Purpose of the Bills

The purpose of the Help to Buy Bill 2023 (the Bill or the Main Bill) is:

• to establish the framework for a new national shared equity program – called the Help to Buy program – aimed at assisting low to middle income earners to purchase new or existing homes by accessing an equity contribution from the Commonwealth. That framework includes:
  • that regulations for Help to Buy may enable administrative review of Housing Australia's decisions under the program
  • a requirement for Housing Australia to report to the Minister on an annual basis
• to empower Housing Australia (formerly known as the National Housing Finance and Investment Corporation) to administer and monitor the Help to Buy program on behalf of the Commonwealth
• to lay the Constitutional foundation for Help to Buy by specifying that state participation in Help to Buy is enabled by a referral under section 51(xxxvii) of the Constitution, or adoption of the Commonwealth legislation
• to empower and set parameters for the Minister to give Housing Australia directions (by legislative instrument) about how it is to carry out Help to Buy functions including decision‑making criteria for entering into Help to Buy arrangements, limits on entering into Help to Buy arrangements, and internal review of decisions made by Housing Australia and
• to require a review of the Help to Buy program three years after its commencement.

The purpose of the Help to Buy (Consequential Provisions) Bill 2023 (the Consequential Provisions Bill) is to support the operation of Help to Buy by making several consequential amendments to the Housing Australia Act 2018 arising from the enactment of the Main Bill.

Structure of the Bill

The Main Bill is divided into six parts:

• Part 1 gives contextual details, outlining the object of the Bill and providing definitions.
• Part 2 outlines the Help to Buy functions and powers of Housing Australia, and sets out how these functions and powers may differ according to whether a state is a ‘participating State,’ ‘cooperating State’ or ‘withdrawn State’.
• Part 3 concerns the Help to Buy Program Directions, which are given by the Minister to the Board of Housing Australia to guide the operation of Help to Buy.
• Part 4 describes how Help to Buy will be financed (from the Consolidated Revenue Fund). It also provides that Housing Australia must pay the Commonwealth amounts received when a Help to Buy arrangement ceases.
• Part 5 provides the Constitutional basis for the participation of states in Help to Buy, outlines how the Bill and other Commonwealth, state and territory laws will interact, and defines the key concepts ‘participating State’, ‘cooperating State’, and ‘withdrawn State.’ It also outlines the administrative framework for Help to Buy, including reporting and review requirements.
• Part 6 contains the application and transitional provisions.

Help to Buy (Consequential Provisions) Bill 2023

The Consequential Provisions Bill contains amendments to the Housing Australia Act to ensure that Housing Australia has the powers and functions to appropriately administer Help to Buy.

Background

Australia’s housing crisis

There is broad agreement amongst housing researchers, policymakers and community organisations that Australia is in the midst of a housing crisis. Urbanism researcher Dr Laurence Troy recently observed that Australia is ‘in a housing crisis – and it is a public policy failure of the biggest kind.’[1] While housing affordability has declined in the post-COVID era because of surging interest rates and growing household numbers, UNSW housing researcher Hal Pawson points out that unaffordability has been one of several ‘fundamental and enduring’ housing problems that have been escalating in Australia for decades.^[2]

The Australian Institute of Health and Welfare (AIHW) noted in September 2023 that the cost of purchasing a home in Australia has risen significantly over recent decades.^[3] In particular, the ‘median transfer price’ for established houses in major cities increased substantially between 2013 and 2023:

… with the median house transfer price in Sydney increasing from around $615,000 in the first quarter of 2013 to around $1.2 million at the start of 2023 (ABS 2023a). Median transfer house prices in Canberra ($975,000) were the second highest among the capital cities at the start of 2023, followed by Melbourne ($810,500) and Brisbane ($750,000), while Perth/Darwin ($575,000) were the lowest.[4]

While house prices have actually fallen compared to the same period in 2022 (as interest rates have increased), the AIHW notes that since 2021 ‘housing costs as a share of income have risen considerably faster for households with a mortgage than for households that rent due to rises in interest rates.’[5]

Declining rates of home ownership for younger households

In April 2023, the AIHW reported that, while the overall home ownership rate has remained between 67% and 70% since the early 1970s, for many age groups – particularly younger age groups and those nearing retirement – the home ownership rate has declined:

The home ownership rate of 30–34 year old’s was 64% in 1971, decreasing 14 percentage points to 50% in 2021 (Unpublished, AIHW analysis of Census data). For Australians aged 25–29, the difference was similar – 50% in 1971, compared with 36% in 2021. Home ownership rates have also gradually decreased among people nearing retirement. Since 1996, home ownership rates for the 50–54 age group has fallen by 8 percentage points over 25 years (80% to 72%).[6]

A 2023 Australian Housing and Urban Research Institute (AHURI) report notes that some young people ‘simply will not attain home ownership over the life cycle,’[7] particularly if they are first home buyers (FHB) who are unable to clear the ever-growing hurdle of saving for a deposit:

…higher house prices coupled with sluggish wage growth has meant that aspiring FHBs have drawn on an array of strategies to achieve home ownership. Intra-family transfers appear to have become increasingly important, with the ‘Bank of Mum and Dad’ providing an important source of housing finance. With the systemic and at times rapid increase in house prices that has characterised the Australian housing market over the past three decades (Kohler and van der Merwe 2015; Yates 2008; Yates and Milligan 2007), the increasingly challenging requirement to accumulate savings for a deposit has placed a growing premium on parental support (Troy, Wolifson et al. 2023; Whelan, Atalay et al. 2023). This is a development that is matched internationally, if not exceeded (Meen and Whitehead 2020; Scanlon, Blanc et al. 2019).[8]

Moreover, the AIHW (2023) has observed that, while homeownership rates for each birth cohort of Aboriginal and Torres Strait Islander people have been ‘steadily rising’ since 1981, the rates remain ‘consistently around 20 percentage points lower than home ownership rates for non‑Indigenous Australians across all birth cohorts and age groups.’[9]

Government policies to support home ownership

Housing is not mentioned in the Commonwealth Constitution and therefore, by virtue of standard convention, responsibility for it (and for the built environment more broadly) largely rests with the state and territory governments. Historically, the primary way the Commonwealth has influenced housing has been through conditional grants to the states under section 96 of the Constitution, principally through national housing agreements and grants for specific infrastructure developments.[10]

Despite Constitutional responsibility for housing resting largely with the states and territories, AHURI points out that all tiers of government have a role to play in addressing housing affordability pressures more broadly (see Appendix A for a summary of those roles).[11] Policies to facilitate home ownership – including first home buyer grants and shared equity schemes – are one of the several ‘housing policy levers’ available to both the Commonwealth and state and territory governments (see Figure 1).

Figure 1: Housing policy levers of Commonwealth, state and territory, and local governments

Source: AHURI, Submission to the Senate Standing Committee Inquiry into the worsening rental crisis in Australia, 24 August 2023, 23.

