Labor’s housing policy in the market for some home repairs

An independent assessor will determine the extra money home buyers can claim from renovations when they sell a house bought through Anthony Albanese’s home-equity scheme.

The Coalition and Labor have locked horns over how to best alleviate the housing affordability crisis ahead of the start of the first rate-hike cycle in over a decade.

An independent assessor will ­determine the extra money home buyers can claim from renovations when they sell a house bought through Anthony Albanese’s home-equity scheme, as Labor revealed it was open to expanding the program beyond 10,000 places a year.

Halfway through the election campaign, the Coalition and Labor have locked horns over how to best alleviate the nation’s housing affordability crisis ahead of the start of the first rate-hike cycle in over a decade and climbing cost of living pressures.

Labor’s housing spokesman, Jason Clare, clarified the ALP policy on Monday amid criticism from Scott Morrison, who said the program was too complicated and would result in the federal government “effectively becoming an owner of your home.”

Under Labor’s plan, up to 10,000 first-home buyers a year would be able to receive a federal co-investment that could potentially boost the purchasing power for a successful applicant by hundreds of thousands of dollars to buy a home worth as much as $950,000.

The Prime Minister said there were unanswered questions about the ALP policy.

“What happens if you decide to renovate your home? I mean, what Labor have been very clear about is that they have a share in your home,” he said. “So, as your home value increases, they are making money off you.

“As your home price goes up, your home value goes up. They are taking a cut, and so you have to pay the government back on their equity and with the capital appreciation. I mean, they are basically riding on your decision to buy your own home.”

Mr Morrison also questioned the fairness of the scheme.

Jason Clare says the state-level shared-equity schemes in Western Australian and Victoria have already addressed the issue of how to account for the owner completing major renovations. Picture: Christian Gilles

“It is for 10,000 people (who will be eligible), and so you will be going along to an auction, and there will be someone who is bidding against you, and they will be bidding with the government and you will be bidding on your own; so, I don’t think Labor have thought these things through,” he said.

Mr Clare said the state-level shared-equity schemes in Western Australian and Victoria had already addressed the issue of how to account for the owner completing major renovations.

“When the house is sold there is an independent valuation of the home, but also of the reno,” Mr Clare said. “When you split the proceeds (from the sale), you get the full value of your renovation.”

Mr Clare also said he had an “open mind” on expanding the number of available places ­beyond the 10,000 a year cap if there was “genuine appetite”.

The take-up of state-based schemes has been underwhelming. The West Australian Shared Home Ownership measure – which can only be used to buy new homes and off-the-plan properties – had only helped 1800 residents into home ownership since it was launched in 2011.

That scheme was more limited, however, with the state government providing a shortlist of available properties.

The British government has also offered a “Help to Buy” equity loan for new homes, which a recent parliamentary committee report found did not provide “good value for money” for the taxpayer, and had inflated house prices.

Labor’s proposed scheme would cost $329m over the four-years forward estimate period, ­reflecting the estimated interest paid on funding the government’s co-investment as well as administrative costs.

Mr Clare said this had been costed by the independent Parliamentary Budget Office. He also argued the policy was a “win-win” for taxpayers, as the return over the longer term dwarfed the associated costs thanks to the ­expected capital gains once homes were eventually sold.

“You don’t invest in housing for five minutes – housing is a long-term investment, always has been, always will be,” he said.

Mr Clare argued that while the Coalition’s home-loan guarantee scheme brought forward the date first-home buyers could enter the market, Labor’s ­approach, which was targeted at lower-income households, would make the difference between renting for life and owning a home.

“This is helping Australians who would otherwise be renting for the rest of their lives, and renting in retirement,” he said.

Andrew Wilson, chief economist at property consultancy My Housing Market, said “from the perspective of the first-home buyer, all’s fair in love and trying to get a house”.

Dr Wilson said anything that helped get more marginal Australians “into home ownership and out of the rental market – which is a horror story at the ­moment – must be a positive”.

But he said share-equity schemes “take away that notion you have full ownership of the property – it’s a shared social housing initiative.”

“At the end of the day, it’s up to those people whether they are comfortable with that type of ­arrangement,” he said.

Brendan Coates, the director of the Grattan Institute’s economic policy program, said he ­anticipated the scheme would be particularly popular among older Australians who hadn’t managed to break into the property market.

“The point with this scheme is you want to make sure you are helping those who would genuinely not be able to afford a home,” Mr Coates said.

Labor’s proposed shared-­equity scheme is modelled on state-level policies operating in Western Australia and Victoria, and will offer up to 30 per cent of the value to help buy an existing home, or up to 40 per cent of the value of a new property, in return for a stake in the capital gains – or losses – in that home.

To be eligible, single applicants under Labor’s share-equity loans must earn $90,000 or less, or up to $120,000 for couples, and the value of the property would be capped according to the market, including a $950,000 limit for Sydney properties, $850,000 for Melbourne homes, $650,000 for Brisbane.

Mr Clare said buyers who participated in the scheme would not be able to sell within the first two years, and would be able to rent out the property only if they ­received a special exemption from the government. This could be, for example, if the homeowner or owners needed to move for compassionate reasons, or were forced to move for their jobs.

Buyers through the scheme would also be required to obtain home insurance, in line with usual bank lending practices.