Is Help to Buy just ‘shuffling deck chairs as the Titanic sinks’?

The Senate economics legislation committee has recommended that the Senate pass the bills, bringing into being the federal government’s shared equity scheme Help to Buy.

The bills aim to bring to life the Albanese government’s pre-election promise of delivering a shared equity scheme to help Australians own their own home faster. Amid a growing cost-of-living crisis and escalating house prices, the scheme aims to enable up to 40,000 eligible Australians to purchase a property with a minimum deposit of 2 per cent without paying lenders mortgage insurance (LMI).

The government scheme would support eligible home buyers with an equity contribution of up to 40 per cent for new homes and 30 per cent for existing homes.  

The scheme would operate over four years with a cap of 10,000 participants per year and be available to eligible residents (earning less than $90,000 or $120,000 if a couple) on a first come, first served basis. These shared equity arrangements will be administered and monitored by Housing Australia (formerly known as the National Housing Finance and Investment Corporation) in states that have referred power for the program or adopted the Commonwealth legislation and in the territories.

However, after receiving political backlash, the Senate referred the provisions of the Help to Buy Bill 2023 and Help to Buy Bill (Consequential Provisions) Bill 2023 to the Senate economics legislation committee for inquiry and report.

In the committee’s final report, which was released yesterday (18 April), following a series of hearings and consultations, the majority of the committee recommended that the Senate pass the bills, stating that Help to Buy would be “a welcomed addition to the suite of housing policies that directly address supply and ownership and is an appropriate response to current housing accessibility and affordability constraints”.

“Importantly, the scheme has been carefully calibrated so to not have an inflationary impact on house prices, a design feature welcomed by many inquiry participants,” the report found, suggesting that having a contained number of participants per year was one of the ways in which the program had been designed to limit the impact on house prices.

“The committee is encouraged by the housing supply measures of the Help to Buy scheme whereby home buyers would be able to access an equity contribution of up to 40 per cent for new homes rather than 30 per cent for existing homes.

“The committee also notes that, importantly, home buyers will share any capital gain with the equity partner on sale, will solely be listed on the title and will be able to modify and renovate their home as normal.“

According to the committee, most submitters to the inquiry supported the intent behind the bills to establish a national shared equity program, with several outlining that it would enable lower-income earners to access finance for a deposit that can be the biggest barrier to entering the property market.

Some purported the benefits of share equity schemes, particularly in their ability to address the issue of mortgage serviceability, and their benefits in comparison to other first home-owner programs.

‘The policy is shuffling deck chairs as the Titanic sinks’

However, others were critical of the shared equity model, particularly raising concerns that it would impact the housing market by increasing house prices in a market that already faces supply constraints.

Indeed, it was revealed at the inquiry hearing that the Department of Treasury had not undertaken any modelling as to the effects this scheme would likely have on house prices.

In a dissenting report to the Senate economics legislation committee inquiry report, the Coalition argued that the shared equity scheme was “utterly underwhelming”, flagging that it would cost the Commonwealth $5.5 billion and only help 10,000 households per year.

“This scheme is tiny compared with the 240,000 new houses required every year if the Government is to fulfil its 1.2 million homes target by 2029,” the dissenters said.

“The proposed scheme’s restrictions, such as cutting off eligibility to people with an income of more than $90,000 and capping eligible homes to roughly half the average house price in cities such as Sydney, means the policy is shuffling deck chairs as the Titanic sinks.”

Moreover, the dissenting report noted that the scheme largely replicates state government shared equity schemes that already exist and which have largely been relatively unpopular. For example, 94 per cent of places in the virtually identical NSW scheme (Shared Equity Home Buyer Helper) were still unused as of March 2024.

The Greens also put forward a dissenting argument, stating that the Labor Party must listen to the growing calls for the government to directly build homes.

The dissenting report’s primary recommendation was that the bill not pass unless Labor shifted on negative gearing and the capital gains tax discount, rent caps, and more investment in public housing.

The Greens warned that the Help to Buy Scheme would only benefit a tiny fraction of potential first home owners, while increasing house prices for everyone not lucky enough to win Labor’s housing lottery, through increasing demand.

Max Chandler-Mather MP, Australian Greens spokesperson for housing and homelessness, said: “It is frankly a sick joke that Labor’s one policy offering on the housing crisis this year will push up house prices and help almost no one.

“Whether small or large, any increase to house prices hurts renters trying to buy a home, and almost every expert agreed, Labor’s Help to Buy scheme will push up house prices.

“Despite this overwhelming expert testimony, Labor hasn’t even asked Treasury to model the impact the scheme will have on house prices and that is deeply irresponsible.

“As multiple experts said, the reality is we will never tackle the housing crisis until we phase out negative gearing and the capital gains tax discount, the massive tax handouts for property investors, denying millions of renters the chance to buy a home.”

Chandler-Mather MP advocated that reallocating funds from eliminating significant tax benefits for property investors could fully finance the Greens’ proposal for a public property developer that would build 610,000 “good quality homes to be sold and rented at below market prices”.

“The majority of the public now support capping rents, scrapping tax handouts for property investors and establishing a public developer to build, sell and rent homes at below market prices, so the question is why does Labor keep siding with property investors instead?” he said.

“Every day Labor refuses to take real action on the rental and housing crisis is another day someone is evicted because they can’t afford their rent, or forced to choose between feeding their kid or paying the rent increase, and Labor should know this will have electoral consequences.”

What do you think of the Help to Buy Scheme? Would it be net positive or net negative? Let us know in the comments below!

[Related: Qld to become first to deliver Help to Buy]