This article is part one of an ongoing series that Coleman Greig will be publishing on affordable housing.
Affordable housing is a complicated topic, and one that Coleman Greig believes Greater Western Sydney needs to tackle immediately given the alarming reports emerging on the population’s housing stress.
In April 2019, Wentworth Community Housing and the Western Sydney Community Forum combined forces to release a report on the crisis in Western Sydney, titled: ‘Home In Western Sydney Housing Affordability and Homelessness Insights April 2019‘.
According to the report, In Western Sydney:
- More than 110,000 households are in housing stress;
- 32.8% of renting households are in rental stress;
- Homelessness has increased significantly, and at a far greater rate than state and national increases;
- Social and affordable housing supply met only 40.6% of the total demand; and
- Home sale prices grew at a faster rate than Greater Sydney.
While Governments throughout Australia have been attempting to tackle the issue of affordability for years, this report leaves us in no doubt that there is a real need for Western Sydney to put this issue at the forefront.
There are a number of policies that have already been put in place by Governments to date, such as the First Home Owners Grant and the First Home Super Savers Account. For further information on these schemes, please see Andrew Grima‘s Article: ‘A Millenial’s Dream: To Lease a House‘.
As Andrew notes in this article, many millennials are taking different approaches to the traditional Australian dream (e.g. renting homes in ideal locations and purchasing investment properties in more affordable ones) although the reality is that they often struggle to reap the government benefits.
With the Commonwealth election looming, the Coalition has yet to make any broad announcements surrounding issues relating to housing, while Labor has announced that it will scale back negative gearing. For Western Sydney, it is clear that more needs to be done – as affordable housing policies need to encompass all areas of affordability, including:
- Home ownership;
- Private rental;
- Community and not-for-profit housing;
- Social housing and supported accommodation (including emergency housing); and
A variety of strategies are needed, particularly those concerning low to middle income earners who find it hard to save a deposit.
One strategy that some government agencies and not-for-profits have utilised is that of shared equity schemes, which enable social housing tenants to achieve the dream of home ownership by assisting them with purchasing their rental homes from the social housing provider. These tenants typically struggle to save deposits, pay mortgage insurance and/or service a loan – although as a result of these schemes, they are able to share the cost of buying a home with an equity partner, such as a private investor, not-for profit organisation or government housing authority.
Examples of state and territory government shared equity schemes include:
- ACT Government: Community Services shared equity scheme;
- QLD Government: Pathways shared equity loan;
- VIC Government: HomesVic scheme; and
- WA Government: Shared home ownership scheme.
Whilst first home buyer grants are important, they are only part of the solution – as it is not solely millennials hoping to purchase their first homes who are looking to achieve the Australian dream. Further, these shared equity schemes also recognise that making social housing more available is not just about the construction of more housing – and that both creating innovative solutions and enabling social housing tenants to achieve home ownership makes way for the purchase of new stock, and the entry of new social housing tenants.
These shared equity schemes have adopted a variety of legal approaches, including:
- The social housing tenant would generally have a 70-80% equity share, with the housing provider owning 20% – 30%;
- Co-ownership of the property with the equity partner as tenants in common, or Loan agreements between the tenant and housing provider for the repayment of their share; and
- The ability to ‘buy back’ the equity partner’s share.
Another example of a more radical shared equity scheme is the ACT Government’s land rent scheme. This option provides any eligible persons (pursuant to an income threshold test) the ability to rent land from the ACT Government, rather than purchase it. Relevant parties are given the opportunity of home ownership by only being required to finance the construction of their own home on the land, and ongoing ‘land rent’ payments to the ACT Government.
They can nominate to purchase the land at any time, at the current market value of the land by converting their land rent interest into a standard leasehold interest. Whilst some do consider the scheme to be unusual, it has largely worked, recognising that one of the fundamental barriers to achieving the Australian dream of home ownership is purchasing the land itself.
If Western Sydney is under significant housing stress, now is the time to consider a comprehensive approach, and innovative solutions.
If you are looking for further information on affordable housing issues, please don’t hesitate to get in touch with one of Coleman Greig’s knowledgeable and experienced property lawyers.
*The Coalition have released a new first home buyers initiative since the release of this article.