Supporting first home buyers - AHURI research and the Homes for Australia priorities

Australian home ownership rates are falling, down from the high point of 73% in 1966 to 67% at the 2021 census. AHURI research led by Swinburne University of Technology forecast further declines in home ownership – to around 63% of all households by 2040 and around 50% for households in the 25-55 age bracket. When this research was conducted in 2020, researchers deemed any trend reversal unlikely, pointing to an unfavourable policy environment that had emerged over decades and lobbyists with interests inconsistent with ownership reform.

It was in this context that AHURI's 2023 Inquiry into financing first home ownership explored what changes would be needed to get home ownership rising again. Nineteen researchers from four universities probed the socio-economic shifts and policy settings shaping access to home ownership. The Inquiry combined data analysis, reviews of Australian and international policy evidence, qualitative research into buyers' pathways to ownership, and micro- and macro-simulations to explore how to help first home buyers.   

Researchers found the decline in ownership rates had occurred despite expenditure designed to enable first home ownership exceeding $37 billion over five decades. Six recommendations were made.
 

Policy actions to help first homebuyers

1. Policy to assist entry to home ownership must focus more on supply-side measures.
   
   Politically seductive measures such as first homeowner grants and tax concessions rarely created additional homes and worsened, rather than eased, the challenge of financing first home ownership. Australia was also found to be an outlier to comparator countries (including the UK and Canada) for its over-emphasis on demand-side measures, and lack of supply-side initiatives. 
    
2. Tax-transfer reforms were required as policies favoured existing homeowners and disadvantaged aspiring first homebuyers.
   
   Tax reforms identified included removing the Capital Gains Tax Discount and negative gearing for investment properties and abolishing stamp duty for first homebuyers — a step already taken by some states.
    
3. Policy must take into account distributional consequences and must be targeted.
   
   Policy settings over the past three decades were found to be poorly targeted and delivered little increase in homeownership rates overall. Given the central role of owner-occupied housing in household wealth accumulation, it is critical first homebuyer policies be designed to ensure they benefit those who may not otherwise achieve homeownership.
    
4. Policy measures that assist lower income first homebuyers need to facilitate both the accessibility and affordability of ownership.
   
   To be effective and extend the benefits of homeownership to more households, first homebuyer schemes need to help first homebuyers overcome the deposit threshold (accessibility) and help first homebuyers keep up with home loan repayments (affordability).
    
5. Policymakers need to be aware of unintended consequences of policy settings.
   
   The Global Financial Crisis highlighted how encouraging owner-occupation can create household and economic risk, and the Inquiry noted first homebuyer policy may also inadvertently encourage urban sprawl and associated infrastructure costs.
    
6. Housing policy ambitions need to include other tenures, such as renting and shared equity, as legitimate long-term housing outcomes.
   
   International experience suggested alternatives such as rent to buy, shared equity and well-regulated affordable rental tenure, along with social rental, could also offer security and life-long wellbeing.

Government actions since AHURI’s Inquiry align with many of these recommendations, often in defiance of lobbyists’ preferences. While demand-side measures have continued via the Help to Buy Scheme and 5% Deposit Scheme, there has been a shift from the Federal Government towards supply-side measures. These include billions pledged to support delivery of 1.2 million homes via the National Housing Accord and $10 billion to increase social and affordable housing supply under the Housing Australia Future Fund. 

Changes flagged in the 2026 Federal Budget to the Capital Gains Tax Discount and negative gearing also align with the Inquiry’s second recommendation. The Government has also taken a more active stance encouraging build to rent construction, including deductions for capital works and concessional tax rates. Other AHURI Inquiry recommendations, including assistance targeting and structuring policy to assist with affordability as well as accessibility, offer guidance for future policy.
 

Improving shared equity programs

Last year, AHURI published research led by Curtin University that focused on shared equity programs – schemes where governments or other organisations help people to access owner occupation in exchange for an equity stake in the property.

The research evaluated 19 shared equity schemes across Australia, Canada, Ireland and the UK since the 1990s – modelling six for long-term impact, examining customer experiences, and interviewing providers and stakeholders – to build an evidence base for future government-led shared equity programs.

Recommendations included simpler scheme design and loan processes, dedicated advice services, and market-sensitive price thresholds so homebuyers in less affordable cities aren't disadvantaged.

Governments could also ease financial sustainability concerns through new funding methods, such as 'patient equity' investment or bond arrangements to attract private capital. Historical loan-book data from existing schemes could also be used to demonstrate performance, helping assess risk and returns to attract further investment.
 

Preparing for a two-tenure society

While levelling the playing field for first homebuyers is an important priority, Australia currently faces a two-tenure future, where many rent for life. A 2024 AHURI study led by the University of Adelaide found three in five Australian renters expect they will never own a home. This requires governments to rethink tax and housing systems to support owners and renters alike, including into retirement.  

The next Brief in this series will address these topics, as it tackles the Homes for Australia priority of ‘making renting fairer and more affordable so renters can live in security and plan for the future’.

For in-depth study findings, policy recommendations, and other insights into how Australia can build more homes, follow the research hyperlinks within this Brief, or visit AHURI.edu.au.