The federal government will use next week’s budget to change up one of its signature housing policies, making its “Help to Buy” shared equity scheme available to more people.
Help to Buy allows homebuyers to “co-buy” their property with the government, reducing the size of the deposit and mortgage needed to buy a home.
Those in the scheme can have the government take a 30 per cent slice of an existing home, or a 40 per cent slice of a new home, which can be bought out over time.
Under the new changes, the income cap will be lifted for both singles and couples looking to buy a home, and the price caps for properties will also be raised.
For singles the income cap will lift from $90,000 to $100,000, and for couples or single parents, it climbs from $120,000 to $160,000.
In Sydney, the property price cap will go from $950,000 to $1.3 million, in Brisbane it goes from $700,000 to $1 million, and in Melbourne it goes from $850,000 to $950,000.
Price caps would be tied to the median house price in that region, rather than the median dwelling price.
The total number of places available in the scheme will remain the same, at 10,000 a year for four years.
It also remains restricted to people that don’t already own a home.
The government argues that under the changes, most first-home buyers will be eligible for the scheme, and roughly two-thirds of all properties nationwide fall under the price caps.
The changes will cost an additional $800 million, with the government offering a total $6.3 billion under the scheme.
The Help to Buy scheme only passed through parliament late last year after a long political battle, and isn’t expected to begin taking applications until later this year.
Housing Minister Clare O’Neil said it’s a sensible expansion of the scope of the scheme.
“The changes that we’re making today will expand this scheme to make sure that more young people get more government support for more homes around the country,” she said.
Mixed view from housing experts
The Help to Buy scheme was politically contentious, opposed by the Coalition who argued few Australians want to co-own their home with the government, and initially by the Greens who wanted to see changes in areas like negative gearing and capital gains tax.
The Greens eventually gave in to pressure from the government to pass the bill, with no concessions made.
Under the new changes the income cap will be lifted for both singles and couples looking to buy a home. (ABC News: Jacinta Bos )
Some housing economists support the scheme, arguing it will help more low-income people into the property market with a very small impact on house prices.
Others like Peter Tulip from the Centre for Independent Studies argue it does very little, and expanding it further won’t do much either.
“It’s a big windfall for the lucky recipients, and they will be able to bid much more aggressively at auctions, and they will put up prices.
“The lucky lottery winners are really happy with this, but everybody else suffers higher prices.
“So it doesn’t improve overall affordability. It just reshuffles a given housing stock.”
A similar shared equity scheme was last year closed by the New South Wales government due to a lack of interest.
It was more targeted than the federal scheme, aimed at single parents, older single people, first home buyers employed as “key workers” and some others.
Mr Tulip says the best thing the federal government could be doing is working with state and local governments to boost supply.
“We are seeing the New South Wales and Victorian governments, which are doing a lot to get building going in their states, taking on the local councils that are opposing new housing,” he said.
“I wish the federal government would give them a bit more help.”
Ms O’Neil said work is underway to build more homes, but some homebuyers also need immediate support to crack the housing market.
“The centre of our response is building more homes because the reason that so many Australians are in housing distress is because we have a housing shortage,” she said.
“We’ve got a now $33 billion (housing) package. Most of that money is going into building more homes.”
Nearly $50 million will also be offered to the states and territories in next week’s budget to help grow the prefabricated and modular home construction sector.
