Real estate Australia: Labor’s shared equity housing scheme

Scott Morrison was widely ridiculed for a tone-deaf remark in the wake of the budget, but Labor’s new plan shows there was a hint of truth to it.

COMMENT

Remember when Scott Morrison suggested the best way to help people who were renting was to get them to just buy a house?

When Today host Allison Langdon asked the Prime Minister why his cost of living budget didn’t include anything for renters, he replied: “The best way to support people who are renting a house is to help them buy a house.”

This was widely ridiculed.

And then we were subjected to the spectacle of the Prime Minister having a big sook and suggesting he never said that, he didn’t mean that, and so on and so forth.

But as they say in the classics, let’s roll the video tape.

“Best way to support people who are renting a house is to help them buy a house."

Scott Morrison has defended a lack of increased support for renters in #Budget2022 by suggesting they buy homes. #AusPol#9News

Changes to home ownership: https://t.co/uTpvMfD5Owpic.twitter.com/nC2a2Os2r0

— 9News Australia (@9NewsAUS) March 30, 2022

Mr Morrison was specifically asked about renters. He chose to respond by talking about a scheme to buy houses.

After he said it, Langdon hit back: “I’m not talking about home ownership here. I’m talking about rental relief.”

Mr Morrison said she was missing the point.

“I know, but that’s my point. People who are buying houses are renters,” he said.

The next day a Tasmanian radio host observed: “You’re copping a bit of flak for your comments about the lack of relief for renters in the budget, saying the best way to help struggling renters is to help them buy a house.”

“I didn’t say that actually,” Mr Morrison claimed.

Of course, he did say that. Even if he didn’t mean to be so blase about the idea that buying your first home is easy.

Scott Morrison. Picture: Jason Edwards

In Parliament, the Prime Minister rattled off a list of the Coalition’s home ownership policies, before taking a sly dig at Mr Albanese’s property portfolio.

“Not everyone can buy their own homes. The leader of the opposition has bought plenty of homes — plenty more than I have and good luck to him. We celebrate success on this side,” he said.

Goodness!

But perhaps pointing to the fact there is some truth in what the Prime Minister said, despite the tone-deaf delivery, Labor leader Anthony Albanese is announcing a big, shiny new housing affordability policy today.

And it’s not about renters at all, unless you count the fact that he also wants to get them into the property market.

It’s a big moment in the campaign, you would have to say, which hasn’t exactly been groaning in meaty policy announcements from either side of politics.

Mr Albanese will announce a shared equity scheme, in which the government will own up to 40 per cent for your new home or up to 30 per cent of existing homes.

Of course that also means your mortgage will be up to 40 per cent lower – unless and until you want to buy the government out.

Anthony Albanese. Picture: Liam Kidston

Up to 10,000 Australians a year will gain access to the scheme if Labor is elected.

The scheme, called Help to Buy, is designed to assist Australians buy a home with a smaller deposit, a smaller mortgage and smaller mortgage repayments.

If you’re interested in the nitty gritty, it’s based on some work by the Grattan Institute that was released in February.

That research noted that home ownership rates are falling fast, especially among the young and poor.

“A national shared equity scheme would help younger Australians get into the housing market faster, especially those without access to the ‘Bank of Mum and Dad’,’’ author Brendan Coates wrote.

“Buyers would be able to borrow less for their first home – reducing the level of risk they take on – especially since interest rates are likely to rise from here.

“Other first home buyers may use the scheme to secure a larger home that can accommodate a growing family, avoiding the need to pay stamp duty twice if they upgrade in future.

A house in Earlwood, NSW, on the market for $850,000.

It would be eligible under Labor’s scheme.

A house in Richmond, Victoria, on sale for up to $825,000.

It has a nice kitchen.

“A national shared equity scheme would also help many older Australians, especially many older single women.

“Many older Australians who rent have more than enough savings for a deposit but can’t buy because they won’t stay in the workforce long enough to pay off the mortgage by the time they retire.

“For instance, about 60,000 renting households aged 45-64 have financial assets (excluding their super) of more than $200,000 (singles) and $300,000 (couples). A shared equity scheme could help many of this group into home ownership, allowing them to pay off any remaining loan with their super at retirement.

“Shared equity could help couples to remain in home ownership if they separate. The home is typically a family’s largest asset and splitting the equity in the home upon separation often requires it to be sold. Separating couples then often lack the assets to each purchase a new home, especially since they must pay stamp duty again.”

The Grattan Institute’s data showed how much harder it has become to save for a deposit.

A unit for sale in Morningside, Queensland.

Also eligible under the scheme.

Under the scheme Labor is proposing, the homebuyer will need to have a deposit of 2 per cent and qualify for a standard home loan with a participating lender to finance the remainder of the purchase.

You also don’t have to be a first homebuyer, so that could be useful for single mums and dads on low incomes getting divorced.

It will only be available to Australians with a taxable income of up to $90,000 for individuals and up to $120,000 for couples.

The Morrison government has a Home Guarantee Scheme which also allows people on low incomes to buy with a deposit as low as 5 per cent.

Labor’s scheme is more generous, but uses the same caps on the price of the house you can buy in capital cities and regional areas.