Facilitating home ownership has been an explicit policy goal of both federal and state governments of all political persuasions for several decades, as noted by Whelan et al (2023):

Home ownership has retained a unique place in Australian society over time. The aspiration of home ownership was clearly articulated in the well-known ‘Forgotten People’ speech of then-Prime Minister Robert Menzies in 1942 (Menzies 1942: 4), and is succinctly encapsulated in the notion of ‘the great Australian dream’. Encouraging and enabling home ownership have been explicit policy aims of governments of all political persuasions at both state and federal levels since the mid-20th century (Dalton 1999; Lawson 2006; Pawson, Milligan et al 2020).[12]

While postwar homeownership promotion policies were heavily supply-side focused (including housing development and the sale of public housing), in the 1980s there was a marked shift to demand-side measures such as first home buyer grants and, more recently, shared equity schemes.[13]

In terms of shared equity schemes, to date they have been only introduced in Australia at the state and territory level. Nearly all states and territories currently have – or have had – some form of shared equity scheme. For example:

• The previous New South Wales Government announced – as part of its 2022–23 Budget – the Shared Equity Home Buyer Helper scheme, a two year trial offering up to 6,000 places through which the NSW Government contributes up to 40% of the purchase price for a new home or 30% for an existing dwelling.
• Victoria’s Homebuyer Fund – announced in late 2021 and anticipated to assist up to 13,000 households – is a shared equity scheme under which the Victorian Government contributes up to 25% of the purchase price in exchange for an equivalent share in the property.
• Since 2011, the Western Australia Department of Communities has offered a limited number of shared ownership home loans - called Opening Doors Shared Ownership Home Loan – through its home loan lender Keystart.

Further details about state and territory shared equity programs are included in Appendix B.

2022 Federal Election commitment

In a speech at the Australian Labor Party’s (ALP) 2022 Federal Election Campaign launch, Prime Minister Albanese (then Leader of the Opposition) outlined the ALP’s proposal for a national Help to Buy program aimed at assisting more ‘hard-working Australians’ to ‘achieve the great Australian dream of home ownership.’ Specifically, he stated that:

I am proud to announce a new policy that will reward the hard work and support the aspirations of more Australians. A plan to help more working families realise the dream of owning their own home. A plan that invests in Australia’s greatest asset: our people. That helps put more Australians on the path to the life they dream about. For too long, Australians who have worked hard have been locked out of the housing market by flat wages and rising prices… …unable to even get a foot in the door let alone their own roof over their heads. We can do better than this.[14]

Further details about the ALP’s Help to Buy program proposal were included in its election policy document Helping More Australians into Home Ownership. These details include:

• Help to Buy would be open to 10,000 Australian applicants each financial year with a total of 40,000 places.[15]
• The Government would contribute up to a maximum of 40 per cent of the purchase price of a new home and up to a maximum of 30 per cent of the purchase price for an existing home. Homebuyers would avoid the need to pay Lenders Mortgage Insurance (which, depending on location, could be more than $30,000).
• Homebuyers would not be required to pay rent on the stake of the home held by the Federal Government.
• To be eligible, purchasers would need to:
  • Be an Australian citizen of at least 18 years of age
  • Earn $90,000 or less per annum for individuals, or $120,000 or less per annum for couples.
  • Live in the purchased home as their principal place of residence
  • Not currently own any other land or property – either in Australia or overseas
  • Have saved the required minimum 2 per cent deposit of the home price and qualify (and can finance) the remainder of the purchase through a standard home loan with a participating lender.
• Homebuyers would be required to pay for any associated purchase costs like stamp duty, legal and bank fees. Homebuyers would also be responsible for ongoing property costs like rates, strata and any other bills.
• During the loan period, the homebuyer could buy an additional stake in the home. The minimum stake that a homebuyer could opt to purchase at any one time is 5 per cent.
• If the homebuyer’s income exceeds the Help to Buy annual income threshold for two consecutive years, they would be required to repay the Government’s financial contribution in part or whole as their circumstances permit.

In this document, the ALP also set out the following ‘price caps’ for properties in ‘eligible regions.’[16]

Figure 2: ALP 2022 Federal Election proposal – Property price caps for Help to Buy program

Source: ALP, Helping More Australians Into Home Ownership, ALP Policy Document, n.d., p.3.

Help to Buy within the Australian Government’s broader housing policy agenda

As part of the Safer and More Affordable Housing measures, the October 2022 Budget allocated $324.6 million over 4 years to establish the Help to Buy program.[17] In a 17 August 2023 media release, Prime Minister Albanese and Housing Minister Collins announced that – through the National Cabinet process – states had each agreed ‘to progress legislation so the scheme will run nationally.’[18]

The proposed Help to Buy program will sit within a broader program of Australian Government initiatives aimed at addressing housing issues at the national level. This agenda includes:

• the Housing Australia Future Fund (to increase investment in social and affordable housing and to address acute housing needs – legislated in September 2023)
• a National Housing Accord (reached in 2022 by the Commonwealth, and states and territories) which includes $350 million in Commonwealth funding over five years from 2024–25 for up to 10,000 affordable homes (to be matched by up to another 10,000 by the states and territories)[19] and an ‘aspirational target’ of delivering a total of one million new, well located homes over 5 years from 2024
• up to $3 billion in 2029–30 for the New Home Bonus[20] to provide performance-based payments to the states and territories for the delivery of an additional 200,000 well-located homes over and above the initial one million homes aspirational target previously agreed under the National Housing Accord
• a $507.4 million Housing Support Program[21] to provide competitive grants to local and state and territory governments to support ancillary infrastructure to increase housing supply
• a $1.0 billion increase in 2023–24 for the National Housing Infrastructure Facility to provide support for social housing through a mixture of grants and concessional loans[22]
• a $2 billion Social Housing Accelerator to provide payments to states and territories to permanently increase the stock of social housing across Australia[23]
• up to $575 million in funding ‘unlocked’ from the National Housing Infrastructure Facility to invest in social and affordable housing, announced as an outcome of the September 2022 Jobs and Skills Summit
• an additional $2 billion in financing for social and affordable rental housing through Housing Australia, through increasing Housing Australia’s liability cap from $5.5 billion to $7.5 billion from 1 July 2023[24]
• incentives to boost the supply of rental housing by changing arrangements for investments in Build‑to‑Rent accommodation[25]
• a $1.7 billion one-year extension of the National Housing and Homelessness Agreement with states and territories, including a $67.5 million increase to homelessness services funding[26]
• the development of a new National Housing and Homelessness Plan[27]
• measures to incentivise pensioners to downsize, to free up housing stock for younger families[28]
• the introduction of the Regional First Home Buyer Guarantee[29] and the expansion of the eligibility of the Home Guarantee Scheme.[30]

The Help to Buy program will complement the Home Guarantee Scheme (HGS), which is administered by Housing Australia and is designed ‘to support eligible home buyers to buy a home sooner.’ Under the HGS, Housing Australia provides a guarantee to participating lenders for between 15% of a home loan (under the First Home Guarantee or the Regional First Home Buyer Guarantee) and 18% (under the Family Home Guarantee). This allows eligible home buyers to buy a home without having to pay Lenders Mortgage Insurance.

Committee consideration

Senate Economics Legislation Committee

On 30 November 2023, 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 by 16 April 2024. Details of the inquiry are at the inquiry homepage.

