Home buyers would only have to pay for 75 per cent of their total house price under a plan praised by Treasurer Scott Morrison less than eight weeks out from a federal budget designed to help ease Australia's housing affordability crisis.
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On Monday, Mr Morrison called the Victorian Labor government's newly announced trial of a "shared ownership" model – where the government retains a 25 per cent stake in a newly purchased house – "very interesting", but signalled he would prefer the private sector to stump up the initial investment.
Under the model, also known as a shared-equity arrangement, the private or public lender shares the profits when the home is ultimately sold. It is one of a suite of reforms introduced by the UK government, where the federal government is looking to for inspiration to tackle an endemic housing affordability crisis at home.
In Sydney, where median house prices have climbed to a record $1.2 million, such a policy would push mortgage prices for first home buyers down by hundreds of thousands of dollars. Similar savings would be found in Melbourne, where the median house price nudged $800,000 this year.
In 2003, Prime Minister Malcolm Turnbull praised the shared-equity approach in his foreword to a taskforce report for the Menzies Research Centre, convened by then prime minister John Howard.
"By allowing homeowners to use equity as well as debt finance, homeowners will benefit from a lower cost of home ownership and institutions will be able to access an enormous, and uncorrelated, asset class," Mr Turnbull said at the time.
Several state government's have home-equity platforms, but none have taken off on a national scale.
The Victorian government's package, released on Sunday, includes a $50 million pilot scheme involving 400 homes where the government will be a 25 per cent partner in the purchase.
In 2008, Mr Morrison called on the Rudd government to increase lending to providers of shared-equity mortgages, but the federal government has not moved forward with the concept since it came to power.
On Monday, the Treasurer noted the Victorian government's amendments to stamp duty and taxing unoccupied property but singled out shared ownership for particular praise.
"Now, taken together I think, good on them for having a good crack at this," he told Sydney radio station 2GB.
A spokeswoman for Mr Morrison said there was no single solution to housing affordability.
"The Treasurer was simply acknowledging the Victorian government is taking a number of actions that are consistent with this position," she said.
A report from the Australian Urban Housing and Research Institute found government-backed schemes that operate at arms-length from government, such as HomeStart Finance in South Australia, have been successful in maintaining financial viability.
But a 2008 Senate housing affordability committee warned if the scheme became a mainstream lending product it would increase demand for larger, more expensive houses.
"If anyone could say, 'I was going to buy a three-bedroom home but instead I am going to buy a four-bedroom home', and simply increase the amount that they borrow to fund that, we would caution against it," the committee found.
On Monday, Mr Turnbull reiterated his belief that supply was the root of the affordability problem.
"I know there are issues about tax and obviously stamp duty is a barrier to investment in housing but, the biggest issue is supply," he said. "The most important thing we need is more housing."
