30% Shared Equity Homeownership Scheme Explained

The Grattan Institute has offered a scheme to help first-time home buyers and older Australians buy property with a 5% down payment.

The housing affordability crisis is getting worse according to a study by the Grattan Institute think tank.

Data shows that between 1981 and 2016, the homeownership rate among 25-34 year olds fell from over 60% to 45%, and among the poorest 40% of this age group, it fell by more than half, from 57% to 28%. .

The Grattan Institute has proposed an equity sharing program to help improve affordability for first-time home buyers.

Under the proposed scheme, the National Housing Finance and Investment Corporation (NHFIC) would co-purchase up to 30% of the home’s value, taking a proportional share of the profits when the home is sold.

Buyers would borrow the remaining funds from a private lender, provided they have at least a 5% deposit.

Owners could also buy out the government’s stake in 5% increments.

Income limits would be $60,000 for singles and $90,000 for couples.

“A national shared capital scheme would help young Australians enter the housing market faster, especially those without access to the ‘Bank of Mum and Dad’,” the report said.

“Buyers could borrow less for their first home – which would reduce the level of risk they take – especially since interest rates are likely to rise from here.

“Other first-time homebuyers can use the program to get a bigger home that can accommodate a growing family, avoiding having to pay stamp duty twice if they upgrade in the future.”

In October last year, the Victorian government announced its own share capital scheme, offering up to 25% of the purchase price to up to 3,000 applicants.

The time it takes to save for a deposit is skyrocketing

According to the Grattan Institute, homeownership rates are falling because it now takes much longer to save for a deposit.

“In the early 1990s, it took the average Australian around seven years to save a 20% down payment on a typical home,” the report said.

“Now that would take nearly 12 years. Unsurprisingly, a growing share of Australians rely on the ‘Bank of Mum and Dad’ for a deposit.

“Meanwhile, older renters with a deposit won’t be in the workforce long enough to pay for a home when they retire, even at today’s record high interest rates.”

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Source: Grattan Institute

Shared equity for retirees?

The Grattan Institute report says that without a change in policy, more retirees will rent in the future.

Previous research from the Grattan Institute estimates that by 2056 only two-thirds of retirees will own their homes, up from almost 80% today.

Mature borrowing has become a hot topic in Australia, as those who fail to break into the market in their 20s or 30s may find it difficult to secure a home loan later in life.

According to the Grattan Institute report, Australian seniors who rent on the private market are far more likely to suffer from financial stress than owners or tenants of public housing.

“Nearly half of all retired renters live in poverty – with incomes below half the median,” the report says.

“Their numbers will only increase as fewer retirees will own their homes in the future. Older women are particularly vulnerable: women over 55 are already the fastest growing group to be homeless. shelter in Australia.”

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Source: Grattan Institute


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