Senator David Pocock's Additional Comments

Overview

1.1I thank the Committee for their work on this report and acknowledge the inputs of hearing witnesses and other contributors to the consultation.

1.2I am in support of the shared equity mechanism as a means of assisting access to home ownership. I also support the Committee’s report and concur with its recommendation that the bills be passed, subject to the following improvements.

Specifying Help to Buy scheme purpose

1.3The objective of the proposed Act is stated as ‘to give Housing Australia the function of entering into shared equity arrangements on behalf of the Commonwealth in relation to residential property to improve housing outcomes for Australians by assisting low-income and middle-income individuals to buy homes’. While this is unobjectionable, there is a case for amendments of two kinds.

1.4Firstly, research evidence shows that, in common with measures such as the Housing Australia First Home Guarantee scheme, the main impact of existing shared equity home ownership programs tends to be to bring forward a household’s entry to home ownership – an issue noted in the UNSW City Futures consultation submission. Provided that assistance is appropriately targeted, this may be a worthwhile objective. However, as argued in the Grattan Institute consultation submission (p4), there is a case for the scheme to pledge the more ambitious goal of enabling access to home ownership for households otherwise unlikely to achieve it. Specifying this more explicitly in the legislation would focus detailed scheme design (and subsequent monitoring and evaluation) attention on this more aspirational objective.

1.5The depth and breadth of Australia’s housing crisis means that government assistance should be targeted to those most in need. In this case, to increasing the total quantum of people able to access home ownership, as opposed to simply bringing that market entry forward.

1.6Amend Section 3 of the bill as follows to better target the assistance being provided by the Commonwealth for those who without it would be unlikely ever to enter home ownership:

The object of this Act is to give Housing Australia the function of entering into shared equity arrangements on behalf of the Commonwealth in relation to residential property to enable access to home ownership for Australians otherwise unlikely to achieve this.

1.7Beyond the objective of assisting entry to home ownership, the Objects of the Act should also be reworded to leave open the possibility of using the shared equity model to assist financially stressed homeowners in avoiding mortgage repossession.

1.8Data from Roy Morgan shows that in January this year 1.609 million households were at risk of mortgage stress, the highest number on record. While expectations are that interest rates will no longer continue to rise, inflation remains sticky and households remain burdened by the cost-of-living crisis.

1.9Under the Homekeeper model recently proposed by Professor Chris Wallace and up to a capped amount, a qualifying household could be offered government assistance in meeting mortgage payment shortfalls for a limited period. In return, the government would acquire a small equity stake in the value of the property, to be repaid on this basis when the owner’s situation allows it – or otherwise when the property is sold. Given expectations that house prices will generally continue to rise for the foreseeable future, the taxpayer would typically benefit to that extent from the repayment; that is, reflecting the size of the government’s equity stake acquired via temporary mortgage payment support.

1.10Enable the possible utilisation of the Help to Buy mechanism as a ‘mortgage rescue’ service by making a minor amendment in Section 3 of the bill as follows:

The object of this Act is to give Housing Australia the function of entering into shared equity arrangements on behalf of the Commonwealth in relation to residential property to improve housing outcomes for Australians by assisting low income and middle income individuals to buy homes and to enable individuals facing mortgage repossession and possible homelessness to remain in home ownership.

Strengthening program evaluation requirements

1.11Consistent with the proposed amendment to scheme objectives as suggested above, there is a case for amending the program evaluation requirements to mandate attention to the scheme’s efficacy in enabling access to home ownership for those otherwise unlikely to achieve it.

1.12Amend Section 45, after subclause (1), to give consideration in the scheme’s evaluation requirements to enabling otherwise unachievable home ownership by inserting additional text as follows:

(1A) Without limiting subsection (1), the review must consider the extent that the operation of the Help to Buy program has assisted in enabling access to home ownership for those otherwise likely to have been permanently excluded from it, as well as for those enabled to access home ownership more quickly than likely to have been otherwise achieved.

1.13Scheme evaluation requirements should also be amended to address concerns raised in evidence to the inquiry that the Help to Buy program needs to be carefully designed to integrate effectively with other Commonwealth Government and state/territory first home buyer assistance programs. This has been raised by a range of expert stakeholders including the Community Housing Industry Association and National Shelter (consultation submission p.4), as well as the UNSW City Futures Research Centre (consultation submission p.4).

1.14Add a new clause in Section 45 to require the scheme is designed carefully to integrate with existing first home buyer schemes as follows:

(1B) The review must also consider the extent to which the Help to Buy program, in its implementation, has effectively integrated with other first home buyer assistance programs (Commonwealth, states and territories), as envisaged in the National Housing and Homelessness Plan.

Considerations relevant in informing decisions on program scale

1.15Although program scale is not specifically stipulated, the proposed legislation establishes a Ministerial power to determine this.

1.16Both Labor’s public commentary and clause 3.4 of the explanatory memorandum notes the policy intention is that the scheme will be open to up to 10,000 eligible purchasers per year for four years and capped in its entirety at 40,000.

1.17There is a case for amending the relevant section to prescribe some of the considerations that should be weighed by the Minister of the day in reaching such a decision. This amendment could be worded so as to emphasise the desirability of significantly increasing the size of the scheme, enabling it to continue in perpetuity and quarantine a portion of places within the allocation for historically disadvantaged cohorts such as older women and First Nations peoples.

1.18This is reflected in evidence provided to the committee including in the submission by the Master Builders Association (p2), suggesting that legislation could stipulate that Ministerial decisions on program size should be influenced by an assessment of the current scale of barriers to home ownership access for low to middle income Australians and the effectiveness of other first home buyer assistance programs in enabling such access for those otherwise excluded.

1.19The consistent average capital gain of residential property in Australia minimises the risk of loss to taxpayers from this scheme, meaning more ambition can be achieved with relatively small cost and risk to the Commonwealth.

1.20Specify a floor in the legislation opening the Scheme up to a minimum 30,000 eligible participants per annum, ensuring the scheme operates in perpetuity (as opposed to exhausting after four years) and quarantining at least one third of available places per annum for offer in the first instance to historically disadvantaged cohorts, such as older women and First Nations peoples.

Senator David Pocock

Independent Senator for the Australian Capital Territory