Federal Election 2022: Why Are The Pollies Talking So Much About Housing?

Help to Buy scheme
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Federal Election 2022: Why Are The Pollies Talking So Much About Housing?

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What is Labor's Help to Buy scheme about?
Help to Buy scheme

You may have heard politicians chatting an awful lot about Australians owning property and ideas to make that happen.

But what are they actually doing and why is it all we’re hearing about right now?

Labor’s Help to Buy scheme

The reason you’re hearing so much about housing right now is because Labor last week unveiled its milestone policy in this area.

It’s called a national shared equity plan, or the Help to Buy scheme if you want something more catchy.

Basically, it addresses the fact Aussies, especially young Aussies, are just struggling to buy a place. And the reason why they’re struggling is because they’re paying rent (which is going up) while trying to save for the average home (which is going up).

Getting 10 to 20 per cent saved for a property is tough in a country where houses have now passed $1 million on average – looking at you Sydney.

Perth houses are on the lower end of that spectrum, with the median sitting at about $620,000 right now, but the fact is that cost is going up like everywhere else in the country.

The government has tried addressing this by acting as a guarantor and allowing you to take out a loan of just 2 per cent. But with interest rates going up that’s still a scary proposition.

So Labor proposed something different. An equity scheme.

Basically, a Labor government would hold up to 40 per cent equity in your home, meaning you have to get a loan only for the other 60 per cent.

In some locations in Australia that means people will be saving more than $300,000 for loans.

Income thresholds for the scheme

To be eligible, you have to make less than $90,000 as an individual or $120,000 as a couple.

You also can’t own another property or have assets that really push you above those thresholds.

As long as you’re under those thresholds, you can access the Help to Buy scheme and don’t actually need to pay Labor out for their stake.

The catch is when you sell it and Labor still has that equity (in other words you haven’t paid them out) they will then take that cut from the house being sold.

Government criticism

As much as Labor has been spruiking this scheme, the government has been shooting it down.

Why? Well because they say it equates to Labor owning a part of your home.

They have also pointed out that once you earn a cent over $90,000 you have to pay Labor out or sell the place.

And they’ve raised concerns over how inheritance will work. In other words, if a couple earning less than $120,000 accesses the Help to Buy scheme, they’ll likely want to pass that property down to their kids as most couples will.

But if that kid earns over $90,000 and can’t pay the government out, they’ll be forced to sell the property.

 Labor’s defence and where the government argument falls down

The key thing to remember when the Coalition raises these criticisms is that nothing is immediate.

It’s not like the minute your income rises about $90,000 you have to pay out Labor’s 40 per cent stake.

No. You actually get a two year grace period, where Labour would look at your income and annualise it to get a sense of your financial position.

Then if it all checks out that you’re well and truly above that threshold, a plan will be made for you to start buying out that Labor equity.

But not all at once. I mean if you have the cash, sure, pay the 40 per cent. But if not, you can figure out an instalment scheme based on what you can afford, which will very much be on a case by case basis.

The fact you are then paying Labor while paying the mortgage on your 60 per cent of the home may sound scary, but the fact is it’s just you paying closer to what would be a “normal” (and generally unaffordable) mortgage.

The other option is there’s no equity scheme and you’ve just got to figure out with the banks a loan on a home costing at least $600,000 for who knows how long.

Why is it important?

Cost of living is a big theme of this campaign. As are rising interest rates.

In that context, getting you into the housing market rather than throwing money into the black hole that is renting is a big deal.

The two parties both have ways of getting you there.

One tries to stop you from needing 10 to 20 per cent, acting as a guarantor in this instance to allow you to take out a loan for just 2 per cent of a property’s price.

The other has put forward a national equity scheme and would go in on the house with you, in a matter of speaking.

If you’re keen to buy a place, who you vote for this election will contribute to the options you have available to you at the end of the day.

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