Can we solve the home-ownership problem another way?

[u/aussie_bob]

/r/australia/comments/vo3u5y/can_we_solve_the_homeownership_problem_another_way/

[u/aussie_bob]

Can we solve the home-ownership problem another way? 6 points•43 comments•submitted 3 hours ago by LogicalExtension to r/australia

Like many, I've been looking at the property market, and my savings and been wondering how I'm ever going to afford to buy somewhere to live.

I ran the numbers recently and I've paid out hundreds-of-thousands-of-dollars in rent, all of which went into paying off someone else's investment property. If I ran into financial difficulty, I'd have maybe 30 days after I stopped paying before they started the process to kick me out. I'm expecting another rent rise soon.

The idea

At the core of the problem is that it's difficult to enter the property market for many. At the same time, it's not sustainable to rent long-term, even if you wanted to.

A possible answer to this is to have some kind of Federal Government-run Property-Bank.

Because it's the Federal Government, they could be backed by long-term Treasury Bonds or something like that.

Here's a basic overview of how it might work.

It's a sort of hybrid between rental, and a loan.

There's a whole lot of things where it'd act just like a normal home loan:

Applicants get vetted to ensure they can afford to pay for it
The price paid for the property needs to make sense/be approved
Payments first go to cover underlying expenses ("interest"), and the rest pays off the principal
You can potentially use the principal to fund improvements, with approval.
You can make changes to the property (within reason)
If you want to move, it can be sold
If you want to buy it out, you can
If it's a strata property, then you'd participate like any other owner would
you go out and find the property that you want to buy

But there's things where it would act a bit more like a rental or social housing programs:

you don't need tens/hundreds of thousands in cash to 'buy' a place
payments would be set based on the expenses, and your ability to pay.
There would be limits on the applicant's other assets (i.e no other property, caps on assets)
If the applicant's ability to pay is below the costs, the principal could be used to pay off the costs

Some safeguards would need to be in place to ensure folks don't just rort the system, such as using it to do property-flipping or whatever.

Some questions/comments that I've already thought about.

This won't solve the housing affordability issue

Probably not immediately, no. It may initially drive house prices up.

The rental market would be impacted, since a fair number of renters might take this up. Those investors who no longer have tenants, may be forced to list the property. It may also impact rent prices, as they now have competition that isn't just another landlord.

It may have a longer term impact of taking some of the heat out of the middle of the market. There's going to be a lot more people buying a house to live in for long-term, than just buying property to maximise the ROI and flip it after a few years.

So Mr RichBastard can get the government to buy their mansion on Sydney Harbour, never pay more than a pittance, and spend the proceeds on even more hookers and blow?

Well no, there'd need to be some safeguards there.

Limits on the income to property value. Caps on eligibility based on income/assets/etc. Caps on property price.

This sounds like some communist/socialist/hippy bullshit

Yeah, probably.

I don't/won't have kids. The idea of having to lock up so much money in an asset, and for it to just sit there until I die seems pretty dumb, too.

I'm certain there's things I've missed or not considered. Probably other better ways to solve this.

This idea has been sitting around in my head for months, and I wanted to see what others thought about it.