Stockland chief challenges CBA to offer loans for a new housing model targeting young workers

Commonwealth Bank will consider providing ‘kick-starter’ home loans to young customers to finance landless homes in a model Stockland chief executive Tarun Gupta says would help workers.

Commonwealth Bank CEO Matt Comyn, Team Global Express chief Christine Holgate and Stockland chief Tarun Gupta at the bank's Momentum conference in Sydney.

Commonwealth Bank will consider providing “kick-starter” home loans to young customers to finance “landless’’ homes in a model Stockland chief executive Tarun Gupta says will help workers get onto the property ladder.

At a conference sponsored by the nation’s largest lender, Mr Gupta challenged CBA CEO Matt Comyn to consider offering the loans for non-conventional housing developments specifically targeting young workers struggling with affordability.

The fast-growing land-lease sector is typically focused on the nation’s retirees, offering an alternative to downsizing into more expensive retirement villages. But the boss of Australia's biggest residential developer said Stockland wanted the bank’s help building land-lease communities for younger generations struggling to buy their homes. Such mortgages would allow ownership of the dwelling but not the land it sits on, and could provide a crucial stepping stone to families. He asked Mr Comyn to consider such loans for retail customers to help young people get onto the property ladder and build equity at a cheaper price point.

“I’m not talking (for) the over-50s because they are selling their homes and buying with equity, but for our key workers in our communities, particularly young key workers,” Mr Gupta said.

“(Stockland) can produce homes at an affordable price point. But the younger families, they don’t have equity ready to buy,” he said.

“In Australia there is really no mortgage product available, and I know there’s some capital constraints and regulatory constraints, but I think it would be great if you could consider that,” he told Mr Comyn during a panel at the forum.

These home loans existed in the US and Britain for communal housing models where the developer retained ownership of the land, Mr Gupta said. Residents in these communities enter into long-term lease agreements for the land, allowing them to purchase the dwelling itself.

In response, Mr Comyn said: “Yes – you’ve heard it here first. I think it’s a very clever idea and consistent with some of our other conversations.”

Given the large amount of affordable housing needed in coming years, Mr Comyn said the bank would be “delighted” to look into Stockland’s proposal and financing structures and products that could contribute to meeting this need.

“We’d be delighted to, of course, there’s always a quid pro quo when you ask people to come along on a panel, so it’d be rude to not say yes.”

Asked about it on the sidelines of the conference, Mirvac chief financial officer Courtenay Smith said the idea was “good” and the land-lease sector could “deliver more homes to Australians.”

“I’m sure financial institutions will be able to think through that and how to support the sector … it’s an opportunity (for them),” she said.

Stockland has not tabled a specific proposal and did not provide specifics of its plan when contacted by The Australian.

Market sources said such home loans could progressively develop in Australia as the land-lease market matured.

However, banks and regulators would probably struggle with the idea, at least initially, because homes had so much of their value embedded in the land, not the built structures, and there could also potentially be title challenges.

Mr Gupta said the land-lease communities model had proved an attractive option for the over-50 demographic in Australia. Downsizing was also freeing up larger homes for families.

“We can work together to create an opportunity for key workers in our communities who are facing steep rents locally, or who are having to move further away in order to buy their home – and then be faced with a long commute. With the right financial product these key workers can enter the housing market with an affordable, quality home, closer to their place of work,” he said.