay, but that's it. We don't have any money for going overseas or making big purchases or anything like that.

Sophie Richardson: So, Bob and his wife are doing okay. But their financial position is nothing like they had imagined for their retirement. They've gone from having a comfortable amount of retirement cash in the bank - enough for travel and holidays – to nothing at all.

There have to be solutions to this. We can't settle for a situation where parents feel obligated to give up their retirement savings. And we can't settle for a situation where their children are locked out if they don't.

Brandon Vaaulu: I had more of a feeling of hopelessness, I guess. I was just like, man, I'm just going to have to keep saving forever. I don't know if I can ever afford to buy a house at this point.

Sophie Richardson: Meet Brandon Vaaulu. He's in his late twenties and unlike everyone we've spoken to so far, he didn't have access to the Bank of Mum and Dad.

Brandon Vaaulu: Yeah, nothing contributed from my parents at all. I just didn't want to put that financial stress on them.

My dad is the only one that works. Um, so he's the sole income earner, and if anything happened to him, you know, there would be no more income. So taking that extra financial burden on my parents would be extra stress for them as well.

Sophie Richardson: That's not to say that Brandon didn't have any financial support. He lived at home with his parents paying just $50 per week until he went flatting at 25. That allowed him to save up a decent sized deposit. But it still wasn't quite enough.

Brandon Vaaulu: So, yeah, basically at that time I caught up with a friend from school and he was looking to purchase a property. He was in the position to be able to afford the house himself. But he was like, kind of telling me like, yeah, I can afford a home now, but it means that I'm just going to have to live paycheck to paycheck, which is okay, but it's not ideal. I have to get someone to come and live with me and board and things like that.

I kind of had some ideas around different ways of approaching the purchase. And so I floated the idea to him like, "Hey, I'm looking to buy a property as well, but I just can't afford to buy it alone. Does a 50/50, or like going halves on a house, sound like an idea? Because it means you're not going to have to live paycheck to paycheck. Your mortgage is gonna be smaller. You're still gonna own. But then it also means that I can kind of get into the property market as well, even though I can't afford it by myself currently.

Sophie Richardson: Brandon's friend was interested, but he wasn't sure. Co-ownership between friends is growing in popularity, but it's still not common or well-known.

Brandon Vaaulu: Um, so we approached a mortgage advisor from KiwiBank. Because he was just about there. He just wanted that little bit of like reassurance, I guess. And so speaking to the mortgage advisor they were able to kind of reaffirm what I told him about how it's going to work and things like that.

I didn't have to do that much convincing. It was pretty much there, but having that expert knowledge just helped get him over the line and feeling a lot more comfortable.

Sophie Richardson: After that meeting, they decided to go for it. Brandon and his friend began the process of becoming co-owners.

Brandon Vaaulu: It worked essentially the same way as if you were to buy with your partner, and the bank sees it the same way as well.

Um, obviously your agreements are going to be slightly different and the way that things work slightly different, but the way the bank sees it is just two individuals buying a property together. The mortgage and the bank side of things was actually really simple. We just did a joint application. You have to be comfortable with sharing all of your financial information with this other person. From a bank perspective, pretty simple: apply like normal. Um, and yeah, give all the financials.

It's the other side through the lawyers, that's a little bit more complicated. We needed to come up with an agreement around if someone was to pass away, what happens to their portion of the house? If there's like a emergency comes up and someone can't work?

We basically had to go through a property sharing agreement to kind of outline all of those kinds of scenarios and what would happen. And that's a legal binding document. So we had to sign it in front of a lawyer. If any of those situations do happen, we know what to do in those cases. And there's no like, "oh, but you said this" and there's no, just like, “ah, yeah, it was just a handshake” kind of thing. It's like, legally we have to do this. So it's a lot clearer.

Sophie Richardson: To give them both some certainty, they made this legal agreement binding for three years.

Brandon Vaaulu: Yeah. So what's going to happen now, I guess, is the three-year period is up this April or May. We've just recently kind of refixed for another three years, in terms of the actual loan portions. So we've got at least another three years left. We don't currently have an agreement in place for that three years. We're quite lucky where we kind of see eye-to-eye. So it's worked out well in that scenario.

Sophie Richardson: So, what kind of difference has the co-ownership made to Brandon's life?

