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In search of the great Australian dream

Australia has long been the country of plenty. We have enjoyed a thriving tourism industry, a bountiful supply of natural resources and strong trade relationships with those across the Asia-Pacific. Thanks to these and other factors, the economy has stayed relatively stable, even throughout the uncertainty of COVID. As a nation, we have come to rely on economic stability and the ideal that owning our own home is a right, rather than a privilege. This is a mindset that Australians have been raised with since birth, even from our early years we sing songs like give me a home among the gum trees. However, with interest rates continue to rise and house values falling – is the great Australian dream alive and well?

What is the newly appointed Labor Governments plan?

The National Housing Supply and Affordability Council

The recently appointed Albanese Government have plans to establish a National Housing Supply and Affordability Council. This expert-led committee will be tasked to position the Commonwealth as a leader in increasing housing supply and improving housing affordability. A key role of the Council will also be to develop and implement Labor’s National Housing and Homelessness Plan. The plan will, “set out the key short, medium and longer term reforms needed to make it easier for Australians to buy a home, easier to rent, and put a roof over the heads of more homeless Australians.”

The National Housing and Homelessness Plan

To start the work required, Australia’s state, territory, and federal housing ministers met in mid-July, for the first time in half a decade. After the meeting the Minister for Housing and Homelessness, Julie Collins, released the following statement, “My state and territory colleagues also discussed the priorities, challenges and housing strategies in their jurisdictions, providing key insights, including how the Albanese Government’s initiatives will boost and leverage their recent investments to increase social and affordable housing.”

The housing reform agenda includes:
• The $10 billion Housing Australia Future Fund that will build 30,000 social and affordable housing properties in its first five years.
• Help to Buy, a new program to make it cheaper and easier for Australians to own their own home.
• The Regional First Home Buyer Support Scheme.
• Establishing a National Housing Supply and Affordability Council; and
• Developing a new National Housing and Homelessness Plan.
• Close collaboration between the Albanese Government and State and Territory Governments will be critical to the development of the new National Housing and Homelessness Plan and Ministers agreed to further meetings to progress reform.

“Housing is central to the wellbeing of all Australians, and all levels of government are committed to ensuring everyone can more easily access safe, affordable housing. All states and territories have agreed to work together on these reforms”, Minister Collins said.

Help to Buy Scheme

Since 1961, the home ownership rate in Australia has been in decline. This has been felt more acutely amongst certain groups, especially younger households and those on lower incomes. Labor has said that, “forty years ago, almost 60 per cent of young Australians on low and modest incomes owned their own home. Now, it is only 28 per cent.” This is the motivation behind the introduction of the Help to Buy scheme.

Whilst there are several criteria that potential homeowners must meet to be eligible, a key point is that they must earn $90,000 or less per annum for individuals, or $120,000 or less per annum for couples. This bracket covers a large range of the population who are classed as low to middle income earners, with only 10,000 spots open each financial year. This equates to a massive number of potential applicants who will qualify for the scheme on earnings alone.

The federal government will provide an equity contribution of up to a maximum of 40% of the purchase price of a new home and up to a maximum of 30% of the purchase price for an existing home. The eligible home buyer will still need minimum deposit of 2% and qualify for a standard home loan to cover the remaining value of the property. With the audience of low to middle income earners in mind, the way the scheme is setup poses its own conundrum. The scheme will naturally skew towards those who are at the higher end of the spectrum of the earnings bracket, as they will have greater borrowing capacity and with less barriers than those on the lower end. So, what happens to those who miss out on one of the spots?

Challenges continue to be faced

The main criticism of this shared-equity scheme is that those who don’t nab one of the 10,000 spots will be left further and further behind on their dreams of home ownership. It has the potential to increase demand on an already strained housing market. With interest rates continuing to increase, potential homeowners borrowing power is waning. Whilst the intention of the scheme is on assisting lower income earners and a younger demographic break into the property market, it will yet be seen whether it is a success or needs to be re-evaluated by Labor.