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills had no comment on the Bills.[31]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, the Government has assessed the compatibility of the Bills with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bills are compatible.[32]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had no comment on the Bills.^[33]

Policy position of non-government parties/independents

Opposition

Shortly after the ALP announced the Help to Buy proposal during the 2022 federal election campaign, former Finance Minister Simon Birmingham reportedly told the ABC that ‘Australians don’t want Anthony Albanese at the table with them sharing equity in their homes.’ The Coalition characterised the proposed scheme as an attempt by the ALP to ‘make money off people buying their own home.’ Mr Birmingham instead pointed to the success of the home guarantee scheme and the Coalition’s election commitment to expand the number of places available, saying that ‘[o]ur policy is about ensuring that Australians get to own their own home. Labor’s policy is about the government owning parts of your home with you.’[34]

Australian Greens

In a 30 November 2023 media release, Greens leader Adam Bandt MP stated that the party would examine the legislation, but he was ‘concerned about approaches that allow a tiny proportion of applicants to buy a house while potentially pushing up prices for everyone else.’ Mr Bandt predicted that it would be difficult to gain a place in the scheme, and stated that property developers would be ‘happy to hear that Labor is dressing up another boost to their profits as a solution to the housing crisis.’ Mr Bandt called for a rent increase freeze, ‘massive’ investment in public housing and ‘phasing out unfair tax concessions for property moguls.’[35]

In the months before the Bill was introduced in Parliament, the Greens expressed concerns about the ALP’s proposed Help to Buy program. Max Chandler-Mather MP told the Australian Financial Review in March 2023 that the proposed income and property price caps meant that access to the program would be narrowly restricted. Mr Chandler-Mather stated that the Greens would pressure Labor to scrap tax concessions for property investors, if Greens support is required for the Bill to pass the Senate. Mr Chandler-Mather stated:

If the government wants to tackle housing affordability for first home buyers, they need to phase out negative gearing and capital gains tax concessions that cost the government $12 billion a year and make it easier for a property investor to buy their fifth home, rather than someone trying to buy their first.[36]

In 2021, Senator Mehreen Faruqi expressed support for a shared equity scheme for persons living in affordable social housing:

It is important we take this opportunity for the Commonwealth to consider its ability to do more, including by establishing a shared equity scheme that allows people to purchase equity in the affordable social home they live in without eroding social housing stock overtime.[37]

In 2008, the Greens welcomed Commonwealth consideration of shared equity schemes as a ‘step in the right direction’ in ‘Additional Comments’ to the Senate Committee Report - A good house is hard to find: Housing affordability in Australia. However, the Greens argued that instead of relying on the ‘dual mortgage approach,’ a potential shared equity scheme should be based on the ‘subsidy retention model’ wherein the subsidy is tied to the creation of affordable housing stock. They stated:

The major challenge for shared equity schemes and other alternative ownership models is how they stand the test of time and whether they are able to deliver affordable housing in perpetuity.

The Australian Greens welcome the consideration by the Commonwealth and some state and territory governments of shared equity schemes (notably West Australia's First Start program and the ACT's shared equity scheme), and note the consideration given to these schemes in Chapter 9 of the committees report. We also note that some financial institutions are also offering shared equity models.

While we welcome these moves as a step in the right direction, we note that there are limits to the amount of money banks can afford to have tied up in longer-term shared equity schemes, and that there are some drawbacks for governments inherent in the manner in which the current model of shared equity requires ongoing top-up subsidies to maintain the number of units of affordable housing their initial investment delivers in perpetuity.

…

The shared equity systems currently being advanced within Australia rely on a dual mortgage approach in which the state holds a mortgage for a certain percent of the value of the home on the assumption that the homebuyer will eventually buy them out and the funds will be returned to the state to be used to subsidise another home owner. The problem with this type of 'subsidy recapture model' is that the value of the subsidy returned at this point will be lower than what would at that point in the future be required to get a family on a similar level of income into a similar unit of housing.

By comparison, subsidy retention models – such as Community Land Trusts, Limited Equity Cooperatives and Deed Restricted Mortgages are able to prevent this slow subsidy leakage and allow governments and philanthropic organisations to deliver an investment in affordable housing in perpetuity.

The other benefit of these subsidy retention models is that by tying the subsidy to the creation of affordable housing stock they produce a supply side strategy that does not introduce more buyers and more cash into overheated housing markets, and thus do not push up inflationary demand.

For Australia to be able to deliver these models requires greater consideration of the legislative and regulative barriers and requirements. To this end we recommend:

Recommendation: That the Council of Australian Governments examines the application of subsidy retention models to deliver affordable housing in perpetuity within the Australian context.

Recommendation: That COAG examines the legislative and regulative barriers and requirements for implementing subsidy retention models, and recommends appropriate reforms to Commonwealth, State and Territory, and local Governments to enable them as appropriate [pp.197–198, emphasis in original]

Independents

In a March 2023 Australian Financial Review article, Independent ACT Senator David Pocock stated that shared equity schemes could be beneficial in helping people overcome barriers to home ownership. Furthermore, Senator Pocock speculated that they could have a ‘less distortionary effect’ on house prices than first home buyer grants.[38]

Position of major interest groups

While there has not been a great deal of commentary about the Help to Buy Bill, in recent years interest groups and think tanks have expressed their views on the benefits and drawbacks of shared equity schemes in general, and the ALP’s 2022 federal election proposal in particular.

On the one hand, several groups have expressed approval of more widespread adoption of shared equity in Australia, whilst cautioning that any scheme would need to be well-targeted and limited in scope in order to not put further pressure on house prices. On the other hand, other groups have argued that the potential benefits of a shared equity scheme are unlikely to outweigh the risk of house price increases.

Comments generally supportive of shared equity schemes, with caveats

AHURI recently predicted that – based on microsimulation modelling of a shared equity scheme similar to the Help to Buy program proposed by the ALP during the 2022 Federal Election campaign – that a well-designed national shared equity scheme has the potential to assist 41 per cent of eligible aspiring first home buyers. AHURI states that a scheme should apply ‘property price thresholds that account for the significant differences in prices that exist across geographically distinct markets in Australia.’[39] In 2015, AHURI told the Senate Economics References Committee that shared equity schemes should also allow buyers to ‘step up’ their equity stake over time and should be tied to new builds in order to increase housing supply.[40]

In various reports, AHURI researchers have raised the concern that shared equity schemes could increase house prices. For instance, Troy et al recently argued that state and territory schemes are deliberately limited to a narrow range of eligible purchasers in order to both limit the potential impact on wider housing markets and contain costs of the schemes.[41] In an earlier research bulletin, AHURI predicted that shared equity schemes would likely have more significant impacts on housing markets than first home owner grants, although the extent of the potential impact was unclear.[42] Berry et al noted that while shared equity schemes offer a number of benefits, they could stimulate housing demand ‘without necessarily stimulating supply, thus reinforcing rising housing prices.’[43]

The Grattan Institute has also expressed support for a targeted national shared equity scheme (even offering its own proposal), whilst raising the possibility of potential property price increases. Brandon Coates discussed with the Age in May 2023 that while first home buyer support (including shared equity and home guarantee schemes) helps to bring forward first home purchases, it has the potential to increase house prices ‘as buyers redirected extra savings from things like stamp duty exemptions to their home-buying budgets.’[44] Mr Coates argued that the Government should focus on increasing housing supply and that ‘[w]should always be really careful about demand side intervention because the larger you make [these home buyer schemes], the more they’re likely to just push up prices.’[45]

In his February 2022 proposal for a national shared equity scheme, Mr Coates stated that the impact of a scheme on house prices would be ‘modest,’ as long as the scheme is ‘tightly’ targeted at lower-income Australians and lower-priced homes’.[46] He suggested that the scheme be capped at 5,000 places ‘in the early years.’[47] The income thresholds proposed by Mr Coates are $60,000 for singles and $90,000 for couples. Mr Coates commented to the Age in August 2023 that the income thresholds proposed in the ALP’s election policy of $90,000 per year for singles and $120,000 for couples were too high. He stated that his proposed lower thresholds would help those who were least likely to be able to buy without assistance.[48]

In the 2022 Final Report of the inquiry of the House of Representatives Standing Committee on Tax and Revenue Inquiry into the impact of tax and regulation on housing – The Australian Dream – several interest groups expressed varying levels support for the use of shared equity schemes, with some suggesting them as a potential way for community housing providers to assist those on low incomes. For instance:

