Key changes to the Home Guarantee Scheme announced by Prime Minister Scott Morrison

The prime minister has said a significant change to one of the Coalition’s flagship policies should help thousands save for a new home, but critics have said it is missing.

The Morrison government says new adjustments to its Home Guarantee Program will enable tens of thousands more Australians to buy homes.

Prime Minister Scott Morrison has announced that the maximum prices for homes available under the scheme will be increased, which will expand the number of people eligible.

The scheme allows people to buy houses with a deposit of just 5 per cent, with the government guaranteeing the other 15 per cent.

“We are building a stronger future for Australians by making home ownership easier, making more properties eligible for the scheme and expanding it to 50,000 places each year,” said Morrison.

The 50,000 places were announced in the federal budget earlier this year.

“People are cutting years off the time it would take to save a deposit on a house thanks to this program. Now even more Australians can get into a home sooner.

“Saving up to buy a home has always been hard work and we know that as prices go up, it gets harder. That’s why these higher price caps take into account the 50,000-per-year expansion of the Home Guarantee Program, particularly in regional areas, where the new Regional Home Guarantee is open to non-first-time homebuyers. ”.

The government estimates that its guarantee scheme has so far helped some 60,000 Australians buy their own homes. He hopes the more generous price caps will help ease supply constraints in regional areas and accommodate larger families.

The guarantee system is structured in three parts: First Home Guarantee, aimed at buyers of first homes in cities, with 35,000 places per year; the new Regional Housing Guarantee, with 10,000 places, aimed at people who buy or build new homes in regional areas; and the Family Home Guarantee, aimed at single parents, with 5,000 places.

New price limits for eligibility in cities, regional areas

Price caps, that is, the highest value of a home you can buy while still benefiting from the program, vary from city to city. There are also different boundaries for regional areas in each state.

The city limit applies in population centers with a population of more than 250,000 inhabitants. If an area falls below that population, the regional limit applies.

According to Mr. Morrison’s new announcement, price caps increase from $800,000 in NSW cities to $900,000; $600,000 in NSW regions to $750,000; $700,000 to $800,000 in Victorian cities; $500,000 to $650,000 in Victoria regions; $600,000 to $700,000 in Queensland cities; $450,000 to $550,000 in Queensland regions; $500,000 to $600,000 in Western Australian cities; $400,000 to $450,000 in WA regions; $500,000 to $600,000 in South Australian cities; $350,000 to $450,000 in SA regions; $500,000 to $600,000 in Tasmanian cities; $400,000 to $450,000 in the Tasmanian regions; $500,000 to $750,000 on the ACT; and $500,000 to $600,000 in the Northern Territory.

To qualify for the scheme, borrowers must still meet the usual loan and repayment assessments of their financial institutions. The new limits take effect from July 1.

In the budget, delivered at the end of March, the government committed an additional $8.6 million to more than double the number of places available under the guarantee scheme to a total of 50,000 per year. That higher total will apply for three years before fading to $35,000 in 2025.

The Regional Housing Guarantee will not begin until October 1, three months after the adjustments to the other two elements of the program.

In his budget night speech, Treasurer Josh Frydenberg described homeownership as “critical to the Coalition.”

“Home builders, the First Home Super Saver program and the Home Guarantee program have helped make the dream of homeownership a reality,” said Mr. Frydenberg.

“Tonight we are going further, more than doubling the Home Guarantee Plan to 50,000 places per year. Help more single parents buy a home with a deposit as low as 2 percent. Help more first-time homebuyers buy a home with a deposit as low as 5 percent.

“Helping more Australians own a home is part of our plan for a stronger future.”

The scheme is available to singles earning up to $125,000 per year and couples earning up to $200,000 in combined income.

To illustrate its effectiveness, the budget documents pointed to the case study of a couple currently renting in Wagga Wagga, NSW. The couple wanted to buy their “perfect home” for $400,000, but were struggling to save the required $80,000 deposit while paying rent.

The guarantee would allow them to buy the house with a deposit of $20,000, a quarter of the size.

The government also announced an expansion of the reach of the National Housing Finance and Investment Corporation (NHFIC), which has so far supported around 15,000 affordable homes by providing low-cost loans to community housing providers. .

The NHFIC’s liability cap will increase to $5.5bn, an increase of $2bn, and that move is expected to support around 10,000 more affordable homes for vulnerable Australians.

Data from the Center for Urban Transitions at Swinburne University of Technology recently showed that a shortage of affordable and social housing was costing Australian communities tens of millions of dollars a year. Dr. Andy Nygaard, an associate professor at the university, found that the cost would rise from $676.5 million in lost social and economic benefits each year to $1.286 billion by 2036.

The central idea of ​​his analysis was that the lack of affordable housing not only harms people who cannot buy or rent homes, but also harms society as a whole.

For example, homelessness leads to more homeless people. And more homeless people create a greater burden on the public health system.

Another example: if a victim of domestic violence has nowhere to go, she is more likely to remain trapped, unable to escape from the abuser. That adds to the burden on the justice system.

“These costs cannot be ignored,” said Dr. Nygaard.

“The social and economic problems associated with our affordable housing shortage will only increase over the next decade if we continue to do what we have been doing: too little.”

The morning after the budget, Morrison was asked directly why he didn’t include more support for tenants.

“It’s about getting Australians into houses,” he replied, adding that “people who buy houses are renters.”

“The best way to support people who rent a home is to help them buy a home,” he said.

Dr. Cassandra Goldie, chief executive of the Australian Council of Social Services, said the strategy was “completely out of touch with the reality of people with low and modest incomes”.

She said many renters had barely any savings, and certainly not enough to pay even a 5 percent housing deposit.

“Tenants should not be second-class citizens in Australia. We have to make renting a decent, respectable, long-term housing option for people,” said Dr. Goldie.

“We have people facing homelessness and hunger because they are trying to keep a roof over their heads. And they’re a long way from buying a house right now.”

Originally published as Key changes to home guarantee scheme announced by Prime Minister Scott Morrison

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