Federal Labor detailed its key housing policy for the election campaign, offering to help 10,000 families purchase a home, dramatically reducing the price of a property.
Key points:
- The labor scheme would have the government cover 30 or 40 percent of the cost of a property
- Initially, 10,000 vacancies would be made available in the scheme.
- The scheme would be open to individuals earning less than $90,000, or couples earning less than $120,000.
Labor outlined a new “shared equity” scheme it would approve in government, essentially buying 30 or 40 percent of a property with the buyer.
That portion of the property would then be owned by the government and could be purchased by the homeowner over time.
Labor estimates it could reduce the cost of a new home by as much as $380,000 for some buyers in more expensive markets and reduce the burden of mortgage payments.
Both Labor and the Coalition faced questions throughout the campaign about how they will address housing affordability, and the rising cost of living is expected to be a central theme at the Labor Party’s Perth campaign launch today.
Sharing the cost of a new home
According to Labor, 10,000 slots would initially be available under the scheme, which would be open to people earning less than $90,000 as an individual or $120,000 as a couple.
The scheme would not be restricted to first-time homebuyers. Instead, it would be available to anyone who does not currently own a property.
Under the proposed scheme, those who buy a property can have the government cover 40% of a new home or 30% of an existing home.
The buyer would be left to buy the remainder of the property – with a minimum deposit of 2% – and would not be required to pay mortgage insurance from the lenders.
Once the property is purchased, the owner would have the option to start buying more of the government property, or they could simply leave the shared ownership structure in place.
However, the owner would have to live on the property for two years, and if the owners’ income increased, they would be forced to start buying more of the property.
Labor says the scheme would cost $329 million over four years but would also generate revenue of its own.
When a property was sold, the government took its share of any capital gains that were made.
Tight price limits in place
The scheme would not be available for any property, with price caps in place for all states and territories.
A cap of US$950,000 would be set for Sydney and major regional centers in New South Wales and US$850,000 for Melbourne and major Victorian regional centres.
|
Qualified region |
Property price cap |
|---|---|
|
NSW – capital and regional centers |
$950,000 |
|
NSW – rest of state |
$600,000 |
|
VIC – capital and regional center |
$850,000 |
|
VIC – rest of state |
$550,000 |
|
QLD – capital and regional centers |
$650,000 |
|
QLD – rest of state |
$500,000 |
|
WA – capital |
$550,000 |
|
WA – rest of state |
$400,000 |
|
SA – capital |
$550,000 |
|
SA – rest of the state |
$400,000 |
|
TAS – capital |
$550,000 |
|
TAS – rest of state |
$400,000 |
|
ACT |
$600,000 |
|
NT |
$550,000 |
The proposed limits mirror those offered in the government’s New Home Guarantee, which Labor said it would continue if elected, along with existing grassroots policies such as the First Home Loan Deposit Scheme.
A significant expansion of these schemes – including tripling the First Home scheme – was one of the government’s key budget commitments and was agreed by the Labor Party.
Concerns were raised earlier that adding demand to the market through these types of share-share programs would only drive prices higher.
When the Grattan Institute made a similar proposal for a national share-share scheme earlier this year, it admitted that prices could rise.
However, it argued that targeting the scheme towards the lower end of the market would ensure that the impact would be modest.
Similar schemes already in place
Several similar schemes are already being carried out by state and territorial governments.
The Victoria’s Homebuyer Fund offers help with 25% of a property and also has more generous income limits.
In Western Australia, the Keystart program does something similar, but with tighter income limits.
A federal parliamentary investigation into housing affordability – which was chaired by Liberal Representative Jason Falinski – analyzed these programs and other models of shared capital.
Although he did not specifically recommend the creation of a national scheme, he had a very favorable view of the idea.
Labor hopes its scheme will work alongside these state schemes and make the option more available to more people.
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