As I write this, there is a Senate debate on one of the government’s housing schemes, of which there are several, all designed to increase the supply of housing at affordable levels across the country. This one is known as the ‘Help to Buy’ scheme designed to help those who want to enter the housing market but are having trouble raising the required deposit.
Under this scheme you can buy a house, unit or townhouse by contributing a minimum 2% deposit, with the government providing an equity contribution of up to 40% for new homes, or 30% for existing homes.
The remainder of the property’s value would be financed through a conventional home loan through a bank or building society. There is no interest on the government’s shared equity and no repayments, the government will only recoup its initial investment – plus a share of any capital gains if the property has increased in value – when it is sold or changes hands. In other respects the government’s shared equity is not repayable but you always have the option of buying back the government’s equity at any time. Schemes such as this have operated successfully in parts of Europe and the UK
Suppose, for instance, you are buying a home worth $600,000 (the scheme has various value limitations depending on where you are), you put up 2% or $12,000 as a deposit, the government puts up 30% or $180,000 and your home loan would then only need to cover the remaining 68% of your property’s value, or in this case $408,000.
This ‘Help to Buy’ Scheme is expected to commence sometime in 2024 if it passes the Senate. There are up to 10,000 places for this financial year, with a total of 40,000 spots allocated over the next four years. The Help to Buy scheme will require legislation in all states and territories so the roll out timetable and specific scheme rules may vary depending where you are in the country.
By the end of the day we will know whether the Senate are inclined to pass this modest piece of legislation – the Liberal National coalition have already said that they would block passage of the Bill before they even saw it but that’s their MO, isn’t it ? The government need the Greens and the cross bench senators to get this legislation through but ‘Mad Max’ Chandler-Mather – the Greens spokesperson – has other ideas and he is demanding that the government legislate a rent freeze and a cap on rent increases and that Negative Gearing and the Associated capital gains tax concessions be eliminated.
Personally, I can’t see the government coming at a rent freeze as, inevitably, this will act as a disincentive for investors to put money into the housing market and, for good or ill, over eighty per cent of our rental housing stock is owned by private investors.
The question of reining in Negative Gearing is an interesting gambit by the Greens as it was until recently a Labor policy only to allow negative gearing concessions on new-builds rather than on existing homes where much of the churning has been occurring. So, there may be room for a compromise here.
For there to be no compromise on this issue would be a failure in our system of governance and progressive legislation but then, maybe that’s what the opposition forces want to see, after all this legislation was originally passed by the lower House in February and has been languishing in the Senate since.
OK, this policy is not a panacea for home ownership in Australia but is it worth dying in a ditch to oppose it as the coalition and Greens seem to want to do ?
We shall see !
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