Share equity scheme makes sense in fixing Australian housing
One of the Australian government’s key housing policies from the last federal election has stalled in the senate and is subject to renewed debate. The scheme in essence is a shared equity scheme and we think that it makes a lot of sense in addressing the housing issues facing Australia.
First, let’s address the politics so we can set it aside. The Labor promoted scheme basically involves the government partnering with private owners in purchasing homes to live in, thereby improving affordability for those who are struggling to get onto the property ladder.
The Coalition’s position is to oppose the scheme, instead opting for an alternative which would allow buyers to tap into their superannuation (retirement) savings to fund deposits towards homeownership.
We don’t think either is a bad idea and in an ideal world, both schemes could be options. Although, the Coaltition’s scheme has some economic challenges. For a $1m home purchase, buyers would need to access $100-200k in super balances in order for it to make sense. Most people don’t build up a super balance to that level until they are in their late 30’s or early 40’s. So the super option only really works to promote homeownership for those on higher incomes.
Shared equity makes sense
We’re used to sharing ownership in other assets like companies by buying or selling shares on the stock market. We buy shares in crypto assets. Likewise, we share cars (Uber), share homes (Airbnb) and share offices (WeWork). So it’s only a matter of time before we start to share in the ownership of the largest purchase most people will make in their life — a home.
The current solution is a government proposed on. People will always have reservations about sharing with the government. However, we see a success shared equity scheme in Australia as paving the way for future industry initiated schemes. We don’t necessarily need the government to promote the scheme forever, just at the beginning to address the gap in the market.
In the United Kingdom, shared ownership has been popular for decades, with over 200,000 households benefiting from it by 2020. The UK model allows buyers to purchase between 25% and 75% of a home and pay rent on the remainder, offering flexibility as owners can "staircase" up their ownership percentage over time.
Similarly, in Canada, the British Columbia government introduced a shared equity scheme that helped over 1,600 households by 2019. In New Zealand, the KiwiBuild (although winding down) initiative has used shared equity schemes to support first-home buyers in high-demand markets.
These programs have been particularly effective in markets with rising property prices, bridging the gap between renting and full homeownership. Australia’s proposed scheme draws from these international examples to help first-home buyers access the market in a competitive property environment.
Affordability is still an issue
Research by Maxcap highlights the housing affordability issue which has worsened since the pandemic — across all Australian states.
As discussed in our video note this week, a comprehensive range of options should be on the table, and the shared equity model is part of that mix. We shouldn’t have an “either-or” approach, instead a “this and that” way of thinking to solve one of the biggest social issues facing Australia.
Bottom line: Australia’s housing crisis requires creative, multifaceted solutions. The shared equity scheme is a proven tool to bridge the gap for first-home buyers, as seen in other markets like the UK, Canada, and New Zealand. It’s not the only solution, but it's a strong one that could be part of a broader strategy to tackle housing affordability.
By leveraging a combination of shared equity, superannuation access, and other innovative policies, we can provide more Australians the opportunity to own a home, rather than being locked out of the market. The debate should focus on offering diverse pathways to ownership, not limiting options. In the end, the goal is simple: helping Australians achieve homeownership without exacerbating economic inequality.
Peter Esho is an economist and Founder of Esho Capital. He has 20 years of experience in investments and markets.