Federal election 2022: Hidden traps of Labor’s housing plan revealed

The pitfalls of Labor’s scheme to help low income earners into their own home have been uncovered amid warnings future interest rate hikes could leave some with ‘negative equity’.

Homebuyers who use Labor’s shared equity housing scheme will be slugged with extra repayments to buy the government out if their household starts earning more than $120,000 per year.

The policy would mean low and middle income earners face extra cost of living pressure to cover the cost of their house if their wages increase — or dis-incentivise them to strive for a better salary.

Labor was under pressure to detail the $329m scheme in a media conference where Opposition Leader Anthony Albanese used the word “plan” more than 30 times but was not able to answer how much more money voters would have in their hip pockets under his plans for government.

Defending his “Help to Buy” strategy in the face of attacks from the government, Mr Albanese said it had been backed by a number of industry bodies.

He labelled criticism from the Prime Minister “desperate” and “extreme,” referencing a 2008 interview where Scott Morrison – then a new backbencher – labelled shared equity schemes a “good opportunity”.

Labor’s Jason Clare spruiks the benefits of the housing plan. Picture: Liam Kidston

The Labor leader passed most specific questions on the policy to his housing spokesman at a Tuesday news conference, but said he had a “comprehensive plan to assist people to buy” and a “comprehensive plan to increase supply”.

Labor also has a $100 million policy to increase emergency housing for women and children escaping domestic violence.

“This is a suite of measures which, taken together, will take pressure off people who are struggling with housing,” Mr Albanese said.

Opposition housing spokesman Jason Clare said the policy would help families “pass on their wealth to their kids rather than passing on nothing because they’re renting for the rest of their life”.

Revealing more detail about the housing plan, Mr Clare said that anyone who got a pay rise taking them above the eligibility threshold would have a two-year grace period, then face extra payments to buy out the government’s stake.

He said that would also apply to kids who want to inherit their parents’ home when they pass away.

Labor leader Anthony Albanese talks housing under a Hills hoist at East Gosford in the seat of Robertson NSW. Picture: Liam Kidston

Mr Clare said one in six people who have signed up to a similar scheme in Victoria have already bought out the government’s stake.

Mr Albanese was in the seat of Robertson, on the NSW Central Coast, spruiking his policy with 21 year old Lydia Pulley, who wants to get into the market.

The dental receptionist and student earns a combined $92,000 per year with her partner.

She said there was “no other option” for her to get into the market than Labor’s plan, although she did say that she would have to “look into” the strict rules which would prevent her from handing down her home to her kids.

Mr Albanese talks to his talking points and mentioned plan 30 times. Picture: Liam Kidston

The three bedroom home she rents in East Gosford for $550 a week is valued at $1.07 million according to Core Logic data, putting it above the price cap for Labor’s “Help to Buy” plan. She said she would likely have to move further away from her job to buy a house cheap enough.

Meanwhile, first home buyers have been warned that applying for loans under government guarantee schemes could put them at risk of negative equity if multiple interest rate rises see house prices fall.

It comes amid warnings of a house price correction if the cash rate continues to climb.

Labor leader Anthony Albanese and his partner Jodie Haydon. NSW. Picture: Liam Kidston

SQM Head of research Louis Christopher expressed concern for those using the 5 per cent deposit required for the existing First Home Guarantee scheme.

“I can see a situation where the Sydney or Melbourne housing market is going to correct by more than 5 per cent in this cycle,” Mr Christopher said.

Labor leader Anthony Albanese and his partner Jodie Haydon talk with Lydia Pulley over a cup of tea. Lydia is a renter struggling to save to enter the housing market. Picture: Liam Kidston

Buyers considering Labor’s “Help to Buy” policy were delivered a similar warning.

The low deposit would leave borrowers vulnerable, RateCity research director Sally Tindall said.

“Property prices are expected to drop, potentially by up to 15 per cent in some areas over the next couple of years. Anyone with a 2 per cent deposit could fall into negative equity in the blink of an eye,” Ms Tindall said.

Those in negative equity may be unable to repay the bank if forced to sell their property, an outcome that will become more likely as costs rise with inflation.

— additional reporting by Tim McIntyre.

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