Brandon Vaaulu: If I go back to the start and have the same conditions that I had at the start, but didn't do co-own, I'd probably still be renting. It would've taken me a lot longer to try and save that deposit, especially with the moving goalpost of the house prices continually going up. The amount that I needed to save was just getting further and further away.

So, I'd say yeah, now, if I didn't do the co-own, I probably wouldn't be in the housing, or at least on the property ladder.

Sophie Richardson: Brandon's experience is a success story. He teamed up with his friend to bypass the Bank of Mum and Dad and get into his own home.

Eventually, his plan is to take his share of the equity and use it to get his own home. If you think about it, it's not a million miles away from Mike and Bob's plan.

Co-ownership with friends is increasingly popular. For some of us, it could make complete sense. It might even provide an antidote to the declining household size we talked about earlier, but it's not a silver bullet.

It's not going to solve all of our housing problems. I have to be honest, I worried about including Brandon’s story. I don't want to perpetuate the myth that everything's fine. And that if you just think outside of the box, and suck it up and save a bit more, and don't have that avocado toast, it'll be fine.

There will always be exceptions that prove the rule and good on them. Good on Brandon. But the fact remains prices are too high for many first home buyers.

Brandon Vaaulu: Oh, yeah, a hundred percent. And even at the point that we purchased the house, the prices were already going up. And when we purchased, we were like, oh, this is kind of expensive. Like, I felt like this was too much for a house.

So we purchased our house for about, um, 630 something. I can't remember the exact price, but, um, yeah, now it's valued at, or just around a million dollars. Which is insane. But like, once again, we wouldn't have been able to afford that had we not gone co-own and purchased it at that time.

Sophie Richardson: And that's why the Bank of Mum and Dad is the country's fifth-largest lender with a $22 billion balance sheet. We know this is perpetuating inequality. We know we need to change something. We can't keep adapting ourselves to the system. We need a system that works for all of us, and that's going to take some serious change.

Shamubeel Eaqub: Look, there aren't many easy solutions, but I think the intervention that we need to make is when we build houses, how do we make sure at least some proportion of that is for affordable housing? We can't just go: we're going to build 50,000 houses and they're all going to be for rich folk.

Because there is such a shortage of housing right now, we need to go: yes, we'll build 50,000 houses, but let's set aside 10,000 for people who need it the most. Let's make sure they’re for social housing, make sure there are rentals. In many parts of New Zealand, the rental stock is barely growing, and in some places it's going backwards, even though the population is growing.

So demand is going through the roof. But there is hardly any rentals to choose from. I mean, you go to Porirua. They had only something like 17 or 18 houses that rented in the month of February. I can't remember the exact number. It was shockingly low. And so if you're looking for a place to live, that's where you work and that's where your kid goes to school, you're pretty stumped.

So I think a lot of the solutions are not necessarily inventing new things. I think there's a lot of good work that's happening around slowly freeing up housing supply, land supply, infrastructure. These are things that are slowly coming through. But there is an urgent need to ensure that some proportion of that is earmarked and retained for affordable housing.

Sophie Richardson: So that affordable rental stock, do you think we need to move more away from having private landlords and more into like a commercial setup where, you know, like there's a KiwiSaver provider that buys a apartment block or...

Shamubeel Eaqub: Yeah. So I think what you're describing is the build-to-rent sector, which is actually quite big in places like Germany, most of Europe. It's growing in the UK, is quite big in the U.S. We don't really have that in New Zealand yet. So, Simplicity is starting one. And I think we'll see a few more.

So the big challenge with built-to-rent is, by and large, it tends to work better for rich renters. Rather than poor renters.

Sophie Richardson: Goddamn it. The solutions are all wrong.

Shamubeel Eaqub: Unless you give subsidies.

So, the thing is you can't make housing cheap if you don't just help people with paying the rent. So there is no magic solution here. There is no silver bullet. I'm a big proponent of build-to-rent in the sense that I think when we build houses, we should make sure that some of it is for rental. Even if it's for rich folk, at least those rich folk are not competing for the other housing that's available. Right? So I think it helps, but it's at the margin. So we shouldn't overstate what it can do. It is not going to be that immediate solution to affordable housing.

It is going to be more of that aimed at the top end because you know, it's really expensive to build a house. And if you want to have a lower rent for it, then it just doesn't work. It's not commercially viable. So we're a little bit stuck. I know Sophie, I think you're looking for some quick wins. We screwed things up for so long.

