Chapter 1Introduction and background
Referral
1.1On 30 November 2023, the Help to Buy Bill 2023 (Help to Buy bill or, the bill) and the Help to Buy (Consequential Provisions) Bill 2023 (consequential provisions bill) were introduced into the House of Representatives.
1.2On 30 November 2023, the Senate referred the provisions of the bills to the Economics Legislation Committee (the committee) for inquiry and report by 16April 2024.
Purpose of the bills
1.3The Help to Buy Bill 2023 establishes, a shared equity program that will assist low to middle income earners to purchase new or existing homes by accessing an equity contribution from the Commonwealth. This program will be called Help to Buy. 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.
1.4The bill is supported by the Consequential Provisions Bill, which makes several amendments to existing Commonwealth legislation primarily the Housing Australia Act 2018 (Housing Australia Act) to support the operation of Help to Buy.
1.5The bills deliver the government’s election commitment to establish the framework for a new national shared equity program and form part of the Commonwealth Government’s commitment to improving housing outcomes and housing reform agenda. In announcing the policy, Prime Minister Anthony Albanese said that the program was part of the government’s plan to 'step up and assist, opening the door of home ownership'.
1.6In the bill's second reading speech, the Minister for Housing, Homelessness, and Small Business, the Hon Julie Collins MP, acknowledged that home ownership is 'out of reach' for many Australians, particularly lower income households, and stated that the bill would assist Australians to overcome the obstacle of both saving for a deposit and servicing a mortgage. Minister Collins specified that Help to Buy was aimed at a broad range of aspiring homeowners, not just first homeowners.
1.7Further, Minister Collins outlined that Housing Australia would administer and oversee the program, and reiterated some of the same eligibility criteria that was contained in the ALP’s party document. Specifics of the program will be determined in the Program Directions, a legislative instrument not subject to sunsetting or disallowance (see paragraph 1.31).
1.8The provisions of the bills primarily set out the administrative and Constitutional framework required for Help to Buy to operate in the states and territories. As the Australian Constitution has no specific clause giving the Commonwealth Government responsibility for housing, the operation of Help to Buy will be enabled by a State’s referral of power to the Commonwealth under section 51xxxvii of the Constitution. It provides:
The Parliament shall, subject to this Constitution, have power to make laws for the peace, order and good government of the Commonwealth with respect to: …
(xxxvii) Matters referred to the Parliament of the Commonwealth by the Parliament or Parliaments of any State or States, but so that the law shall extend only to States by whose Parliaments the matter is referred, or which afterwards adopt the law. Help to Buy will therefore only operate in those states and territories which refer constitutional power under section 51 (xxxvii).
1.9For the program to function in respective states, states must also pass their own legislation. It was agreed at National Cabinet, that all states will progress legislation so that the scheme can run nationally from 2024. Help to Buy will operate in the Territories following the commencement of the bills pursuant to section 122 of the Constitution. Minister Collins stated that the Commonwealth Government will 'continue to work closely with State and Territory governments on the rollout of the scheme'.
Background
Australia’s falling rate of home ownership
1.10Australia's home ownership rate refers to the proportion of owner-occupied private dwellings that are owned by the occupants, either outright (without a mortgage) or with a mortgage.
1.11The rate is commonly calculated from the Australian Bureau of Statistics (ABS)Census of Population and Housing(the Census). As an official enumeration of the entire population, the Census provides the most thorough assessment of how homeownership has changed over time. However, the data is only collected once every five years. Household data collected more regularly, such as the ABS’Survey of Income and the Housingand theHousehold Income and Labour Dynamics in Australia(HILDA) survey, can be used in conjunction with the Census to provide a more wholistic view of trends in homeownership over time.
1.12The three datasets produce varied results due to the differences in data collection methodologies, such as timing and sample size. However, overall, a gradual decline in aggregate home ownership rates is observable over the past fifty years across all three:
the 2021 Census found a homeownership rate of 67 per cent, the lowest figure recorded since a high of 70.2 per cent in 1961;
the ABS Housing Occupancy and Costs (2019–2020) found that 66 per cent of Australian households owned their own home with or without a mortgage, compared to 70.6 per cent in 1999–00; and,
the HILDA 2016 survey showed a fall in home ownership rates from 68.8 per cent in 2001 to 64.9 per cent in 2014.
