The New South Wales government is set to finally join most other Australian states and territories with a shared equity program for housing. It’s offering to buy up to 40 per cent of a new property or up to 30 per cent for an existing property.
The initial shared equity pilot, which is scheduled to start in January next year, will be open to up to 3000 people each year and will run for two years. It is the centrepiece of a broader $2.8 billion housing package to be included in the state budget on Tuesday.
The scheme will be open to essential services workers (including teachers, nurses and police), as well as single people who are either parents or over 50. Participants can have an income up to $90,000 for singles and $120,000 for couples, and they will need to save up at least 2 per cent of their property’s value as a deposit.
The policy has been in development for around a year, with NSW’s Department of Planning and the Environment first mentioning it was working on the policy in its Housing 2041 strategy and 2021-22 Action Plan, which were released in May of last year.
Similar shared equity programs are already available in every other state and territory except for the NT (which has offered shared equity loans in the past). For example, Western Australia has offered low-deposit and shared equity loans through state-owned lender Keystart since 1989.
At the federal level, Prime Minister Anthony Albanese announced a nationwide shared equity loans program, modelled on WA’s Keystart program, as one of the centrepieces of his housing policy. Labor’s proposed program will be limited to 10,000 participants a year.
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According to leading independent economist Saul Eslake shared equity programs can put some upward pressure on prices. But that impact is likely to be pretty small given some of the key features of the scheme, particularly given that property prices are expected to be going down rather than
“As a general rule, history shows us that any program that allows people to pay more for housing than they otherwise would – be it first home owner grants, lower interest rates, relaxed mortgage lending standards, deposit guarantee schemes allowing people to take money out of super for deposits or shared equity schemes – will put some upward pressure on prices in a supply constrained market,” he told The Fifth Estate.
But he said how much pressure that will place on house prices will depend on the nature of the scheme and how many people take it up.
In the case of both the NSW program and Labor’s federal shared equity programs, Mr Eslake there are three key features that will limit the upward impact on house prices.
The first is that they have a limit on the number of people who can access the program each year, which will be a small percentage of first home buyers and an even smaller percentage of overall property transactions. The second is that there is an income test on applicants, and the third is that there’s a limit on the value of properties that can be bought through the scheme.
“One advantage, in principle, of shared equity schemes compared with other forms of support for home ownership is that least taxpayers get a return on the money they put in when the properties are sold. That’s assuming they go up of course, which at least for the next couple of years might not be the case,” Mr Eslake said.
“The Western Australian keystart scheme, on which the federal government’s Shared Equity scheme is based, is self-financing now.”
The program in NSW also helps to address a genuine problem in NSW with essential services workers increasingly struggling to afford housing.
“Because property prices are so high in Sydney, it’s become increasingly difficult for essential workers – most of whom are not paid particularly well – to live in the communities that they serve,” Mr Eslake said.
“I think that has big disadvantages from that both from the point of view of the workers themselves, who might have to commute long distances to get to their job, but also because of kind of loss of connection with people living in the communities that they serve.”
The Property Council of Australia’s NSW executive director Luke Achterstraat said he welcomed the NSW government’s investment into housing supply initiatives, but emphasised program delivery is now the key.
“Improving the planning system and delivering more housing supply are the biggest levers the state government has to address affordability,” he said. “We are some 100,000 homes short of where we need to be in NSW so it is timely to support the private sector in getting on with the job of building quality homes and beautiful communities for the people of NSW.”
“In particular, strategic investments that support faster planning assessments and accelerate the rezoning of housing precincts will help remove bottlenecks and streamline the system. Our planning system is complex so it is critical these announcements are matched with a focus on simplification not duplication, and a strong cultural focus on delivery.”
NSW Treasurer Matt Kean said many older singles struggled to find secure housing, with the number of women aged over 55 among the fastest growing cohort of homeless people in the nation.
“Housing security is the bedrock of financial security. A safe and secure home is fundamental to allow people to earn an income, care for their loved ones and pursue their own interests and aspirations,” he said.