Sean and Beth McElhenny’s family of four recently bought a three-bedroom home in Sydney’s north – something they didn’t think they would be able to afford for more than a decade.
And instead of paying $6,800 a month in mortgage repayments the couple, who work as teachers, only pay half that amount.
The catch is, technically they only own half the house – the other half is owned by a nonprofit that they can buy out at any time.
The home was bought as part of a shared equity scheme, where the government or nonprofit buys a portion of a home and an individual or couple owns the rest.
Such schemes are growing in popularity across Australia, and can provide a leg up into the housing market for people who don’t have the privilege of parental wealth. But are they a solution to Australia’s housing crisis?
“It’s institutionalising the bank of mum and dad for people that don’t have the bank of mum and dad,” says Tim Buskens, chief executive of Hope Housing, which relies on investors for its program and through which McElhenny bought his home.
The organisation, like other shared equity schemes, allows people to buy into a home with a smaller deposit and chips in a percentage of the price so the buyer only has to make mortgage repayments on their slice.
Primarily via word of mouth, Hope Housing has so far supported six families to buy a home since it launched in August, Buskin says. It has a further 12 approved, and 85 on the waiting list, and is targeted at key workers such as nurses, teachers and cleaners, who don’t earn a “Sydney wage” and can’t afford to live in their communities.
Joey Moloney, an economics expert at the Grattan Institute, agrees such schemes can help people who don’t have access to parental wealth.
According to a recent survey by the thinktank Per Capita, two-thirds of Australians wanting to buy a home believe it will only be possible via an inheritance from their parents.
But, he says, it is just one tool “in the housing toolbox” that should be limited, otherwise it risks driving up house prices even further.
Still, he says it should be a crucial part of the federal government’s housing agenda. Labor promised a scheme in the lead-up to the last election, but it is yet to materialise.
Moloney says the scheme should be targeted at singles earning up to $60,000 and couples earning up to $90,000 who would otherwise be locked out of the housing market. He says it would be best directed towards people stuck renting who wouldn’t otherwise be able to pay off a mortgage before they retire, or people looking to regain home ownership after a divorce.
“The guiding light here is that renting in retirement is the No 1 risk factor for poverty,” Moloney says.
But he says anyone eligible for the scheme would benefit. Sean McElhenny, 35, had been living in a two-bedroom apartment with his family of four. McElhenny says it probably would have been too late to buy by the time they could afford the three-bedroom house they need.
“In 10 to 15 years, the kids would have been looking at leaving home so we wouldn’t even need it then,” he says.
He says he is not bothered by the fact he and Beth would only earn 50% of the profit if the house were to be sold, given they view it as a stable family home for the next 20 years rather a moneymaker.
“We actually have a home now where our kids have their own bedrooms and actually have space to have their friends over,” he says. “It means, if we want, our family of four can eventually become a family of five.”
The independent economist Saul Eslake agrees the program can help people locked out of the housing market, as shown by a scheme in Western Australia which began in 2007 and has since helped 8,300 people buy a home. Similar schemes have more recently been introduced by state governments in Victoria, South Australia and Tasmania, and are being trialled in New South Wales.
But Eslake says it is a Band-Aid that is favourable among governments, given they can walk the thin line between helping people locked out of the market, while not devaluing the homes of existing property owners.
“It doesn’t represent an overall solution to deeper problems in the housing market,” he says.