Help to Buy: Labor promises to ‘open the door of home ownership’ – but does the contentious scheme stack up?

Anthony Albanese’s government says Help to Buy will assist people earning a modest income to buy a home. But opinions are mixed on whether a shared equity scheme is the best way forward. Photograph: Mike Bowers/The Guardian

Another key housing fight looms for the Albanese government. This time, it’s the Help to Buy scheme – a policy the prime minister has declared would “open the door of home ownership to tens of thousands of Australians”.

In a nutshell, the proposal is known as a shared equity scheme and it aims to help eligible applicants get into the housing market by loaning them 30% (for an existing build) or 40% (new build) of the purchase price. This reduces the bank loan to 60% or 70%, so those eligible will require smaller deposits and loans.

In its current form, the scheme will be limited to 10,000 applicants a year, for four years.

But to pass the bill, Labor faces combative upper house where it does not hold a majority.

The Greens and the Coalition have already publicly shared their distaste for the idea – for different reasons – and without support from either of them, it’s unlikely to ever become a reality.

Let’s look at how the policy stacks up.

What does Labor think it can achieve?

Labor says instead of directly bringing down house prices, the government will help those earning a modest wage to get into home ownership.

A Labor-chaired parliamentary committee tasked with looking at the bill’s merits concluded in April that the scheme addresses “access and affordability hurdles” of home ownership by reducing the upfront costs along with the long-term mortgage repayments.

But not everyone agrees this is the best way forward.

What do the opposition and crossbench think about it?

While the committee’s majority report assessing the bill was largely positive, the Coalition and the Greens issued their own dissenting reports.

The Liberal senators Andrew Bragg and Dean Smith called it an “entirely warped approach”.

Part of their criticism centres around the value for money. The scheme will be offered to a maximum of 40,000 participants at a cost of $5.5bn to the federal government. It extends to single-income households earning up to $90,000 or couples with a joint income of up to $120,000.

There is also a price limit on eligible homes so, for example, a participant cannot apply to use the shared equity scheme to buy a home in Sydney above $950,000 (in Sydney the median dwelling costed about $1.1m in January).

Bragg and Smith say the policy is “shuffling deck chairs as the Titanic sinks”.

The Greens, meanwhile, have already signalled they won’t pass Labor’s bill unless the government budges on removing negative gearing and lowering capital gains tax discounts.

The Greens senator Mehreen Faruqi said the housing affordability crisis could not be solved by this “unambitious”, which offers a hand to a “lucky few”.

The Greens say they also want the federal government to invest in increasing public housing stock.

“This is a deeply unambitious policy, introduced at a critical point, where homelessness, rental and mortgage stress are skyrocketing,” the dissenting report said.

But the independent ACT senator David Pocock is broadly supportive of the scheme. Pocock said the bill should pass but recommended the cap of 10,000 eligible households a year be changed to a floor of 30,000 households. He also recommended a third of the scheme’s houses be set aside for historically disadvantaged cohorts, such as older women and First Nations peoples.

Are economists and housing experts on board?

During the inquiry, concerns were raised about whether the policy might unintentionally raise housing prices, but most of the economists who appeared said the impacts were quite small given the scheme’s proposed size.

The Grattan Institute’s economics program director, Brendan Coates, described the scheme as “modest” but a “piece of the puzzle” in solving the housing crisis.

“I don’t think we should judge this scheme on does it solve housing in Australia? Because it doesn’t,” he said. “What we should judge it on is: does it fill in a piece of the puzzle that we need it to fill in? … And I think it does.”

Matt Grudnoff, a senior economist at The Australian Institute, was lukewarm on whether the policy would achieve its intended outcome – increasing home ownership rates – but said its small size meant it was unlikely to impact housing prices. He suggested the focus should be on limiting negative gearing and scrapping the capital gains tax discount instead.

The chief economist of Master Builders Australia, Shane Garrett, said the program was “not huge”, noting the amount of first home buyers in 2023 was 117,000. Garrett said Help to Buy would be “still better to have … than not”.

What do housing advocacy groups say?

Maiy Azize, spokesperson for the national campaign to address the housing crisis, Everybody’s Home, said the scheme was “perfectly fine” but “not a solution to affordability”.

National Shelter, the peak body for improving housing affordability, said the scheme could give disadvantaged groups a shot at home ownership, but it recommended the fund extend beyond its intended four years to support low-income homebuyers into the future.

Support is mixed, so where does it go now?

The Greens have warned Labor that it will hold the bill hostage in the Senate unless it agrees to negotiate on the related tax policies – negative gearing and capital gains tax discounts.

However, the Albanese government has already signalled it is unwilling to bargain with the minor party over these issues.

The stalemate continues for now but just like last time there was a housing impasse, someone will surely budge.