1.13While the above data indicates that the aggregate home ownership rate has only slightly declined overall since the early 1970’s, certain demographics have exhibited more significant declines in home ownership rates over time. For example, lower income households have experienced greater declines in levels of home ownership than higher income households. According to the Grattan Institute’s 2022 The Great Australian Nightmare report, between 1981 and 2021 home ownership rates for the lowest 40 per cent of income earners fell from 57 per cent to 28 per cent. Young people in general have been disproportionately affected. According to the 2023 Intergenerational Report:
The decline in homeownership is most significant for younger age groups. Home ownership fell by 18 percentage points from 1981 to 2021 for those aged between 30 and 34, and 17 percentage points for those aged 25 to 29. A smaller decline in home ownership rates has occurred among those approaching retirement age – falling by nearly 3 percentage points between 1981 and 2021 for those aged between 60 and 64.
1.14The two main constraints to acquiring homeownership, saving for a deposit, which can be up to 20 per cent of the purchase price of a house, and servicing mortgage repayments have become increasingly difficult.
1.15Increases in house prices relative to income have lengthened the time required to accumulate a deposit. In 1982, the time required to accumulate a deposit was 3.3 years, as of 2023, it is 10 years. Rental costs also deplete savings for aspiring owners. Against this backdrop the cost of living as measured by the Consumer Price Index (CPI) a collective measure of household inflation, has risen steadily to one of the highest in living memory causing more pressure on would-be home buyers.
1.16The capacity of a median income household to service a mortgage has also declined as house prices and interest rates have increased. The portion of income needed to service a new loan rose from 40.3 per cent in 2022 to 46.2 per cent in 2023. According to the 2023 Housing Affordability report produced by ANZ and CoreLogic, such circumstances may 'explain a lacklustre lift in first home buyer loan numbers throughout 2023 compared to other buyers'.
The housing reform agenda
1.17The Australian Labor Party committed to a housing reform agenda in its election campaign in 2022. The Prime Minister Anthony Albanese (then Leader of the Opposition) announced a national shared-equity program, called the Help to Buy program, at the Australian Labor Party’s Campaign Launch in 2022. The details of the program were included in the ALP’s election policy document ‘Helping More Australians into Home Ownership’. As summarised by the Parliamentary Library, the document outlined that:
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).
Help to Buy would be open to 10,000 Australian applicants each financial year with a total of 40,000 places.
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 two 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 five 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.
1.18The document also outlined price caps for eligible properties in each major city and region.
1.19The October 2022–23 Budget included a range of commitments to affordable housing and new housing supply, in particular formalising housing policies that the Labor party took to the May 2022 election. Help to Buy was included as part of the Safer and More Affordable Housing measure, with $324.6 million allocated to it over 4 years from 2022–23.
Key provisions of the bills
Help to Buy Bill 2023
1.20The Help to Buy Bill 2023 comprises of one schedule with six parts:
Part 1 of the bill outlines the purpose, scope, and interpretative guidelines necessary for understanding and applying the bill's provisions. In particular, it provides definitions for relevant terms such as 'Help to Buy arrangement' and 'shared equity arrangement';
Part 2 sets out the role and powers of Housing Australia in implementing Help to Buy. Housing Australia’s functions and powers differ based a state’s referral of power status;
Part 3 sets out the Ministers power to give directions to the Board of Housing Australia regarding how Help to Buy will operate, the directions will be known as the Program Directions;
Part 4 sets out how Help to Buy arrangements will be financed;
Part 5 provides the Constitutional framework for the participation of states in Help to Buy. It outlines how the bill and other Commonwealth, state and territory laws will interact, and specifies categories for the states accordingly. It also outlines the reporting and review requirements; and,
Part 6 sets out application transitional provisions.
1.21A summary of the key provisions of the bill are provided below.
Commencement
1.22Clause 2 states that the bill will commence the day after Royal Assent. However, Clause 12 provides that Housing Australia cannot enter into Help to Buy arrangements in a participating State or a Territory until the Program Directions are in force.
Objectives and definitions
1.23Clauses 3 and 4 provide that 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.
1.24Clause 6 defines a 'Help to Buy arrangement' as a shared equity arrangement, entered by Housing Australia on behalf of the Commonwealth.
