Without meaningful national housing strategies, first home buyer schemes will only increase owners’ wealth | Hal Pawson and Chris Martin

In the decade to 2021, more than $20 billion was given by Australian governments in tax breaks and cash grants to first-time homebuyers.

While aiding access to home ownership is an electorally popular policy, these schemes have been widely criticized by economists and public policy experts as unjust and ultimately counterproductive, with each new boost in aid further pushing up prices for those who miss it.

That $20 billion could instead have financed about 60,000 social rental homes or 137,000 first-time homebuyer homes on an equity-sharing basis.

Even before the economic stimulus response to Covid-19 ramped up, Australia’s annual spending on first home buyer cash payments and stamp duty concessions escalated – from $1.2 billion to nearly $3 billion in the three years from 2016.

In addition, governments have introduced other schemes to increase the purchasing power of the first home buyer. These broader measures include the Housing Guarantee, a new national program to facilitate low-deposit mortgages, initially unveiled by Scott Morrison in the heat of the 2019 election campaign.

Now, after a lively debate on the topic ahead of the latest federal poll, the Albanian government plans to broaden its approach further through its new Help to Buy stock scheme. For up to 10,000 average-income households per year, this scheme provides a federal contribution of up to 40% of a home’s purchase price, with the government taking an equity stake in the property.

First home buyer aid programs in Australia do little to facilitate access to a home for people who would otherwise be permanently excluded. Rather, their main effect is to bring home ownership to the fore for middle-income people who are already close to purchasing. In this way they help supported households to put a new, higher price in the market.

This limitation is related to the broader reality that a revival of home ownership cannot be achieved by extending support for the first home buyer on the current model alone. To seriously address this broader goal, system changes are needed to meet the much more difficult challenge of facilitating housing affordability in general.

Yet this objective is at odds with the dominant theme of home ownership policy: facilitating wealth accumulation through wealth ownership.

Some will argue that this requires deregulation of land use planning. In our view, however, the main problem lies in the unassailable status of key tax and social security policy institutions that encourage those with extra money – or credit capacity – to spend it on housing.

While this remains entrenched, measures aimed at facilitating access to and affordability for first-time homebuyers will accomplish little more than increasing the wealth of existing homeowners.

When it comes to recently ramped up help for first-time buyers, Australia is certainly not alone. As revealed in our new research, similar movements have been observed in a number of other countries in the 2010s, including the UK, Ireland and Canada.

As in Australia, this reflects growing concerns about declining – or at least flattening – home ownership in many advanced economies during the early 21st century, and especially since the global financial crisis.

This, in turn, is arguably the result of the increasing financialization of housing – treating it as an attractive investable asset – which, combined with historically low interest rates, has pushed home purchases out of reach for a growing number of younger adult households.

In Australia, the chances of acquiring their own home at the age of 30 have decreased significantly. Since the 1970s, the average age of first home buyers has risen by six years to 32 years – almost doubling the number of years between reaching adulthood and acquiring a home.

At the same time, first home buyers, especially in Sydney, Melbourne and Perth, are now buying fewer homes and more units, while more and more people are achieving this life goal only with the help of parental financial support.

While Australian governments have recently responded to the challenge of initial home ownership policies by broadening and deepening the range of aid programs, they have continued to focus on the demand side of the housing market – that is, boosting consumer purchasing power.

Contrary to other countries, as well as Australia’s own historical experience, little or no attention has recently been given to supply-side measures to expand housing development suitable for this cohort.

In early post-war Australia, the surging homeownership rate was supported by large-scale government-commissioned housing for low-cost sales, as well as government issuance of mortgages and regulatory preference for private loans by first home buyers.

Today, especially in Singapore, but also in European countries such as the Netherlands and Germany, national and state governments continue to play an active role in the development of land and housing for first-time buyers.

Meanwhile, authorities in the UK and Ireland are using planning powers to ensure that housing projects in the private market include both affordable rental housing and lower-cost sales units.

Not only are such approaches largely absent in Australia, but we also lack a coherent overarching policy framework for addressing housing challenges.

Again, this puts us out of step with some of the countries mentioned above, which frame first-time homebuyer assistance measures within meaningful national housing strategies.

Leave a Comment