New government. New policies.

Australia has a new prime minister and party in power.

With housing a hot topic during the election campaign, what does Labor bring to the table for existing and aspiring homeowners?

Following are Labor’s initiatives and the benefits and concerns.

“Help to Buy” Scheme

Government helps with up to 40% of property price for new homes, 30% for established, households source the rest of finance with as little as 2% deposit. Government holds a part ownership stake in the property, which can be bought out over time.

Allocation: 10,000

Income cap: $90,000 for individuals / $120,000 for couples

Property price cap: varies by region from $400,000 to $950,000

Restricted to owner-occupier buyers who don’t currently own a property

Commences July 2022

Comments

This scheme proposes more equality in rates of home ownership by enabling the purchaser to share up to 40% of the purchase price with the government with only a small deposit. It also offers the opportunity to save on lenders mortgage insurance but buyers will still have to fund their transactional costs, including stamp duty, legal costs and bank fees.

The added flexibility of buyers being able to top up their ownership stake once in a better financial position is another advantage of the scheme, although any change in the proportion of ownership would presumably be accompanied by a paydown in the share of equity that has accrued in the property back to the government.

Although the scheme provides a more affordable entry point for low-to-middle income earners, with the market softening and prices expected to drop over the next few years, some buyers may find their home is worth less than the debt held against it and it will be important to know if the government will share in the downside risk if the property is sold while in a negative equity situation.

It is likely the 10,000 allocated places will be taken up quickly but anyone considering the scheme should be aware of the risks associated with buying on such a small deposit.

Establishment of a National Housing Supply and Affordability Council

The newly established council would sit within the National Housing Finance and Investment Corporation (NHFIC) renamed Housing Australia

The council would:

Take a leadership role for setting land supply targets (in consultation with state and territory governments)

Establish a housing data warehouse focussed on housing supply, demand and affordability

Advise on town planning policies and land supply

Report on government owned land releases, rental affordability, homelessness and the number of new social and affordable homes built annually

Advise on appropriate housing measures within all current and future city and regional deals

Comments

Housing Australia’s expanded role would administer the various government programs, including Help to Buy, existing deposit guarantee schemes and the Housing Australia Future Fund, as well as take responsibility for the newly created National Housing and Affordability Council and National Housing and Homeless Plan.

The NHFIC’s expanded interest should help to address the issues that make housing unaffordable, while also providing more transparency and reporting about the release of government owned land and helping to steer policies related to social and affordable housing supply.

Labor has said they intend to fund some of these initiatives by applying higher fees on foreign buyer purchases.

The Housing Australia Future Fund

A $10 billion initiative with the objective of funding social and affordable housing properties

Over the first five years the fund has a goal of building:

20,000 social housing properties

10,000 affordable homes for key workers

$200 million in maintenance and improvement of housing in indigenous communities

$100 million for transitional housing options supporting women and children in domestic violence situations

$30 million for housing veterans who are experiencing or are at risk of homelessness

Comments

Even with the generous forecasted funding, it is thought that the 30,000 additional dwellings over five years remains insufficient.

A recent report from Brendan Coates at the Grattan Institute noted even with 100,000 extra social housing properties targeted towards people most in need, more than two thirds of low-income Australians would remain in the private rental market where national rents are currently rising at around 9% per annum.

National Housing and Homelessness Plan

Aims to establish key short, medium and longer term reforms making it easier for Australians to buy a home, rent and provide shelter for homeless Australians

Comments

This plan is yet to be formulated so little detail is available. However, the Labor party has expressed a commitment to working with a broad range of stakeholders including the states and territories, local governments, industry bodies, superannuation funds and other relevant experts on how to address housing, finance and urban development.

It is evident that housing has become an important conversation that our politicians are having. Let’s hope it’s not just conversations they’re having and we some positive outcomes to these well-meaning policies.

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Published August 5, 2022

By Belinda Cassano