Sophie Richardson: Yeah.

Shamubeel Eaqub: I don't think we have quick wins left.

Sophie Richardson: Right.

Shamubeel Eaqub: So it is really about subsidies. It is really about targeted supply. It is about just helping people who need it the most, either with money or with dedicated, reserved housing for them.

Sophie Richardson: Do you think the government could become the Bank of Mum and Dad?

Shamubeel Eaqub: Look, that's what shared equity kind of does. So shared equity programs are good, but they're very expensive.

So, if you had to go: Shamubeel, here's a billion dollars – go do something. I would go and put that straight into affordable rentals and not into shared equity. And the reason is because I could help so many more people.

Sophie Richardson: The gains are bigger than in the other areas?

Shamubeel Eaqub: It’s more about the spread. So for those people who enter the shared equity scheme, if they can do it, it's wonderful for them. It's like winning the lottery. But you're not going to help that many people.

Let's say you only have 10% deposit. That means that we have to come up with another 10%, right? That's the cost to the program. So let's say it might be, say a $100,000 of subsidy. In contrast, a hundred thousand dollars of subsidy would house a lot of people.

Sophie Richardson: Yeah.

Shamubeel Eaqub: And so I think that's really where we have to go. You know, when you've got so many people who are dependent on housing support already, where is the money best spent? It's a shared equity program, which is really what is, I guess, the corollary to the Bank of Mum and Dad. Should that be bigger? Um, I don't think from a government perspective. I think we should absolutely encourage the private sector to develop something there. In the US there is a really cool outfit called Divvy that does exactly that.

So you tell them what your income is and what your rent is and all that kind of stuff. And they go, okay, you are allowed to go and buy a house for say a million dollars. And then when you buy that you rent that house for a few years to build up your equity, then you buy the house off them.

Sophie Richardson: Gosh.

Shamubeel Eaqub: So, there are some really cool solutions that are coming out there. Mainly because they're also screwing up the housing market and not building enough homes and it's getting expensive.

Sophie Richardson: So it's not just us then?

Shamubeel Eaqub: We are particularly broken. So there are not many places in the world where house prices are nearly 10 times the average household income. We are extraordinary in terms of how expensive it is.

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Sophie Richardson: So where does this leave us? There isn't a nice ending to wrap this all up. It's a long-term problem that needs long-term solutions. The Bank of Mum and Dad isn't going anywhere any time soon. For deposits to become, affordable house prices have to fall a long way, which, as Shamubeel pointed out, is unlikely to happen.

Our economy is entirely wrapped up in the property market and the government wouldn't let it fall. And even if they did, as we've heard over the last two episodes, there are a lot of averagely well-off parents, many nearing retirement, who'd be in big trouble. The situation is a mess. It feels like the only good option is to drastically increased housing supply or to somehow invoke a huge cultural and regulatory overhaul to move away from home ownership towards stable and secure long-term rentals. Rentals that still need to be built. Neither of these are quick fixes.

Bumping up housing supply is the work of decades. Changing our social attitudes and structures takes generations. In the meantime, the Bank of Mum and Dad is going to continue to assist where it can, and the children of those where it can't will continue to struggle.

So what does this mean? What will our country look like 10, 20, 30 years from now? Will we force change or settle for our two-tier system? Security for the rich, and cold, damp, badly maintained, insecure homes for everyone else?

I can't answer that question, but right now it feels like we're at a bit of a crossroads. We know there's a problem. It's not a partisan political issue anymore. It's accepted wisdom that we have a housing crisis. So, what are we going to do about it?

Do we plow straight on? Or is it time to stop and head in a different direction? In part, it's up to all of us. In bigger part, the responsibility lies with the government of the day. Whichever colour they are. And it's our responsibility to vote in representatives that bring about the most equitable outcomes possible.

That's ultimately why governments exist. To make society the best it can be for the largest number of people.

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Sophie Richardson: You've been listening to Consume This with me, Sophie Richardson.

This episode was produced by Tom Riste-Smith. The executive producer was Gemma Rasmussen. The bank of mom and dad research data was collected and analyzed by Scott Moore.

Consume This is brought to you by Consumer NZ. We're proud of our independence, which we can only achieve because we're a not-for-profit supported by our members.