Labor's Help to Buy Scheme: Addressing Symptoms, Not Causes of Housing Affordability

The Australian Housing Urban Research Institute (AHURI) raised concerns in a report last year suggesting that the $20 billion spent by governments over the past decade to assist first-time homebuyers had actually increased inequality and made housing less affordable.

According to the report, these measures added to the demand and subsequently drove up house prices.

The Productivity Commission has also chimed in, advocating for the abolition of first home buyer subsidies, arguing that it works against improving affordability.

Following suit, the federal government recently introduced legislation to establish its own Help to Buy scheme, which aims to provide support for homebuyers.

But the Australian Labor party has taken it a step further by announcing their own shared equity scheme as part of their election campaign. This scheme aims to help low and middle-income earners, with the government providing up to 40% of the purchase price in return for an equity stake of a similar amount. Participants would only need to pay a minimum 2% deposit and still qualify for a standard home loan. Additionally, they would be exempt from lenders' mortgage insurance.

The projected cost of Labor's Help to Buy scheme is estimated to be $329 million over its initial four years. The scheme will be available to homebuyers with a taxable income of up to $90,000 for individuals and up to $120,000 for couples.

Housing Minister Julie Collins highlights that the shared equity scheme will particularly benefit renters, making home ownership a reality for thousands of Australians:

"Right across the country, Help to Buy will be life changing, bringing home ownership back into reach for thousands of Australians, particularly renters," Collins stated.

However, skeptics, including AMP chief economist Shane Oliver, argue that shared equity schemes like Help to Buy are merely a "band-aid solution" at best and potentially counterproductive at worst. Oliver warns that by bringing forward demand, there is a risk of exacerbating the affordability problem and benefiting those already in the property market through higher prices.

Labor's Help to Buy scheme is just the latest in a series of housing policies that fail to address the underlying causes of the affordability crisis. While it may provide some relief and allow homebuyers to enter the market with a smaller deposit, it ultimately falls short of providing long-term solutions.

Published:Friday, 8th Dec 2023
Source: Paige Estritori

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