• The Community Industry Group – a peak body working for community services and organisations in southern NSW – cautioned that while governments should be encouraging home ownership, care must be taken to ensure that these measures do not increase house prices and that any support enables those on very low incomes to purchase a home.[49]
• PowerHousing Australia proposed two potential models for shared equity schemes in Australia – one where the Government contributes 20 percent towards the purchase of a house, and another where community housing providers sell properties to their current or prospective tenants on a shared equity basis.[50]
• Shoalhaven City Council urged the Australian Government to ‘investigate tax and policy settings that encourage innovative housing models that will deliver affordable housing, including but not limited to, means tested shared equity schemes...’ in order to increase housing supply and diversity in well-located areas.[51]

In May 2022, the Housing Industry Association stated that the ALP’s proposed Help to Buy scheme was a ‘sensible first step’ to help people who were struggling to buy their home and that a ‘small and targeted government-backed scheme offers the chance for low- and moderate-income households to achieve their dream of homeownership.’[52]

In 2008, then-president of the Australian Council of Trade Unions Sharan Burrow gave a speech in support of well-designed shared equity schemes at a ‘Shared Equity Seminar.’ Burrow stated the following:

Shared equity innovations are a complementary part of the affordability solution and it is across the middle and higher ranges of the income distribution where they will take root and grow.
 
I have been vocal in expressing my support – and that of the ACTU – for shared equity schemes, for several years.
 
Australia has been at the forefront of research and new product development in this arena.
 
For example, the first mass market, private sector shared equity product was recently introduced by Rismark International in conjunction with Bendigo and Adelaide Bank in March 2007.
 
In the public sector, the SA and WA governments have introduced fully-fledged shared equity programs over the last 12 – 18 months.
 
The appeal of shared equity products is real and immediate:

• A shared equity loan delivers borrowers with an instantaneous benefit. With the currently available Bendigo/Adelaide Bank loans for example, borrowers can reduce their current mortgage repayments by 30% or more, which is a tangible thing in the current and prospective interest rate environment.
• Many can move out of the rental market and purchase their first home sooner.
• The housing market is stabilized if demand is maintained.

But design matters, and it matters a great deal. In my view it is vital that:

• Home owners should retain the majority of the capital gains on their home.
• The shared equity lender should also share proportionately in any arms-length capital loss.
• The product should have a 20-25 year term like any normal home loan.
• The borrower should retain all of the control rights associated with their home including the choice, after a set period of time, to buy out the equity partners.

Shysters and rip-off merchants can give any scheme a bad name, and these criteria are really fundamental. In this respect it is worth reiterating this simple fact: Shared Equity does not mean Sub-Prime.[53]

Comments expressing reservations about shared equity schemes

In 2022, the Productivity Commission concluded that – unless it is well-targeted at those experiencing persistent marginalisation in the housing market – assistance to prospective home buyers presents too great a risk of increasing housing demand and, consequently, house prices. Resources should instead be directed towards supporting people who are homeless or at risk of homelessness. The Productivity Commission stated:

It is well known that assistance to first home buyers can contribute to higher house prices. Assisting prospective home buyers increases the number of people wanting to buy a home and the amount they can borrow. The additional demand, if not accompanied by an increase in the number of homes available, places pressure on house prices and reduces housing affordability. It is not typically home buyers who benefit from the assistance, it is the sellers who receive a higher sale price. What this means is that assisting home buyers can (somewhat counterintuitively) make housing less affordable, particularly for people who do not qualify for assistance.

There is also a risk that, over time, governments may fuel an ‘assistance spiral’, where the assistance makes house prices more expensive by increasing demand, prompting governments to increase assistance, pushing up prices further, and on it goes.

The absence of a clear cut economic case for government support for home buyers, together with the potential for home owner assistance to reduce housing affordability, means that there are better community returns from providing more assistance to people at who are (or are at risk of) experiencing homelessness. As a first step, governments should phase out first home owner grants and stamp duty concessions (ideally in concert with wider reforms to stamp duty) unless these measures are targeted at people experiencing marginalisation in the housing market. Savings should be redirected to supporting people who are homeless or at risk of homelessness (including because of rental stress).[54]

In a similar vein, shortly after the NSW Government announced its shared equity trial in 2022, the Community Housing Industry Association’s NSW head of policy commented to The Guardian that rather than focusing on homebuyers, more needed to be done to help the growing number of families waiting for social housing spots.[55]

Shortly after the ALP first proposed the Help to Buy program in May 2022, the chief economist of real estate company Ray White reportedly stated that the scheme could help those who could not rely on the ‘bank of mum and dad’ to buy their own home. However, she cautioned that the shared equity relationship would likely impose restrictions on the property, such as the ability to use it as an investment property.[56] In the same article, Dr Cameron Murray, a University of Sydney housing expert, reportedly commented that while the policy may help some by making it easier to access finance, it would not address the underlying affordability issues. He said that ‘[i]f you want people to have cheap housing, give them cheap housing. You can go and do all the financial tricks in the world but at the end of the day if they’ve paid that price, someone’s paying the price.’[57]

Financial implications

As part of the Safer and More Affordable Housing measures, the October 2022 Budget allocated $324.6 million over 4 years to establish the Help to Buy program.[58]

The Explanatory Memorandum states that the Government’s investment under the Help to Buy program to support 40,000 households to purchase or build a home would have no impact on the underlying cash balance. Costs incurred by Treasury and Housing Australia will have a negative impact on the underlying cash balance, but the Explanatory Memorandum does not indicate by how much.[59] The Explanatory Memorandum to the Bill also specifies that ‘compliance costs will be considered as part of the Policy Impact Analysis for the Program Directions.’[60]

In the lead-up to the 2022 election, the Parliamentary Budget Office costed the impact of the ALP’s Help to Buy program proposal on the underlying cash balance at $328.7 million over the forward estimates, based on the following assumptions:

• The entirety of the 10,000 places available in each financial year would be allocated.
• The distribution of places between states and territories, and within each state and territory (capital cities, regional centres, and rest of state), would be based on population.
  • Different property price thresholds exist between different cities and regions.
• 25% of participants in the scheme would purchase new homes and 75% would purchase existing homes.
  • This is a higher ratio of new home purchases than in the Australian Bureau of Statistics’ Lending Indicators and reflects a judgement that participants would have a preference towards new homes (relative to other buyers) because of larger equity contributions from the Government.
• 30% of participants would be single and 70% would be couples.
• The Government would contribute an average of 37% equity towards new homes and 28% towards existing homes.
• Property values grow in line with nominal GDP after 2025-26.
• Each cohort of 10,000 participants would begin purchasing equity back from the Government after four years at an initial rate of 5%, increasing each year to 2032-33 as more homes are sold and more participants are expected to exceed the income thresholds of the proposal.
  • While some participants may purchase equity back from the Government before 2025-26, this is expected to be small and has not been incorporated into the costing.
• Purchase prices would be based on the maximum borrowing capacity of participants but capped at the thresholds set by NHFIC [Housing Australia].
  • The average borrowing capacity of participants would be $455,000 for singles and $526,000 for couples. As the income and property price thresholds do not change over the period to 2032-33, there is little expected change in the average borrowing capacity of participants.[61]

In addition to the impact on the underlying cash balance, the PBO found that the proposal would decrease the fiscal balance by $346 million, and the headline cash balance by around $7.61 billion over the 2022–23 Budget forward estimates period. The PBO explained:

The fiscal and underlying cash balance impacts largely reflect the public debt interest and departmental expenses required to administer the scheme, and the headline cash balance impact largely reflects the expected equity contributions of the Government. The proposal would have an impact beyond the 2022-23 Budget forward estimates period…

The fiscal, underlying cash, and headline cash balances differ in the treatment of investment gains, public debt interest, and equity investments. The yearly impact on net debt would be broadly consistent with the cumulative movements in the headline cash balance.[62]

More specifically, the PBO detailed the impact of the proposal over the 2022–23 Budget forward estimates period as follows:

Table 1: Financial Implications ($m)

Source: Parliamentary Budget Office, 2022 Election Commitments Report: ECR163, 2.