Constitutional basis and co-operation of the States and Territories
1.25As noted, Help to Buy will be enabled by a referral of power to the Commonwealth by one or more states under section 51xxxvii of the Constitution.
1.26Help to Buy will operate in territories upon the passage of Commonwealth legislation. According to the EM:
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.
1.27The bill outlines three categories of matters related to the referral of power: primary, residual, and amendment matters. Depending on when a state’s referral law is enacted, it determines the relevant version of the Act concerning that state. If enacted before the bill, it is the original bill, if passed after the bill, it is the bill as originally enacted and amended until the state's referral law commences. Accordingly, the bill categorises the states based on the status of their referral: participating, cooperating, or withdrawn.
Functions and powers of Housing Australia
1.28Housing Australia’s functions and powers differ based a state’s referral of power status. For all categories however, Housing Australia must act in a 'proper, efficient and effective manner, and take all reasonable steps to comply with the program directions'. A summary of the categories of states and how Housing Australia may interact with them is as follows:
Clause 35 defines a participating state as one that has either referred primary, residual, and amendment matters to the Commonwealth Parliament under paragraph 51(xxxvii) of the Constitution, or has adopted the primary and residual versions of the Act (upon commencement) and referred the amendment matters. The status of a participating state remains even if the reference or adoption terminates in certain circumstances. Being a participating state allows full participation of eligible homebuyers based on the enacted legislation and any future changes.
Clause 36 defines a cooperating state as one which was a participating state and has terminated its reference of the primary matters but not its reference of the residual and amendment matters. In these states, Housing Australia cannot enter new shared equity arrangements, but it continues to manage and ensure compliance with pre-existing arrangements and can vary existing shared equity arrangements.
Clause 37 defines a withdrawn state as one that has terminated its adoption of the residual version of the Act or at least one reference of the residual or amendment matters. Housing Australia cannot enter or modify shared equity arrangements in a withdrawn state, it continues to administer existing arrangements. Housing Australia is prohibited from making new financial contributions in withdrawn states, reflecting the cessation of the state's involvement in the program.
Ministerial Power and the Program Directions
1.29Part 3 of the bill defines the scope of the Minister's authority to issue directions to Housing Australia regarding Help to Buy operations.
1.30Clause 24 provides that, the Minister may, by legislative instrument, issue directions to the Housing Australia Board regarding the functions of Help to Buy in participating and cooperating states. The directions will be known as the Program Directions. The legislative instrument will be exempt from disallowance and sunsetting under the Legislation Act 2023.The EM states that the exemption is designed to provide long-term stability to the program's participants.
1.31Changes to the Program Directions require unanimous agreement from participating and cooperating States and Territories. Further, the Program Directions, once enacted, cannot be amended to include a direction that is inconsistent with the Bill or the Housing Australia Act 2018. According to the EM:
Due to the long-term scope of operation of the Program Directions and the significant effect it has on participants, the current approach to amending the Program Directions to ensure that it remains fit for purpose is to review and update discrete sections of the Program Directions from time-to-time, as required, to enable the effective administration of Help to Buy.
1.32Clause 25 stipulates that the Program Directions may include directions from the Minister about strategies, policies, decision-making criteria, limits on Help to Buy arrangements, internal review processes, complaint handling, reporting requirements, and other relevant matters concerning the Help to Buy program.
1.33Clause 26 provides the limitations on the Program Directions. The Minister's direction-making power is limited to ensure it is not inconsistent with the bill or the Housing Australia Act 2018. Further, directions cannot require specific individuals or lenders to participate in the program or dictate Housing Australia's decisions in specific Help to Buy arrangements.
Financing Help to Buy Arrangements
1.34Subclause 27(1) and 27(2) provide that the Commonwealth must provide Housing Australia with the necessary funds for the equity contributions which will be exclusively for making equity contributions under the Help to Buy arrangements.
1.35Subclause 27(4) provides that the funds for Help to Buy arrangements will come from appropriations from the Consolidated Revenue Fund, which will ensure ‘timely availability of funds to Housing Australia and program participants.’
1.36Paragraph 28(a) provides that Housing Australia must pay to the Commonwealth all amounts it receives under Help to Buy arrangements. The EM states:
When an individual repays part or all of their Help to Buy arrangement, Housing Australia is required to pay the Commonwealth all amounts it receives related to the Commonwealth’s initial equity contribution and any other expenditure under the Help to Buy arrangements. This includes capital gains or losses on the equity contribution and other fees, such as enforcement costs due to non-compliance.
