Federal Labor has detailed its key housing policy for the election campaign, proposing to help 10,000 households gain access to homeownership by dramatically reducing the price of a property.
Key points:
- The labor scheme would see the government cover 30 or 40% of the cost of a property
- Initially, 10,000 places would be made available in the system
- The program would be open to people earning less than $90,000 or couples earning less than $120,000
Labor presented a new ‘equity participation’ scheme it would adopt in government, essentially buying 30 or 40% of a property with the buyer.
This part of the property would then belong to the government and could be purchased by the owner of the house over time.
Labor estimates it could reduce the cost of a new home by up to $380,000 for some buyers in the most expensive markets and reduce the burden of mortgage repayments.
Labor and the Coalition have faced questions throughout the campaign over how they will tackle housing affordability, and the rising cost of living is expected to be a central theme as Labour’s campaign launches. in Perth today.
Share the cost of a new home
According to Labour, 10,000 places would initially be made available under the scheme which would be open to people earning less than $90,000 as an individual or $120,000 as a couple.
The scheme would not be limited to first-time home buyers. Instead, it would be available to anyone who doesn’t currently own a property.
Under the proposed scheme, those buying property could ask the government to cover 40% of a new home or 30% of an existing home.
The buyer would be left to buy the rest of the property – with a minimum deposit of 2 percent – and would not be required to pay mortgage insurance from lenders.
Once the property is purchased, the owner would have the option of beginning to purchase more of the property from the government, or could simply leave the condominium structure in place.
However, the owner would have to live in the property for two years, and if an owner’s income increased, they would be required to start buying more of the property.
Labor says the scheme would cost $329 million over four years, but would also generate its own revenue.
When a property was sold, the government took its share of the realized capital gains.
Tight price caps in place
The program would not be available for just any property, with price caps in place for each state and territory.
A cap of $950,000 would be set for Sydney and major regional centers in New South Wales, and $850,000 for Melbourne and major regional centers in Victoria.
|
Eligible region |
Real estate price ceiling |
Maximum savings on the purchase of a new home |
Maximum savings on the purchase of an existing home |
|---|---|---|---|
|
NSW – capital and regional centers |
$950,000 |
$380,000 |
$285,000 |
|
NSW – rest of the state |
$600,000 |
$240,000 |
$180,000 |
|
VIC – capital and regional center |
$850,000 |
$340,000 |
$255,000 |
|
VIC – rest of state |
$550,000 |
$220,000 |
$165,000 |
|
QLD – capital and regional centers |
$650,000 |
$260,000 |
$195,000 |
|
QLD – rest of state |
$500,000 |
$200,000 |
$150,000 |
|
WA – capital |
$550,000 |
$220,000 |
$165,000 |
|
WA – rest of state |
$400,000 |
$160,000 |
$120,000 |
|
Its capital |
$550,000 |
$220,000 |
$165,000 |
|
SA – rest of state |
$400,000 |
$160,000 |
$120,000 |
|
TAS – capital |
$550,000 |
$220,000 |
$165,000 |
|
TAS – rest of state |
$400,000 |
$160,000 |
$120,000 |
|
LAW |
$600,000 |
$240,000 |
$180,000 |
|
NT |
$550,000 |
$220,000 |
$165,000 |
The proposed caps mirror those offered in the government’s new housing guarantee, which Labor says would continue if elected, as well as popular existing policies such as the first home loan deposit scheme.
A significant expansion of these schemes – including a tripling of the First Home scheme – was one of the Government’s key budgetary commitments and was accepted by Labour.
Concerns have been expressed before that adding demand to the market through these types of equity investment programs would only drive up prices.
When the Grattan Institute made a similar proposal for a national equity participation scheme earlier this year, it admitted prices could rise.
However, he argued that targeting the program at the lower end of the market would ensure the impact was modest.
Similar schemes already in place
A number of similar programs are already run by state and territory governments.
Victoria’s Homebuyer Fund offers to help with 25% of a property and also has more generous income thresholds.
In Western Australia, the Keystart program does something similar, but with stricter income thresholds.
A federal parliamentary inquiry into housing affordability – which was chaired by Liberal MP Jason Falinski – examined these programs and other models of shared equity.
While he did not specifically recommend the establishment of a national regime, he saw the idea rather favorably.
Labor hopes its program will work alongside these state-run programs and make the option more accessible to more people.
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