As discussed below, it is worth noting that while paragraph 28(a) of the Bill specifies that Housing Australia must pay to the Commonwealth all amounts it receives under Help to Buy arrangements (clarified on page 18 of the Explanatory Memorandum to include amounts paid back by homeowners), neither the Bill nor the Explanatory Memorandum detail whether (and if so, how) the Commonwealth would share in any capital losses (particularly if a homeowner defaults on their mortgage). The Bill also does not clearly set out whether the Commonwealth would share in the growth in value due to home improvements. In its 2022 election costing, the PBO assumed the following about treatment of capital losses and value added through improvements:

In the case of capital losses, the Government would share any losses with the applicant based on their relative equity ownerships. The Government would not claim any share of the value added through home improvements.[63]

However, the Bill does not clearly state either of these assumptions. The PBO particularly cautioned that the lack of detail included in the proposal about how losses would be treated in the event of a default means that the financial implications of the program are uncertain:

…if applicants are to avoid paying lenders mortgage insurance, this would imply that either the Government would guarantee the mortgage or that commercial lenders would be able to recover any capital losses from default against the entirety of the property value. In either case, there may be downside risk to the Government, where the costs of a property market downturn are borne disproportionately by the Government. The Parliamentary Budget Office (PBO) has adopted a set of high-level assumptions to model these factors, but the associated uncertainties could result in the financial implications of the proposal being significantly different than estimated.[64]

Item 16 of the Consequential Provisions Bill inserts proposed subsection 49(4A) into the Housing Australia Act, which states that in ensuring that Housing Australia’s dividends for a financial year do not exceed its profits for the same year (as mandated by subsection 49(4) of the Housing Australia Act), any liabilities or defaults in relation to Help to Buy will be disregarded. The Explanatory Memorandum states that this is in order to ‘recognise the separation in functions between Help to Buy and Housing Australia’s existing housing functions.’[65]

Appropriations

Subclause 27(1) of the Bill specifies that the Commonwealth must pay Housing Australia amounts to enable Housing Australia to make the Help to Buy equity contributions on behalf of the Commonwealth. Subclause 27(2) states that Housing Australia can only use these funds for that purpose.

Subclause 27(4) provides that the Commonwealth will provide the funds through appropriations from the Consolidated Revenue Fund, which is appropriated accordingly. The Explanatory Memorandum explains that this arrangement ‘will provide certainty to Housing Australia and Help to Buy participants that funds will be available in a timely manner.’[66]

Paragraph 28(a) specifies that Housing Australia must pay to the Commonwealth all amounts it receives under Help to Buy arrangements (for example, when a homeowner repays some or all of the money received from the Commonwealth). As clarified in the Explanatory Memorandum:

When an individual repays part or all of a Help to Buy arrangement, Housing Australia is required to pay the Commonwealth all amounts it receives in relation to the Commonwealth’s initial equity contribution and any other expenditure under Help to Buy arrangements, as soon as reasonably practicable. Separate to the capital loss or gain on the Commonwealth’s equity contribution, other expenditure that is captured includes any other fees received by Housing Australia such as enforcement costs paid due to non-compliance.[67]

Item 14 of the Consequential Provisions Bill repeals and replaces section 47B of the Housing Australia Act (which deals with credits to the Housing Australia Special Account) to clarify that payments made by Housing Australia to the Commonwealth are not credited to the Special Account. According to the Explanatory Memorandum, this includes ‘any amounts that must be repaid as a result of Help to Buy arrangements and any interest received by Housing Australia as a result of undertaking Help to Buy functions.’[68]

Key issues and provisions

What does the Bill seek to achieve and how?

As outlined in clauses 3 and 4 of the Main Bill, the object of the Bill is to enable Housing Australia to enter into ‘Help to Buy arrangements’ with low-income and middle-income residential property buyers in participating states and territories. The Explanatory Memorandum observes that the Bill is aimed at reducing the ‘key barriers’ to home ownership, namely saving for a deposit and servicing a loan. It states:

It has been increasingly difficult for homebuyers to save sufficient funds for a deposit and, coupled with the increased costs of servicing mortgages, this has made accessing home ownership increasingly challenging for low and middle income earners.

Help to Buy is designed to improve housing outcomes for eligible Australians by reducing the upfront deposit hurdle and ongoing mortgage repayments associated with purchasing a home.[69]

Clause 6 of the Bill defines a ‘Help to Buy’ arrangement as a shared equity arrangement, entered by Housing Australia on behalf of the Commonwealth. Subclause 7(1) further defines what is meant by a ‘shared equity arrangement,’ that is, a contract or arrangement through which Housing Australia contributes part of the purchase price of a residence is recognised by way of a mortgage or other right relating to the property and is entitled to a return on its contribution based on the value of the property. Alternatively, a shared equity arrangement may be a contract or arrangement that is prescribed by the regulations.

Subclause 27(1) of the Bill dictates that the Commonwealth must pay to Housing Australia amounts to enable it to make contributions under Help to Buy arrangements. In turn, clause 28 states that Housing Australia must pay the Commonwealth any amount it receives under a Help to Buy arrangement (including, as explained in the Explanatory Memorandum, any fees received by Housing Australia such as enforcement costs paid for non-compliance).[70]

Importantly, Part 2 of the Bill highlights the key role that Housing Australia will play administering Help to Buy in participating states and territories. In particular:

• Subclause 10(1) enables Housing Australia to enter into a shared equity arrangement on behalf of the Commonwealth with an eligible purchaser of residential property located in a participating state or a territory, as well as to determine the terms and conditions of that arrangement and to monitor compliance.
• Subclause 10(2) empowers Housing Australia to terminate Help to Buy arrangements and determine the consequences of noncompliance.
• Subclause 10(3) requires Housing Australia to perform its Help to Buy functions in a ‘proper, efficient and effective manner’ and to take all reasonable steps to comply with the Help to Buy Program Directions (discussed below).  
• Subclause 11(2) states that, in carrying out its Help to Buy functions, Housing Australia may enter an arrangement or contract with any persons or entities, including the Commonwealth, state or territory, an authority of the Commonwealth, state or territory or any other body.

Why is a national shared equity scheme necessary?

As noted above and in Appendix B, nearly every state and territory has some form of shared equity scheme. Indeed, subclause 41(2) states that the Bill is intended to operate concurrently with state or territory home buyer schemes (defined in clause 5 as any current or future state or territory program that provides financial or other types of assistance to individuals towards the purchase of residential property).

