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During the past four decades in which homeownership among Australians aged 25-34 has sunk from around 60% to 45%, and 71 to 65% across all age groups. But homeownership in Singapore climbed from around 60% to 88% in the same period, continuing the growth from the low 20% homeownership rate it had in the early 1960s.
There’s a good chance that’s because Singapore is doing something right.
What Singapore has that Australia does not is a public housing developer, the Housing Development Board, which puts new dwellings on public and reclaimed land, provides mortgages, and allows buyers to use their compulsory retirement savings (what Australians call superannuation) for both a deposit and repayments.
There’s more to it than that. It limits eligibility by income and age, requires owners to hang on to the property for five years, and limits their resale to only other eligible buyers.
Eight in ten of all the dwellings in Singapore today were built over the past half century by the Housing Development Board.
In a new paper released this month I suggest an Australian version called HouseMate, that could halve the cost of buying a home.
Introducing HouseMate
Housemate would build on underutilised crown, council, and federal land, land acquired by compulsory acquisition, or land purchased at market prices, and by tenders from private developers
HouseMate would sell the dwellings at a discounted price (A$300,000 on average) to Australian citizens aged over 24 and in a de facto or married relationship and to single citizens aged over 28 and over, where no household member owns property
HouseMate would offer loans underwritten by the federal government for up to 95% of the purchase price, charged at one percentage point above the cash rate, which at the moment would be 1.1%
HouseMate buyers would be permitted to use their superannuation savings and contributions for both the deposit and ongoing repayments
HouseMate buyers would be required to occupy the home, with limits on leasing and resale for seven years. They will own the home freehold, paying council rates, insurances, and having responsibility for maintenance and body corporate representation
HouseMate owners could sell after seven years. But if they sell to the private market instead of another eligible HouseMate buyer, that would trigger a waiting period of seven years before the seller became eligible for another HouseMate home, and a fee of 15% of the sale price
Homes for half price
HouseMate, a proposed national institution to build new homes and sell them cheap to any citizen who does not own a home
My calculations suggest building these homes on land that would cost little (perhaps A$50,000 averaged across all types) would by itself cut the price 20-35%.
The lower interest rate, and the use of superannuation savings for both the deposit and repayments would cut the “after super” cost saved by as much again, cutting the “after super” cost savings 50-70%.
The use of superannuation savings where available makes sense. Homeownership does more for security in retirement than does super.
Because the use of super would be quarantined to new HouseMate homes, it would be unlikely to push up the price of existing homes.
No other housing policy change would do anything like as much to make homeownership cheaper, or to free up income for families at the times they need it most.
The changes to tax arrangements often talked about, including changes to capital gains tax and negative gearing, might on my estimate at most cut prices by as much as 10% - enough to reverse only six months of the past year’s price growth.
There would be critics
Because HouseMate would divert first home buyers away from private markets, private sellers would find reasons to argue it would be bad for the people it helps and somehow financially reckless or unsustainable. Banks would argue the same thing.
But because the non-land cost of HouseMate dwellings would be mostly covered by the purchase price (and 15% of private resale prices) and the other costs would mostly be covered by the interest margin, the budget cost would be low - on my estimate peaking at A$1.7 billion after seven years and shrinking to $640 million after 20 years
The $1 billion or so per year would provide 30,000 affordable houses per year. Compared to the A$100 billion spent on the COVID JobKeeper scheme, that cost is a rounding error. Australia spends $125 billion per year on healthcare.
Each year about $11 billion is given to private landowners through rezoning decisions. Taxing those value gains could fund HouseMate ten times over.
We have got the land
The New South Wales Land and Housing Corporation has four times the net assets of Singapore’s Housing Development Board at $54 billion. Queensland’s Housing and Public Works has $10 billion in land assets. Victoria’s Department of Families, Fairness and Housing has $17 billion.
We could start by upgrading and selling existing public housing to its tenants under HouseMate rules.
The Australian Capital Territory has operated this way for decades, developing low or zero cost rural land for housing and selling the homes at cost, although in recent decades it has acted more like a private developer, maximising revenue at the expense of putting people into homes.
To start with, there would be bottlenecks
HouseMate would be overwhelmed at first. I have suggested lotteries to allocate homes until the system ramps up.
Just as Medicare didn’t displace but operated alongside the private health system, HouseMate would operate parallel to the private market, adding to overall supply rather than increasing demand in the private market.
I’ll finish with a story. I met a Singaporean resident recently who moved to Australia to study social work. She said they don’t really have homeless people in Singapore because the Housing Development Board provided an option for almost everyone.
To find homeless people required moving to Australia. I think we ought to try it. What’s the worst that could happen?
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New ideas and analysis by Dr Cameron K. Murray
Hi Dr
When I heard you on a podcast last week I thought I had to set everything aside to go through your work. I feel like we are living in important times and I want to say I did my best but I know I can't do it alone.
Something you said during one of your interviews was that for the game of mates to be stopped it has to come up against a bigger game of mates and it reminded me of an article I'll link here.
http://savingcommunities.org/issues/landtrust/
It sounds like if we can't get reform at the government level yet then we should attempt to build an island of justice in a sea of injustice.
If we can't get 100% of the economic rents made common property then maybe we can get the large majority common on our little island in return for investors bankrolling the process with long term returns.
I have tried mapping the numbers with a spreadsheet and found that a developer using this model would be losing a moderate linear return for a much larger cumulative return in the long run with a 20-30 year crossover of the projections. I'll link this but I'd really like to know if you see any major problems with the model in the first link.
https://docs.google.com/spreadsheets/d/1fVR-uYp6WpG6DVwqZ-1sVf3Y0GAvA8GUKTK9PvciAU4/edit?usp=drivesdk
If you aren't familiar with it and you could find the time to share your insight I would be grateful. I'm looking for the checkmate move that spreads because it is a better game.
Not sure if your still in brisbane or your now in Sydney, I'd be happy to fly down to meet with you if this is a potential idea that could work and the right team built around it.
Your a legend
Tom White
Murwillumbah
0447805580
Love this! I was not aware you had put this proposal together.
I would be stoked if this could be actioned in the form you have described, however I have the two small critiques:
- Australia has largely lost the institutional capacity to build mass social housing that we once had. Appreciate that you're saying we should build that up again (and we should), but I'd like to see as much immediate action in the social housing space as possible.
- My city planning brain is loathe to consolidate social housing where it is cheapest and most convenient (govt - owned land) - instead of dispersing it throughout our cities and desirable areas with access to infrastructure. In my mind, we need to get to a state where social housing is evenly dispersed throughout our cities. Like in Singapore, we want everyone going to the same schools, building relationships with one another - being in each other’s lives.
With this in mind, what do you think of the following as an addition to your policy:
What if the Government committed to buying (x) percentage of all new housing developments in existing urban areas where more housing is desired? The government would purchase these properties off the plan and sell them / rent them at an affordable cost.
Say a developer proposes to build a set of ten townhouses in an inner suburb. The Government would then commit to buying one of those townhouses for the purpose of providing subsidised housing for those who need it. This would also give developers more confidence in knowing they have one less townhouse to sell.
Now expand this to the macro scale - feasibility for new housing would increase, cities would meet population growth in a more sustainable way, more lower-income workers would be able to live closer to their job etc.
Most importantly in the context of your policy proposal, this would allow the government to start creating social housing immediately, rather than having to build the institutional capacity of a major public developer.