When single mum Casey* bought a house in February with help from the Coalition’s Home Guarantee scheme, it helped her recover from the financial abuse she endured by her daughter’s father, and break the cycle of insecure renting.
She was mindful of choosing a home that wouldn’t keep her “awake at night thinking of mortgage repayments”, a wise move given the interest rates rise, and bought a modest unit for $400,000.
But she says she was lucky to find a home for that price and saving a 2% deposit and affording mortgage repayments can be a stretch for many single parents. It’s why she thinks Labor’s Help to Buy election promise, which offers shared equity in homes, could be good news for helping more single parents achieve the housing security she now has.
“It has a lot of value in it because people can get into a home before they have the capability to fully own it themselves,” Casey said.
A shared equity scheme, specifically targeted at single parents, is already being pursued by Melbourne based charity Ys Housing. It has just been given approval to build its first nine homes in the Melbourne suburb of Reservoir to help transition single mums out of social housing.
“It’s basically very similar, if not identical to what the Labour party is proposing … And we think it’s a really interesting solution for low income single parents,” Oscar McLennan, a co-founder of Ys Housing, says.
“It allows you security of tenure, it’s your house … And on a monthly basis, you’re spending, in some cases, substantially less than you would if you’re in the private rental market.
“You’re actually proportioning risk with the government, but more importantly you’re not putting families under housing stress month to month, and that is the key.”
Labor’s Help to Buy scheme, announced on Sunday, is not specifically targeted at single parents. It promises to contribute up to 40% of the house price for new homes, and 30% for existing homes, for 10,000 low income earners. Homeowners would then pay a minimum 2% deposit and mortgage repayments on upwards of 60% of the property price.
It is modelled on similar schemes in Western Australia and Victoria, which was praised by the prime minister, Scott Morrison, when he was treasurer in 2017.
The Coalition has expanded its Home Guarantee scheme to 50,000 places annually, with 5,000 spots targeted to single parents with incomes up to $125,000 who can buy a home with only a 2% deposit and have lenders mortgage insurance waived.
Financial experts have flagged that entering the property market with a 2% to 5% deposit is risky as mortgage rates rise.
According to analysis by Ys Housing, if interest rates rise from 2% to 4.5%, single parents who bought a $600,000 house with a 2% deposit with a 30-year mortgage under the Coalition’s scheme will have their mortgage repayments rise by $900 a month. Those buying a house under the same terms, but with 40% under Labor’s shared equity scheme, would have their repayments rise by $500.
The chief executive of the Union for Single Mothers and their Children, Jenny Davidson, praises the Coalition’s scheme for helping single parents buy homes. Over the last year, more than 2,300 single parents out of the 2,500 places available under the Coalition’s Home Guarantee scheme have bought a home, with 85% being single mums.
But Davidson says a shared equity scheme would expand this help to the many single parents who can’t afford 2% deposits or mortgage repayments on current house prices. She told Guardian Australia this in an interview prior to Labor’s Help to Buy policy announcement.
Speaking after Labor’s announcement, she said: “It’s going to help a tiny percentage of single mother families in Australia.”
“We also need more social housing, we also need better support for families that are renting and in reality are probably going to be renting for their entire lives,” she said.
Matt Grudnoff, a senior economist at the Australia Institute, says that while Labor’s policy would help expand the Coalition’s scheme to people who can’t afford mortgage repayments, he is wary of it pushing up house prices.
“Both major parties aren’t keen to actually reform the system,” he says. “They just sort of tinker around the edges and the tinkering often is about privileging one group or another at the expense of making housing less affordable in the future.
“If you wanted to really help single parents, then I think strong rental reforms would be another way you could do it.”
Julia*, a single mum renting in an outer suburb in Melbourne, says she has lived in three different rentals in the past three years, and has been on the waiting list for social housing since 2019.
Julia has been trying to secure a spot under the Coalition’s Home Guarantee scheme, doing her best to save the 2% deposit. “I only drive when necessary. Put extra jumpers on in winter, keep the curtains closed during summer. Never throw out food,” she says. “If I got a house I would just spend six months in disbelief that I’m no longer [at] risk of being kicked out. I’d have stability for my daughter. I could paint her room.”
But Julia hasn’t been able to get approval for a loan. Asked if she would seek the Labor government’s Help to Buy scheme if they are elected, Julia says she was wary of co-ownership with the government but would like to find out more information.
Julia is considering moving to a rural area where homes are cheaper, but that means leaving her job and support network.
McLennan says he thinks the stacking cost of living single parents face when moving further away and into lower standard housing is often lost in the debate, but it is driving how Ys Housing set up their scheme, as is the need to build new housing stock so as not to push up housing prices.
“For us, building new, building along public transport corridors, building with renewables to power the homes and save on energy costs is front of mind and it is key.”
* Names have been changed
