The well-trodden path to homeownership that our forebears travelled has become more challenging to current and future generations in overheated housing markets both in Australia and overseas. With the transition from rental to home ownership becoming more challenging, a suite of alternative finance models, loosely known as ‘shared equity’ have sought to bridge the divide and create a stepping-stone into home ownership for home buyers. Our counterparts in the USA and UK have created an array of schemes to suit market conditions, legislative and regulatory requirements, and political priorities to meet the ever-growing demand for assistance into homeownership. Key to the success of each of these schemes has been securing funding from varying sources including government, private finance and philanthropy.
In the UK, bi-partisan political support of housing assistance has seen a long history spanning 40 years in the provision of shared equity (known as shared ownership) to over 270,000 households since its inception. More recently, shared ownership has been complemented by the Help to Buy: Equity Loan scheme that has assisted a further 220,000 households into home ownership in England (Scotland and Wales run separate, but similar, equity loan schemes). In addition, the USA has utilised its inclusionary zoning legislation to create shared equity provision, and given the comparatively low level of government funding towards this asset class, has explored the role of philanthropy to assist in the ‘proof of concept’ needed to attract private investment.
While shared equity is likely to remain niche in the context of the overall housing market, the proven international models of shared equity provision remain relevant in the Australian context. Given the competing demands on the public purse, it is proposed that shared equity provision in Australia align high subsidy schemes to targeted households (e.g. low-moderate income households) and encourage the market through private finance to provide lower subsidy models to a broader cohort of home buyers.
Mainstreaming shared equity as a solution to homeownership affordability will require a multi-industry response with government taking a leadership role. The newly appointed Commonwealth Housing Minister is well placed to champion shared equity by enabling opportunities to engage both the financial services and property development industries to support ways to facilitate shared equity provision. Understanding the commercial requirements of private finance in investing in a newly created, stable asset class is critical as well as working with the development industry and State Planning Ministers to explore appropriate and standardised inclusionary zoning, are fundamental to scalable success. The National Housing Finance and Investment Corporation (NHFIC) is an existing mechanism well placed to pursue shared equity provision alongside their new deposit assistance scheme being launched in 2020.
Australia is positioned to benefit from the expertise and learnings in shared equity provision with UK and USA experts and practitioners poised to work with Australia to ensure more Australians can turn the dream of homeownership into reality.
Keywords: Homeownership, shared equity, inclusionary zoning legislation, philanthropy, housing finance, housing development, subsidy