This piece originally appeared on the Hargraves Institute blog.
Australia’s housing affordability crisis is deepening by the day.
Despite more than $3 billion being spent by the Federal Government on rent subsidies, first home owner’s grants and efforts to boost public housing stocks, all our efforts are failing.
The situation is hitting low-income earners the hardest and if we fail to address it there are already fears this crisis will create an intergenerational wealth gap with profound implications for the future of the Australian community.
We must look at new ways to tackle this problem. Taking the same approach as we have in the past is doomed to fail. Simply relying on governments to ‘fix it’ will fail.
We need to find new solutions, solutions that tap into market mechanisms and involve the innovation, resources and expertise of business.
But perhaps more importantly we need solutions that help revive our sense of community, our community spirit.
It is ironic that as we increasingly live in big urban areas, we are living closer to each other than ever before and yet we have having less to do with our neighbours that ever before.
There are solutions.
One model that has run successfully in the US for almost 20 years has helped 28,000 low income earners get into their own home.
The scheme provides grants of around $15,000 per property but the critical element of the program is the requirement of families to provide ‘sweat equity’ – in other words to volunteer their labour on building the home.
The project also involves community and corporate volunteering and the use of donated materials to keep the cost of housebuilding low.
It has been estimated for every one dollar of government funding spend on this program it unleashes $7 in value.
Another such approach that needs to be explored is the shared financing model – in which low income families hold a share in the property with government, community housing providers or other partners retaining a share.
It means financial institutions could provide commercially viable mortgages to families for their portion of the home.
Research by Equity Economics, commissioned by Habitat for Humanity, shows new approaches to support social home ownership, land release and reforms in planning and zoning could improve the prospect of home ownership for families on low incomes.
The research argues one option would be the establishment of a $20 million, 5 year pilot program. It would involve governments providing land to the value of $20 million and extensive involvement from the private and community sectors to provide volunteer labour, affordable finance and subsidised building materials. It could put 200 low income families in home ownership and unlock the equivalent of $140 million.
Moreover, it could reap a saving of $3 million in the commonwealth rental assistance over the equivalent period of the mortgage (after excluding the $20 million cost of the program).
Across the nation struggling families are being forced to live in substandard and transitory accommodation – or even being left homeless – because of an estimated shortage of more than half a million (553,000) affordable properties.
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 and a limitation on repayments to no more than 25% of their disposable income. The use of volunteers – including the new owner’s own ‘sweat equity’ – and discounted building materials help keep the price of building a home down.
But for organisations that do such work the rising price of land and property values mean such models are being tested.
Hence the need for pilot programs that make available cheaper land and that also foster the involvement of corporations and community groups to contribute to finding solutions.