There are mixed opinions in the literature on whether a national shared equity scheme is necessary. In 2009, AHURI researchers Pinnegar et al, expressed concern that the strengths of state-based shared equity systems could be replicated on a national scale; specifically:

…national reach could be fostered through a new scheme overseen and administered from Canberra. This would represent an equally substantive commitment. It would risk replication with initiatives already in place, and would need to establish frameworks that ensured that variations in market dynamics, affordability and consumer interest across the country could be accommodated. The strengths of state/territory based schemes would be hard to create: it is unlikely that the sensitivities required in terms of understanding local needs, responsiveness to market dynamics and integration with wider housing (and indeed social and economic) policy objectives could be fostered through delivery at this scale.[71]

A few years later, an AHURI report argued that there is a role for national leadership in the shared equity space, but any national program must take into account income differences and the diversity of housing markets both within and between states:

The fragmented nature of shared equity schemes across different jurisdictions suggests that there is a role for national leadership at a policy and regulatory level, and potential for state and territory government involvement in supporting government run schemes (AHURI 2010). However, housing market trends are not uniform across a state/territory or between and within cities. The design of shared equity products needs to take into account differences in incomes and house price characteristics across city sub-markets (AHURI 2010).[72]

On the other hand, Churchill Fellow Samantha Evans argued in 2019 that national leadership is in fact required in order to make shared equity a ‘mainstream’[73] solution to homeownership affordability. Evans stated that the Commonwealth Housing Minister is well placed to champion shared equity and to engage with industries such as financial services in order to facilitate shared equity provision. Evans also identified the National Housing Finance and Investment Corporation (now Housing Australia) as ‘well placed to pursue shared equity provision alongside [the Commonwealth’s] new deposit assistance scheme being launched in 2020.’[74]

The Grattan Institute – in its 2022 proposal for a national shared equity scheme – stated that a national scheme would make financial sense and could even eventually replace state schemes:

Several states already have shared equity schemes, but a national scheme is needed. Existing state schemes are typically small, and often limited to public housing tenants or to purchasing homes solely from government-run developers.

The federal government has lower borrowing costs than state governments, and is much better placed than private providers to secure the long-term financing required to manage the scheme. The National Housing Finance and Investment Corporation [now Housing Australia] already offers various deposit guarantees. And the federal government will be on the hook for a larger bill for Commonwealth Rent Assistance payments should home ownership fall among retirees.

In time a federal scheme could replace existing state schemes, or help fund them through a national partnership agreement.[75]

Given the costs associated with establishing and administering a shared equity scheme on a national scale (see Financial Implications, above), as well as the complex Constitutional foundation of Help to Buy, clarity about the necessity of a national scheme (including whether there will be a role for national ‘leadership’ in facilitating involvement of key stakeholders in shared equity schemes) would be useful.

How will risks associated with promoting homeownership, particularly amongst lower income households, be managed?

Whelan et al (2023) note that ‘eligible home buyers under the mortgage guarantee and shared equity schemes experience more precarious employment outcomes, highlighting the critical need for FHBs and policies to create sustainable housing outcomes.’[76] While homeownership has advantages over other forms of housing tenure such as renting (including long-term security, wealth accumulation and taxation advantages),[77] it also entails financial risk. And in the context of a shared equity scheme, that risk is enhanced by several factors, including the asymmetry of information between the purchaser and provider (exacerbated by the fact that shared equity products are inherently more complicated than traditional mortgages and leases), unanticipated changes in house prices and interest rates, and ‘moral hazard’ in relation to the resale value of the dwelling.[78] These risks will need to be carefully managed in the Help to Buy programs.

Significantly, subparagraph 7(1)(a)(ii) of the Bill states that one of the features of a ‘shared equity arrangement’ is that the Commonwealth is entitled to a return on the contribution based on the value of the relevant property. However, neither the Bill nor the Explanatory Memorandum discuss whether the return includes value added by improvements made by the homeowner, what may happen if a property loses value, or who bears the risk of foreclosure. As AHURI (2013) has stated, a key feature of shared equity schemes is how investment returns are dealt with, specifically:

At one extreme, there are schemes where both owners share any variation in house prices in proportion to capital values; those where the secondary owner only benefits from the capital appreciation and takes no downside risk; and those where there is an investor return built in so that the proportion of capital owned by the secondary owner increases over time to provide a near guaranteed return on their investment.[79]

As it stands, the Bill leaves homebuyers without a clear picture of whether or not the Commonwealth will benefit from improvements they make to the property and also share in the risk – however remote – that the property will lose value (or that homebuyers may default on their loan).

While it is possible that these matters will be dealt with in the Program Directions (made under clause 24), they are arguably of sufficient importance to all parties concerned to include in the main legislation. Indeed, a Core Logic analyst is quoted as stating (in reference to the recently introduced NSW shared equity scheme that is similar to the ALP’s Help to Buy) – in a 2022 Australian Financial Review article – that:

With the housing market probably heading into a downturn over the coming year or years, some buyers may find their home is worth less than the debt held against it… It’s important to know if the government will share in the downside risk if the property is sold while in a negative equity situation.[80]

What is the Constitutional basis for the Bill?

The Explanatory Memorandum states:

The operation of Help to Buy will be supported by a State’s referral of power to the Commonwealth under section 51(xxxvii) of the Constitution. Help to Buy will also operate in States that have passed legislation adopting the Act and referred power to the Commonwealth to make amendments to the Commonwealth legislation. Help to Buy will also operate in the Territories from commencement of the Bill pursuant to section 122 of the Constitution.[81]

Under the Commonwealth Constitution, the power of the Commonwealth Parliament to make laws is limited to enumerated subjects or subject matter areas (called heads of power).^[82] Most of these subjects are listed in sections 51 and 52 of the Constitution. However, this list of powers given to the Commonwealth Parliament does not expressly refer to a number of subjects including education, housing, the environment and criminal law. Nonetheless that does not put those subjects beyond the Commonwealth Parliament’s law making powers. For example, even though the Commonwealth Parliament has no explicit power in relation to the environment, it may, under its external affairs power, prohibit the construction of a dam by a state if that is necessary to give effect to an international agreement on the environment.^[83] The legislative powers of the Commonwealth Parliament may also be expanded by other means such as the parliaments of the states referring matters to the Commonwealth Parliament under section 51(xxxvii).

According to the Explanatory Memorandum:

Help to Buy will operate in the Territories pursuant to section 122 [the Territories power] of the Constitution from the date of commencement of the Bill. This will apply to the Northern Territory, the Australian Capital Territory, Jervis Bay Territory, Norfolk Island, Christmas Island and Cocos (Keeling) Islands.[84]

The Government however, does not intend the Main Bill to be enacted until at least one or more states have

enact[ed] related legislation to refer power to the Commonwealth under section 51(xxxvii) of the Constitution. Introduction of the Bill in advance of state legislation having been enacted will enable Help to Buy to be available to eligible home buyers as soon as possible after referrals are finalised. Help to Buy will only be available in those States which refer constitutional power, as well as in the territories. [85]

How will states and territories participate in Help to Buy?

The Bill categorises states that are engaging with Help to Buy (that is, those states that have referred power to the Commonwealth Parliament or that have adopted Commonwealth legislation) as ‘participating,’ cooperating’ or ‘withdrawn.’ In essence, Housing Australia can only enter into shared equity arrangements with purchasers in a ‘participating’ state and territory. A state that is no longer ‘participating’ becomes either a ‘cooperating’ or ‘withdrawn’ state.

Participating States and Territories

Clauses 5 and 35 of the Bill define a ‘participating’ state as one which has either referred primary, residual and amendment matters to the Commonwealth Parliament for the purposes of paragraph 51(xxxvii) of the Constitution, or has adopted the primary and residual versions of the Act (upon commencement) and referred the amendment matters. According to the Explanatory Memorandum:

Becoming a participating State enables full participation of eligible home buyers in that State based on the enacted legislation in addition to any future changes.[86]

As outlined above, Part 2 of the Bill (clauses 10 to 13) sets out Housing Australia’s powers and functions in administering Help to Buy in participating states, including entering in to Help to Buy arrangements, determining terms and conditions of those arrangements, monitoring compliance, and any other power necessary for it to fulfill its functions.

