National Help to Buy Scheme Lauded as Win for All

The passing of the Federal Government’s Help to Buy scheme legislation will ensure home loans are not just for the wealthy, an industry sector lobby group says.

The scheme was one of two key pieces of legislation debated during Parliament’s last two sitting weeks for 2024 that will impact the property sector.

A year after its introduction, The Greens earlier this week agreed to vote in favour of the Help to Buy scheme introduced by the ALP in the Senate, allowing the bill to go back to the House of Representatives. 

The bill was introduced and read first in November 2023 before passing the House of Representatives and being read in the Senate for the first time in February of this year. 

During its progress through Parliament, The Greens had refused to support the bill, asking for changes to negative gearing, rent caps and increased funding for social housing. Labor had then refused to negotiate with The Greens on the bill.

The scheme is intended to help low and middle income earners access housing. 

Housing Australia will implement the scheme by providing up to 30 per cent equity for eligible homebuyers taking out a home loan for existing homes, and up to 40 per cent equity for a home loan for a new home. 

The bill estimates that it can do this for 40,000 households nationally with 10,000 places available each year.

Homebuyers will only need a 2 per cent deposit to access a home loan through the scheme which will cost $239 million.

▲ Greens leader Adam Bandt, whose party attempted to negotiate for negative gearing changes, rent caps and increased social housing funding.

Housing Australia will report to the housing minister every year and a review undertaken of the scheme after three years.

It will also retain its rights to a return on the equity it provides. 

Property Council chief executive Mike Zorbas said the scheme provided a means for different wealth classes to access housing.

“We need to ensure that home loans are not just for the wealthy, and that we are giving first homebuyers a realistic chance at accessing credit for housing,” Zorbas said.

Zorbas said the scheme enabled people to get a loan without a large deposit.

“Removing blockers to home ownership is important and one of the biggest challenges, alongside access to finance, is saving up for a home deposit,” Zorbas said.

▲ Property Council of Australia chief executive Mike Zorbas: Help to Buy will ensure access to home loans regardless of wealth inequity.

“Schemes like this must be targeted directly to those who need them most, and this initiative will hopefully help 40,000 low and middle-income Australians into home ownership.”

The scheme will also create a market for developers to sell homes to, which in turn would create more income to make future projects more feasible. 

Build-to-rent incentives

Legislation that will provide tax incentives for the development of build-to-rent projects is also set to be debated and hopefully passed.

These incentives are expected to make it more feasible for developers to get projects up and to provide confidence to financial lenders. 

Zorbas said the PCA would continue to “work with the Federal Parliament on measures to boost housing supply and affordability, including vital build-to-rent communities”.

Build-to-rent accounts for 12 per cent of the US housing market and 5 per cent of the UK housing market. 

▲ Hines has announced it will sell its development sites in Melbourne and move into operating build-to-rent projects.

The subsector currently represents just 0.2 per cent of the Australian housing market. 

“If we get this legislation right, it will have more than twice the positive impact of the welcome Housing Australia Future Fund which will provide 40,000 new homes,” Zorbas said.

The legislation allows for two tax concessions: one where the capital works deductions rate is increased from 2.5 per cent to 4 per cent and one where the management investment trust withholding rate is cut from 30 per cent to 15 per cent.

Developers and investors can access one or both of the concessions if their build-to-rent projects have started after May 9, 2023; will provide 50 or more build-to-rent apartments; the build-to-rent component will be owned by a single entity for 15 years; the apartments will be rented out to the public for three years; and, 10 per cent of the apartments are affordable.

Affordable is defined in the legislation as being rented out at 74.9 per cent of the market rate.

The projects will be able to be traded as long as it is always a single entity that retains ownership during the 15 year period specified in the legislation.