How can shared equity schemes help people living with disability?
Home buyers share the capital cost of purchasing a home
Last updated 26 June 2019
For some people living with a disability shared home ownership schemes may be a viable housing option. Shared equity schemes involve the home buyer sharing the capital cost of purchasing a home with an equity partner, and allows lower income homebuyers to buy sooner as they need a lower initial deposit and have lower ongoing housing costs.
Over the first 10 years of the National Disability Insurance Scheme, approximately 110,000 people living with a disability and who receive a package are expected to move from their current housing. These are people seeking to move out of their parents’ home (50,000); out of institutions, nursing homes, aged-care facilities and boarding houses (20,000); out of homelessness (5,000); and out of affordability stress in private rental (35,000). But to what sort of housing will people move?
Currently people with disability are seven times more likely to be living in public housing, reflecting lower incomes and the need for housing assistance. Given the reality of long public housing waiting lists, not all will find shelter there. Specialised community housing will support others, as will some low value markets in the private rental sector. However there will still be an estimated 35,000 to 55,000 NDIS participants needing affordable housing.
What are the benefits of shared equity schemes for people living with a disability?
While shared ownership is an important housing option for some people with disability in Australia it is not appropriate for everyone who is living with a disability. Just as people living with disability have different income levels and disability complexities, there are different shared equity models that have different levels of financial obligations and ownership benefits for people.
For people who have some capital (either through savings, family support or employment), shared home ownership schemes may be a viable housing option. By living in a house they partially own, people with a disability can be confident that any modifications they make to their property to improve access and liveability will be there for their long term benefit.
Shared ownership also gives people with disability the ability to choose aspects of their ongoing care that they might not otherwise be able to. When people with disability live in housing that is owned by the same organisation providing their support, their rights as tenants and their self-determination as users of support services can become compromised. If they choose to discontinue non-accommodation services made available by the housing provider, people with disability may be required to find an alternative place to live. Having their own home means that a person with disability may be able to choose the services that suit them best from a range of providers.
How has it worked in Australia?
A number of shared ownership models exist that could help people with disability move into their own home.
One government-backed shared equity scheme is the Western Australian Government’s Keystart Disability Home Loan, which is available to both first and subsequent home buyers, and aims to assist people with permanent disabilities, or those who care for a dependant with a permanent disability, to buy an affordable home. The home owner can buy an existing home of their choice (subject to the equity partner’s approval) or a new home only if it is required to meet their specific needs (e.g. universal design).
The home buyer enters into a co-ownership agreement with the WA Housing Authority as an equity partner, with the Housing Authority owning a maximum of a 40 per cent share in the property (or to the value of $150,000). For their other shared equity loans, Keystart has a restriction in only owning a maximum of up to 30 per cent of the property. The homebuyer requires a 2 per cent deposit (or $2,000, whichever is greater), and there is a maximum annual income threshold of $60,000 for singles, $70,000 for couples and $80,000 for families.
The home owner is responsible for outgoings, (such as insurance, rates etc.) but pays no rent or interest on the Housing Authority’s share. When the house is sold, the market value is divided between the parties so that they each receive the same proportion as their equity share. Having reduced equity in the property means homebuyers receive a reduced capital gain when they sell than might be the case if they solely owned the house.
AHURI research reveals that in 2013–14, 2014–15 and 2015–16, the numbers of Keystart Access Disability Home Loans approved were modest, at 87, 85 and 65 respectively.
An example of a non-government shared equity scheme is Housing Choices Australia (HCA)—Mixed Equity Program, which targets people with disability who need support to live independently and who have low income but moderate assets that disqualify them from priority access to social housing. Shared home owners are required to make an equity contribution of minimum 25 per cent of the property price, up to $142,000—the upper limit imposed by Centrelink’s Commonwealth Rent Assistance (CRA) eligibility rules.
Home owners choose the property they wish to live in from the open market, within the agreed budget and in accordance with HCA’s property standards. The property is purchased using funds provided by the applicant, the Office of Housing and HCA. HCA retains title and the owner has secure tenure under a Residential Tenancies Act lease, paying rent equivalent to those in community housing (25% of income plus CRA). The applicant signs a Mixed Equity Partnership Agreement securing their financial interest in the property.
The home owner is released from responsibilities for outgoings such as maintenance, council rates, body corporate fees and building insurance, which are all undertaken by HCA. If the shared owner wishes to move on, HCA will sell the property on the open market and will share the proceedings from the sale with the shared owner in accordance with their initial project contribution (i.e. 25% of proceeds, less selling costs, for a 25% share). A shared owner can also buy out HCA’s share in full.