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Getting back on the horse

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The 2021-22 Federal Budget will be announced on Tuesday 11 May. What can we expect for residential building?
Achieving the step into home ownership provides personal and financial security that often endures a life time. Governments around the country recognize this and operate a range of programs that assist aspiring home owners purchase their first home.

The range of support measures for first home buyers include grants and stamp duty concession schemes operated by the states, while the First Home Super Saver Scheme and the First Home Loan Deposit Guarantee are operated at a national level. Several states also offer concessional lending products and shared equity schemes and other more focused programs to assist disadvantaged groups within the community.

A common criteria across almost all of these schemes is that in order to be eligible you must never have owned property in Australia.

While this is fundamental for a program that is designed to assist first home buyers, targeting first home buyers seems unnecessarily arbitrary in the context of achieving a broader policy objective of promoting home ownership.

Programs assisting first home buyers service a large number of Australians each year and are adequate for those who follow a ‘conventional’ housing journey (i.e. move out of the family home, rent while saving a deposit, then purchase a home). However not everyone is so fortunate. Many people who don’t own their own home are excluded from first home buyer support programs because they have owned a home at some point in the past.

Every year households encounter hardship that leads to some falling out of home ownership, forfeiting the benefits that this had afforded them. Hardship may arise through illness, loss of a job, relationship break down or any of the countless other ways that a person’s personal circumstances change.
For some a change in housing tenure will be transitory as they work through temporary hardship, for others the benefits of home ownership will be lost permanently.

Given the significant benefits of home ownership to individuals and to the community there is a compelling case to consider whether some of the assistance that is available to first home buyers should be made available to those seeking to re-enter home ownership.

Broadening the eligibility criteria for first home buyer programs inevitably raises the question of whether this could lead to people ‘double-dipping’. This is an issue that would need to be addressed in the design of any such reforms.

The evolution of first home buyers support programs provides evidence of how these programs can be targeted. Early iterations of first home buyer support programs, beginning with the First Home Owner Grant that commenced in 2000, had few restrictions on eligibility provided that the grant recipient had not owned property in the past.

Over time the eligibility to first home buyer support programs have become increasingly targeted. Many of these programs now include criteria relating to household income levels, property price caps, location, they apply differently if a home is new or existing, and Australian citizenship is a condition for some schemes.

Schemes have become increasingly focused on supporting low and middle income households’ purchase moderately priced homes. These reforms have been fiscally prudent and ensured that assistance is targeted to those who are likely to face greater difficulty meeting the savings requirement to secure the finance required to purchase a home, yet have capacity to repay a mortgage.

There are international examples where eligibility criteria for home buyer support measures have been more accommodating of those reentering home ownership. For example, the definition of a first home buyer in the Canadian Home Buyers Plan includes those who have not owned a home in the preceding four years.

The Canadian scheme shares some similarities with the First Home Super Saver Scheme, in that it provides restricted access to savings within superannuation to purchase a home. It is not inconceivable that the eligibility for the FHSSS be broadened to enable those reentering home ownership to access savings within super on the same terms as first home buyers.

If Australia is to maintain a high level of home ownership then policies must continue to support households purchase a home. Support for first home buyers is an important part of this but the rigid criteria that deprive support to people attempting to re-enter home ownership seems contrary to achieving this.