Review by the Administrative Appeals Tribunal
1.37Clause 43 of the bill grants regulation-making power to allow certain decisions made by Housing Australia to be reviewed by the Administrative Appeals Tribunal (ATT). According to the EM, this independent review process aims to maintain scrutiny over the administration of the program.
1.38Complaints about Help to Buy can be investigated by the Commonwealth Ombudsman, however this is limited to participants in participating and cooperating states. Program participants in a withdrawn State will still be able to seek review through an internal complaints mechanism that will be provided by Housing Australia, or externally through the Commonwealth Ombudsman.
Annual reporting
1.39Subclause 44 provides that, in accordance with section 46 of the PublicGovernance, Performance and Accountability Act 2013, the Housing Australia Board must prepare an annual report to provide to the Minister. The Minister will have the power to direct the content to be included in the report but it must include any changes to the Program Directions during the reporting period and the impacts of the change on the operation of HousingAustralia.
Review of Help to Buy
1.40Subclause 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 sitting days of the report being given to the Minister.
The Help to Buy (Consequential Provisions) Bill 2023
1.41The consequential provisions bill makes amendments to the Housing Australia Act. In summary, it:
amends the simplified outline to clarify that Housing Australia has to carry out Help to Buy functions in addition to its existing functions;
inserts definitions for ‘Help to Buy functions’ and ‘Help to Buy Program Directions’;
introduces ‘Help to Buy functions’ to Housing Australia's responsibilities;
amends paragraph 8(1)(e) to specify that Housing Australia's incidental powers do not extend to its Help to Buy functions; and,
provides clarity as to how the Housing Australia Board will receive and consider Help to Buy Program Directions.
Consultation
1.42The Explanatory Memorandum (EM) did not reference any consultation activities in relation to the bills.
Commencement
1.43The bills commence the day after Royal Assent. However, the bill provides that Housing Australia cannot enter into Help to Buy arrangements in a participating State or a Territory until the Program Directions are in force.
Legislative Scrutiny
1.44The Standing Committee for the Scrutiny of Bills (Scrutiny committee) made no comment on either of the bills: the Help to Buy Bill 2023 and the consequential amendments bill.
Human rights implications
1.45The EM stated that the bills are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. The bills engage with the following rights:
Article 11(1) of the ICESCR – the right to an adequate standard of living; and
Article 12(1) of the ICESCR – the right to health.
Financial impact
1.46The EM stated that the government’s investment under the Help to Buy program would have 'no impact on the underlying cash balance'. Furthermore, that the costs incurred by the Treasury and Housing Australia would have a 'negative impact on the underlying cash balance'. The EM did not indicate by how much.
1.47The Parliamentary Budget Office costed the impact of the Help to Buy program. It found that the program would decrease the fiscal budget by $346 million, and the headline cash balance by $7.61 billion over the 2022–23 Budget forward estimates period. It noted:
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.
Regulatory impact
1.48The explanatory memorandum offered no discussion on the regulatory impact of the bills, and no Policy Impact Analysis was provided. However, the EM stated that 'compliance costs will be considered as part of the Policy Impact Analysis for the Program Directions'.
Conduct of the inquiry
1.49The committee agreed to open submissions on 30 November 2023 and set 9 February 2024 as the closing date. The committee wrote to a range of key stakeholder groups, organisations and individuals, drawing their attention to the inquiry and inviting them to make a written submission.
1.50The committee received 13 submissions which are available on the committee's webpage and listed at Appendix 1.
1.51The committee held a public hearing on 5 March 2024 in Canberra. The witness list can be found in Appendix 2.
1.52Details of the inquiry, including links to the bills and associated documents, are published on the committee's website.
Acknowledgements
1.53The committee thanks all individuals and organisations who assisted with the inquiry, especially those who made written submissions and participated in the public hearing.
Report structure
1.54This chapter begins with a brief description of the homeownership rates in Australia and outlining the government’s housing reform agenda. The chapter finishes by setting out the purpose and key provisions of the bills.
1.55The second and concluding chapter outlines the key issues put forward in evidence and presents the committee's views and recommendation.