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A Solution to Affordable Home Ownership?

The plight of those struggling to afford rental accommodation is leading to ever greater demand for social housing. Alternative financing arrangements such as group collateral, used in some of the poorest countries in our region, may be something we can learn from.

Perhaps to the surprise of no one, the latest housing approval figures have revealed new home buyers are being locked out of the nation’s hottest property markets as investors continue to out-spend them.
The plight of first home owners is troubling and solutions have continued to elude policymakers.
We often think of first home owners as young couples looking to make a start in life, but there are many among the ranks of first home owners who are low income earners who have never managed to save enough to afford owning their own home.
More alarming is the plight of those struggling to afford rental accommodation which is leading to ever greater demand for social (government subsidised rental) housing.
A NSW parliamentary committee released a report this month (Note: Sept 8) that warned that the social housing waiting list in the state is anticipated to balloon to 86,000 by 2016. This is bad news given people wanting an average family house in parts of Sydney already face a 10 year waiting period.
The committee has released a raft of recommendations to increase the availability of public housing rentals but it’s a problem that won’t be solved quickly, if at all. We must find ways to make home ownership more affordable for low income earners, if we are to fight this crisis on a number of fronts. And we must seek more innovative solutions.
Perhaps we can learn from the innovation that is happening in some of the poorest countries in our region. At the very least there are certainly lessons for us to heed in how we send aid to these countries which have a shelter crisis far worse than Australia. It is estimated that some 500 million people live in slums across Asia and the numbers are rising.
In some of these countries, alternative financing arrangements are making a real difference. Known as ‘group collateral’, communities to whom the banks deny finance will pool their resources so as to secure microfinance loans for one another.
This allows poor families to access the credit they need to make small but significant changes to their homes. These housing improvements are particularly important in areas prone to natural disasters such as typhoons where structures need to be built to a standard in order to survive.
In Cambodia, community savings groups are one powerful example of this kind of community solidarity. Once the pool of collateral is established, families take it in turns to take out small loans to upgrade or repair their home.
If repayments prove too difficult in the short term other community members can step in to cover the repayments so as to ensure the fund continues revolving. In the longer term everybody repays, the loans keep being distributed, and together the community improves its living conditions and builds its resilience to the next storm or flood.
In Habitat for Humanity Australia’s work overseas, we see communities working together to lift themselves out of poverty. Whether former bonded labourers in Western Nepal or evicted slum communities in Phnom Penh; it is often through neighbours helping neighbours that families, one-by-one, are transitioning into adequate shelter.
Housing finance is an important ingredient in Habitat’s poverty reduction approach. In the developing world where only 24% of families have accounts at formal financial institutions, micro-finance arrangements in the region are providing a hand-up needed by the poor.
As the literature on the efficacy of microfinance loans on poverty reduction mounts, countries like Germany, Norway, and Australia are paying attention and programming accordingly.
That said, the level of overseas aid directed at supporting the financially marginalised in our region needs increasing. This is especially so given the government’s desire to get a greater impact from its aid in the region.
In Australia, Habitat for Humanity provides socially disadvantaged people with the opportunity to purchase a home on favourable terms. It involves providing a no-profit loan to the family with affordable repayments.
While the use of volunteers (including the new owner’s own ‘sweat equity’) and discounted building materials help us keep the price of building a home down – the rising price of land and rising property values mean models such as this are suffering.
But there are some encouraging signs; Habitat for Humanity is working with the community banking sector to deliver a shared financing model. It could mean that low income families could access finance for part of their mortgage with a not for profit providing some top up finance.
Many corporates, such as QBE, are also providing financial support to Habitat for Humanity in providing home ownership for those in need. This is a community problem and we need to draw on the resources and expertise that exist across the community to tackle it.
Governments also have an important role to play. They could do more to make land available to organisations that provide social housing to people on low incomes for purchase on favourable terms. There would also be merit in means testing first home owners schemes so they help lower income households, as per the recommendations of the Productivity Commission.
Safe, decent housing should be available to all, but if we are to succeed in achieving this goal here and overseas, we are going to have to find new innovative ways to give those most in need a roof over their head.

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