Note that Part 2 of the Bill sets out how Help to Buy will work in ‘participating states and territories’ (emphasis added). As noted above, Help to Buy will operate in the territories pursuant to section 122 of the Constitution (rather than territories having to refer power or adopt legislation). As such, there is no mechanism for territories to become ‘cooperating’ or ‘withdrawn.’

Cooperating States

Clauses 5 and 36 of the Bill define a ‘cooperating’ state as one which was a participating State and has terminated its reference of the primary matters but has not terminated its reference of the residual and amendment matters, or has terminated its adoption of the primary version of the Act but has not terminated its adoption of the residual version of the Act and has not terminated its reference of the amendment matters. According to the Explanatory Memorandum:

A participating State may choose to become a cooperating State if it does not wish for new participants in that State to be able to purchase a residential property with the assistance of Help to Buy but wants to ensure that existing participants from that State can continue to be supported by the Help to Buy program, which refers to the Act, regulations, Program Directions and any other legislative instruments made under the Act.[87]

Clauses 14 to 18 in Part 2 of the Bill establish Housing Australia’s powers and functions in administering Help to Buy in cooperating states. As set out in clause 15, Housing Australia has similar functions in terms of administering existing Help to Buy arrangements in cooperating states as it does in participating states, including monitoring compliance. Notably, however, under clause 17, Housing Australia cannot enter into any new Help to Buy arrangements in cooperating states.

As summarised in the Explanatory Memorandum:

While Housing Australia will not be able to enter shared equity arrangements with participants located in cooperating States, it will continue to administer and monitor compliance with Help to Buy arrangements which were entered into while the State was still a participating State, and do anything incidental to these functions for cooperating States.[88]

Withdrawn States

Clauses 5 and 37 define a ‘withdrawn’ state as one which was a ‘participating’ state and is not a ‘cooperating' state. That is, a previously participating state that has terminated its reference of the primary matters and its reference of either or both the residual matters or amendment matters; or has terminated its adoption of the primary version of the Act and its adoption of the residual version of the Act and/or its reference of the amendment matters. The Explanatory Memorandum clarifies that:

A withdrawn State ceases to apply the Help to Buy legislation. No new participants from that State can join the program and existing participants are only able to continue in the program to the extent an existing contractual arrangement is in place at the time the State becomes a withdrawn State. Program changes that are made by the Commonwealth once the State becomes a withdrawn State do not apply to program participants from that State.[89]

Clauses 19 to 23 set out Housing Australia’s powers and functions with respect to Help to Buy in withdrawn states. Subclauses 20(1) and (2) state that Housing Australia will continue to administer existing Help to Buy arrangements in withdrawn states. However, as with cooperating states, according to subclause 22(1), Housing Australia cannot enter into any new Help to Buy arrangements. Importantly, subclause 22(2) adds an additional limitation in withdrawn states – Housing Australia cannot make any further contributions to existing Help to Buy arrangements. According to the Explanatory Memorandum:

Housing Australia is also not permitted to make any further contributions under Help to Buy arrangements in withdrawn States. This stipulation clarifies that when a State has withdrawn their referrals or ongoing adoptions, Housing Australia is also unable to make any new or further financial contributions to new or existing participants of the program from that State.[90]

How will the Program Directions inform the operation of Help to Buy?

Clause 24 empowers the Minister to give to the Board of Housing Australia directions about how to carry out their Help to Buy functions. These directions collectively constitute the ‘Help to Buy Program Directions.’ According to the Explanatory Memorandum, the Program Directions will play a central role in shaping key aspects of Help to Buy:

The Program Directions are the key vehicle for the Government to set out its expectations for Housing Australia’s implementation and administration of Help to Buy and, as such, the Minister must give at least one such direction.[91]

Clause 12 provides that Housing Australia cannot enter into Help to Buy arrangements unless Program Directions are in force. According to clause 46, the Minister must consult with the participating and cooperating states, the ACT and the NT before giving directions under clause 24.

Importantly, under paragraph 46(1)(c), regulations or legislative instruments (including directions) cannot be made unless the Minister is satisfied that none of the states and territories submitted a written objection to the proposal during the consultation period. However, neither the Bill nor the Explanatory Memorandum provide detail on how objections will be resolved, if they are received by written notice.

Clause 25 enumerates the matters that may be included in the Program Directions to guide Housing Australia in administering Help to Buy and to further define Help to Buy arrangements, including criteria that Housing Australia must follow in making decisions while carrying out its functions, directions regarding the number of residential properties in relation to which Housing Australia may enter Help to Buy arrangements, and directions relating to Housing Australia’s reporting function.

Program Directions will be a legislative instrument (albeit, as discussed on pages 14-15 of the Explanatory Memorandum, not subject to disallowance and exempt from sunsetting).

Whelan et al (2023) note that, in order for a shared equity scheme to be effective in reaching its target population, it must be well designed, including accounting for inter- and intra-state variability in incomes and in housing markets.[92] At this point, the indications of key components of Help to Buy – including the ‘upper limit’ of Commonwealth contribution, minimum deposit requirement and number of places available – can be found only in the Explanatory Memorandum and other extraneous sources. [93] It thus remains to be seen how these important issues will be addressed, including what evidence base will be used to support the Program Directions. It is also worth considering whether it would provide more certainty to both participating lenders and potential participants to have clarification about key numbers (including the upper limit of Commonwealth contribution and minimum deposit requirements) set in primary legislation.

How will the impacts of Help to Buy be evaluated?

Whelan et al (2023) note that international case study research as to the efficacy of shared equity schemes has so far reached mixed conclusions. In some cases, researchers have found that a particular shared equity scheme did not assist the target population – that is, it did not reach those for whom homeownership would otherwise have been impossible.[94]

Given the mixed track record of shared equity schemes in achieving their intended objectives, it is critical that the outcomes of Help to Buy be rigorously evaluated against program objectives. Subclause 45(1) of the Bill states that the Minister must cause a review of Help to Buy to be undertaken as soon as possible after the end of three years after commencement of the Bill. Subclauses 45(2) and (3) require a written review report to be presented to the Minister by the persons undertaking the review and for the Minister to table the report in each House of Parliament within 15 days of the report being given to the Minister. The Explanatory Memorandum states that the tabling ‘ensures appropriate public and Parliamentary transparency concerning the findings of the review and Help to Buy’s operations.’[95]

Subclause 25(3) specifies that Program Directions can include directions about reporting relating to Housing Australia’s functions in participating, cooperating and withdrawn states. Clause 44 provides that the annual report prepared by the Housing Australia Board (as required by section 46 of the Public Governance, Performance and Accountability Act 2013) must detail particulars of any changes to the Program Directions and the impact of those changes during the reporting period. According to the Explanatory Memorandum:

The Minister will have the power to direct the content to be included in the report, through the Program Directions. This is to enable the Minister to receive a complete understanding of the administration and implementation of Help to Buy by Housing Australia.[96]

Neither the Bill nor the Explanatory Memorandum are clear about how Help to Buy will be evaluated, or by whom the evaluation will be conducted. Furthermore, it is worth considering whether – given the importance of knowing whether the program is reaching the target population – an earlier review might be advisable.

How does the Consequential Provisions Bill support implementation of the Help to Buy program?

The Consequential Provisions Bill supports the implementation of Help to Buy by enabling Housing Australia to appropriately administer Help to Buy, in addition to its other functions and powers. To do this, the Consequential Provisions Bill makes several amendments to the Housing Australia Act 2018. In particular, the amendments clarify how the Housing Australia Board, staff and other administrative arrangements will interact with new Help to Buy function.

