Labor’s pitch to voters has a surprising winner
So we got Labor’s contribution to housing policy last week, with their Help to Buy scheme.
This is a shared equity scheme, with the government effectively coming in as a money partner on your home.
So if you can come up with a 5% deposit, the government will chip in another 30% for existing homes, or 40% for new homes to help get you over the line.
The government now has a stake in your home, and if you sell for a profit down the track, the government is going to expect their cut.
Note, this doesn’t include any value you add along the way through renovations or major works. If you pay for that yourself, you get to capture any uplift you create.
I’m a big fan of that. It recognises that the family home is often the first place people go to build equity, and so its great that the scheme doesn’t close the door to that.
Some people have said that the government shouldn’t be making money off your home, but for the low income earners the scheme targets, I don’t expect you’ll be hearing any complaints.
Because it is a substantial amount of money. The price cap in Sydney is $900,000, so 30% is $270K. That’s going to go a long way.
Now when I was looking into this, I discovered that there’s a surprising winner in shared equity schemes – older people.
We often think about these schemes as helping young Aussie couple getting their first home, but older Australians need support too.
Especially older women. They are the fastest growing cohort of homelessness in Australia, and many never purchase property again after a divorce.
And so with the state-based shared equity schemes we’ve seen, experience shows that they have been popular with older buyers, with young buyers more drawn to low deposit schemes.
From The AFR:
Older single women and downsizers are the groups most likely to benefit from the opposition’s proposed home ownership scheme, experience of these programs shows.
Shared equity or shared ownership schemes offered people with some equity but who did not qualify for a standard mortgage a chance to get into the market, and these were more likely to be older people with fewer working years ahead of them, Grattan Institute program director Brendan Coates says.
As many as 80 per cent of working-age single people – those aged between 25 and 64 – fell below the proposed scheme’s $90,000-a-year gross income threshold and 42 per cent of working-age couples earned less than the combined $120,000 limit, Grattan research shows.
But in Western Australia, where the state government’s Keystart program offered two products – a shared equity scheme and a low-deposit home loan –- there was an age split between the two products, chief operating office Lindsay O’Sullivan said.
“Most customers with shared equity generally tend to be older,” Mr O’Sullivan said. “Customers who are on a low-deposit home loan tend to be younger.”
“In our experience, there might be people who have previously been homeowners and through a relationship breakdown are no longer the family home owner,” Mr O’Sullivan said. “They’ll generally tend to be older.”
… Mr Coates, who proposed a shared equity scheme in February, said that just one-third of women who separated from their partner and lost the family home bought again within five years, and less than half were shown to have bought again within 10 years.
So look, I think it’s a winner. It’s great that we’re recognising that housing is a need, no matter what stage of life you’re in.
And a bit of extra support for single women is most definitely welcome.