The UK affordable home ownership scheme that we need

By Julia Corderoy

Properties in Oriental Bay, Wellington. Photo / Getty Images
Properties in Oriental Bay, Wellington. Photo / Getty Images

Could this home ownership scheme from the UK be the answer to New Zealand and Australia's housing affordability woes?

It's called "staircasing" and it works like this: Instead of buying a house outright, homeowners are able to purchase a share in a property and gradually increase this stake as their savings grow - effectively allowing homeowners to "staircase" up to full ownership.

Classified as a type of shared ownership arrangement, staircasing was announced as a part of the UK government's Help To Buy initiate in 2013. Other Help To Buy schemes include government-backed equity loans, mortgage guarantees and home savings accounts.

Under the shared ownership staircasing scheme, a household is eligible if they earn £80,000 (NZ$140,000) a year or less (or £90,000 (NZ$159,000) a year or less in London).

Generally, the homebuyer starts with purchasing at least 25 per cent of the equity in the property (but no more than 75 per cent) through a mortgage, while renting the remainder of the balance from a housing association.

The Australian Commonwealth Bank recently released its Future Home Insights Series, which identified a number of trends that are predicted to significantly influence the housing market from now until 2030 and beyond.

In it, the major bank predicted staircasing to be one of the emerging path ways that could disrupt the way to get into home ownership.

"We know these trends will significantly impact how Australians live, buy and sell property. At the same time, these trends could change how lenders meet the needs of Australian home buyers in the future," Commbank's executive general manager of home buying Dan Huggins said of the report.

COULD IT WORK DOWN UNDER?

Shared ownership doesn't exist in New Zealand and Australia yet in the way it does in the UK. At the moment, the dominant focus here is on equity loans.

An equity loan is a low interest loan, subsidised by the government, that goes towards your deposit or boosts your borrowing power. Most states offer a type of shared ownership equity loan scheme but the level of subsidy varies among the states and territories.

But Mortgage Choice CEO John Flavell said a staircasing scheme could work well Down Under and benefit many Australians struggling to achieve home ownership.

"Anything that helps Australians into the property market should be applauded. While 'staircasing' is a home ownership technique that is not currently employed in Australia, there is nothing to suggest a scheme like that couldn't work here," Flavell told news.com.au.

"At the end of the day, I believe the time has come for the government to rethink the schemes and grants they currently have in place to help and support first home buyers.

This market is increasingly struggling to get a foot on the property ladder, and they will continue to struggle unless something is done."

BACKLASH IN THE UK

The Help to Buy shared ownership scheme has received some criticism in the UK, however. Critics of the scheme argue that buyers have few rights. For example, despite only owning a share of the property, buyers are still responsible for 100 per cent of the service charges and maintenance costs.

Further, when the time comes to sell, the sale is split along the lines of the original agreement, even if the homeowner paid for and carried out improvements to the property.

The property must also initially be offered for sale through the housing association rather than on the open market.

Opponents have also argued that a 25 per cent share of a home can still be a real stretch for buyers in high growth areas - like Sydney and Melbourne here - and not many struggling buyers can even afford to "staircase" upwards to full ownership anyway.

So for it to work here, Flavell told news.com.au that its kinks would need to be ironed out. "Obviously, if a scheme like this was to be implemented in Australia it would need to be sufficiently researched and well regulated to ensure all parties involved benefit," he said.

If a scheme like this was to be implemented in Australia it would need to be sufficiently researched and well regulated to ensure all parties involved benefit.
John Flavell, Mortgage Choice CEO

But he also said staircasing shouldn't be the only option. Flavell stands steadfast that first home buyers should be allowed to access their superannuation for a home deposit.

This has been a long-time polarising debate which has ultimately been dismissed over concerns it could undermine the core objective of the super system - to provide income in retirement - and that it could push house prices up even further.

"At Mortgage Choice, we have long advocated the need for the government to introduce new first homebuyer schemes. While 'staircasing' could be one scheme, another could involve superannuation," he said.

"For example, if we were to allow first home buyers to access their superannuation for a house deposit, this could reduce the need for Lenders Mortgage Insurance and help these buyers jump onto the property ladder.

"And, at the end of the day, it is only fair that first home buyers should be allowed to invest part of their super in their own bricks and mortar."

- news.com.au

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