Item 1 of the Consequential Provisions Bill amends section 4 – the simplified outline – of the Housing Australia Act to clarify that Housing Australia has Help to Buy functions in addition to its existing functions under that Act. Item 2 adds definitions of ‘Help to Buy functions’ and ‘Help to Buy Program Directions’ to section 5 of the Housing Australia Act.

Items 3 to 6 amend section 8 of the Housing Australia Act 2018, which establishes Housing Australia’s existing financing, guarantee and capacity building functions. Item 3 adds ‘Help to Buy functions’ to Housing Australia’s functions as set out in subsection 8(1). Item 5 amends paragraph 8(1)(e) to clarify that Housing Australia’s power to do anything incidental or conducive to the performance of its other functions does not apply to its Help to Buy functions. As noted in the Explanatory Memorandum, this is because Housing Australia’s Help to Buy functions ‘are limited to the functions conferred in the [Help to Buy] Act, Housing Australia Act or any other Commonwealth law.’[97]

Item 11 provides clarity as to how the Board will receive Help to Buy Program Directions. It adds proposed subsection 14(2) to the Housing Australia Act, stating that the Minister must not include directions about Help to Buy in the Housing Australia Investment Mandate (made under subsection 12(1) of the Housing Australia Act). The Explanatory Memorandum states that:

This distinction makes clear that the Program Directions are the vehicle for the Government to set out its expectations for Help to Buy and direct Housing Australia on the performance of the Help to Buy functions. Comparatively, the Housing Australia Investment Mandate is the vehicle for the Government to set out its expectations for functions other than Help to Buy functions and direct Housing Australia on the performance of Housing Australia’s functions other than the Help to Buy functions.[98]

Item 12 amends paragraph 16(1)(a) of the Housing Australia Act to direct the Housing Australia Board to also consider the Help to Buy Program Directions in deciding the strategies and policies it must follow.

Section 48 of the Housing Australia Act imposes on the Board an obligation to ensure, according to sound commercial principles, that the capital and reserves of Housing Australia at any time are sufficient to meet likely liabilities, as well as to adequately provide for default in repayment of principal or in the payment of interest in connection with loans made by Housing Australia. Item 15 of the Consequential Provisions Bill inserts proposed subsection 48(4) to clarify that this section does not apply to liabilities or defaults under Help to Buy arrangements, which, according to the Explanatory Memorandum, ‘are subject to specific funding arrangements with the Commonwealth’.[99]

Other provisions

Commencement

Given that state participation is enabled by Constitutional referral or adoption of Commonwealth legislation and given this referral or adoption date may vary across states, implementation of the Help to Buy program will be somewhat complex. With respect to commencement of the Bill, clause 2 states that the amendments will commence on the day after Royal Assent. The Explanatory Memorandum clarifies that is ‘to enable Housing Australia to establish the Help to Buy program and prepare to receive applications’ (p. 21). The Explanatory Memorandum also states that:

It is the Government’s intention that the Bill not be enacted until one or more States enact related legislation to refer power to the Commonwealth under section 51(xxxvii) of the Constitution. Introduction of the Bill in advance of state legislation having been enacted will enable Help to Buy to be available to eligible home buyers as soon as possible after referrals are finalised…The Government will work closely with state governments to finalise their referrals of power, as agreed in August 2023.[100]

Importantly, clause 12 dictates that Housing Australia cannot enter into any Help to Buy arrangements in a participating state or territory until Program Directions are in force. However, clause 48 enables consultation on legislative instruments – including Program Directions – to occur wholly or in part before the commencement of the Bill. According to the Explanatory Memorandum, this is ‘to ensure that consultation can be completed to allow the timely making of legislative instruments such as the Program Directions, which support the operation of the Bill.’[101]

Appendix A: Commonwealth and State and Territory housing roles

Source: Australian Housing and Urban Research Institute, Submission to the Senate Standing Committee, Inquiry into the worsening rental crisis in Australia, 22.

Appendix B: Summary of state and territory Shared Equity Schemes

Under the New South Wales Shared Equity Home Buyer Helper scheme, the NSW Government can contribute up to 40% of the purchase price for a new home or 30% for an existing dwelling. Eligibility is limited to single parents, ‘older singles’ (over 50 years), first home buyers in key industries (such as teachers and nurses) and survivors of domestic violence. Asset limits also apply. The scheme was announced as a ‘two-year trial’ offering ‘up to 6,000 places’ in the NSW Government’s 2022–23 Budget (at p. 1–9).

Victoria’s Homebuyer Fund – announced in late 2021 – is a shared equity scheme under which the Victorian Government can contribute up to 25% of the purchase price in exchange for an equivalent share in the property. The scheme is targeted at homebuyers who have saved at least a 5% deposit, and that earn $130,485 or less per year for individuals, or $208,775 or less per year for joint applicants. The fund is anticipated to assist ‘up to 13,000 households’ over time.

In Western Australia, the WA Department of Communities offers a limited number of shared ownership home loans - called Opening Doors Shared Ownership Home Loan – through its home loan lender Keystart. Keystart offers up to 30% of the purchase price of newly-built homes and off-the-plan properties listed on the state’s Opening Doors website (note that, there are currently a limited number of properties for sale as the WA Government ‘is considering these properties for other programs to support the WA community’). The scheme targets lower income households who have saved at least a 2% deposit. The Opening Doors Shared Ownership Home Loan initiative was launched in 2011, and appears to have replaced the First Start shared equity program that was introduced in 2007 (p. 147).

The South Australia Government’s HomeStart Shared Equity Option allows participants with a maximum household income of $100,000 to borrow up to 25% of the purchase price of a home as an interest-free and repayment-free loan. Finance is provided by the SA Government’s housing finance company, HomeStart Finance. HomeStart was established in 1989, and has offered a variety of lending products. It has been writing shared equity loans since 2007.

The Tasmanian Government offers the MyHome shared equity program, in which eligible participants (who meet certain income limits and who have saved at least a 2% deposit) share the cost of buying a home with Homes Tasmania. Homes Tasmania’s equity contribution varies depending on what type of home is purchased. HomeShare launched in mid-2022, and appears to have replaced the HomeShare shared equity program which was launched in 2009.

The Queensland Government offers the Pathways Shared Equity Loan program, which assists public housing tenants to purchase a share in the property they are currently renting from the Department of Communities, Housing and Digital Economy. Participants must not be able to afford to buy 100% of the home they are renting through a standard home loan, and they are obliged to buy at least 60% of the home. The Pathways program was launched in 2008.

The ACT government offers a Land Rent Scheme, which was introduced as part of the ACT Government's 2007 Affordable Housing Action Plan. The scheme essentially provides low to moderate-income purchasers a way to access land at a below-market price. Purchasers can rent land through a land rent lease rather than purchasing the land to build a home. Available blocks of land (limited to vacant, single-dwelling residential blocks that are previously unleased) are available from the Suburban Land Agency. The Land Rent Scheme was introduced in 2008.

The Northern Territory Government does not currently offer a shared equity scheme; however, it has in the past. In 1987, NT Cabinet approved the introduction of the Shared Equity Home Ownership Scheme to allow potential homeowners to purchase an ‘affordable share’ of a dwelling using private sector finance. The Scheme was introduced in the context of high interest rates and was pitched as ‘a new way of overcoming the problems of affording home ownership.’ The NT Government replaced this program with the HomeShare Tenant Shared Equity and HomeStart Private Shared Equity programs in the late 1990s, which were in turn replaced with a subsidised and low-deposit loans program called HomeBuild Access (alongside grants for first-time home buyers) in 2013.