Home Lifestyle Should the first home owner grant be cut to tackle homelessness?

Should the first home owner grant be cut to tackle homelessness?


A recent report by the Productivity Commission suggests that public revenue that now goes to support first home buyers could be better spent on a social housing product to help alleviate homelessness.

The National Housing and Homelessness Agreement (NHHA) is an agreement between the Commonwealth and state and territory governments that deals with the provision of housing and homelessness services.

While the States and Territories have primary responsibility for housing and homelessness services, the NHHA recognizes the shared responsibility of the Commonwealth and the States and Territories to improve housing outcomes across the spectrum of housing settings, including for Australians who are homeless or in at risk of homelessness.

In part, the Performance Commission’s review looked at the effectiveness and appropriateness of the NHHA’s objectives, outputs and outcomes.

Commissioner Malcolm Roberts said the agreement was largely administrative, did not promote reform and was ineffective in improving access to affordable housing.

Most controversially, the report raised questions about whether programs to support first-time homebuyers do justice: About $3 billion is spent nationally on first-time homebuyer support and only $1.2 billion is spent on homeless services.

The Western Australian First Home Buyer Grant is not means-tested, but only applies to homes worth less than $750,000 in Perth and other areas south of the 26th parallel and less than $1 million north of that point.

For many, maintaining a deposit is a major barrier to home ownership – in a number of surveys, prospective homebuyers have identified the difficulty of maintaining a deposit as an obstacle, and often as the most significant obstacle, preventing them from buying a home.

The approximate average deposit paid by first home buyers has risen significantly since the early 2000s. Based on a 20 percent deposit, the average deposit more than doubled from less than $50,000 in 2002 to well over $100,000 in mid-2022, outpacing earnings growth.

It is encouraging that media reports suggest that the State Government remains committed to promoting home ownership and supports the continuation of the First Home Owner Grant.

All levels of government have a choice about where they spend tax revenue and I strongly believe that it is better to promote home ownership and all the benefits that can be gained from owning your own home, rather than diverting that money to social housing. Data from a number of local apartment developments show that the first home buyer subsidy is working. In 2014, less than 10 percent of buyers were first-time home buyers, but in 2021, that number was 25 percent and is still more than 20 percent.

In most cases, these buyers are leaving the rental property, so the incentive has the added effect of increasing the supply of rental properties.

Median home and condo prices in Washington remain the lowest in the nation, so at least in Washington, I’d argue that the first home buyer grant is money well spent.

As for whether these grants increase house prices, I favor REIWA who argue that the grants have little effect on prices, saying that the bigger barrier to home ownership is stamp duty.

The Productivity Commission is also recommending that states and territories abolish stamp duty, but REIWA supports a model where buyers can opt for annual payments instead of having to finance a lump sum up front.


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