Banks need to embrace shared ownership concept as way forward for home affordability

Key workers – such as teachers, nurses, ambulance and fire officers and the police – perform essential services.

Across the Sydney some 156,000 workers are employed in these occupations, equating to some six per cent of the workforce.

However, high property prices and high rents are placing barriers to their home ownership which were not experienced by previous generations. 

There is now a serious mismatch between where key workers live and work, according to an important report prepared by Sydney University researchers for the Teachers Mutual Bank, Firefighters Mutual Bank, Police Bank and My Credit Union.

The report found that in the decade to 2016, key areas in Sydney lost up to 20 percent of teachers, nurses, policy and emergency service workers to outer and regional areas, while areas including the Illawarra, Southern Highlands and the Hunter Valley had net gains.

In 2006 more than 20 local government areas were affordable to a police senior constable. By 2016, that number had declined to four. 

The majority of key workers now reside in outer ring suburbs, which the report advised was unlike other world cities, such as London, New York, or San Francisco.

The problem begins with the shortage of affordable rental homes near employment as this undermines the capacity to save for a deposit.

An enrolled nurse with five years experience on $57,000, requiring a one bedroom rental property, would be able to afford a median property in only 9 per cent of middle ring suburbs and in no inner ring suburbs. 

As a consequence, many key workers are commuting long distances to get to work, or are living in unaffordable rental accommodation. 

There's no doubting Sydney needs its Macquarie Street policy makers to improve key worker access to home ownership given the lack of affordable and appropriate homes.

But the report also identified one way to help restore housing options that requires innovative consideration of the plight of challenged home buyers bu the banking and superannuation sectors.

A key suggestion was the implementation of shared equity models that have long been used in the United Kingdom to help low and moderate income earners enter home ownership. 

According to the UK Council of Mortgage Lenders, there are around 200,000 shared ownership homes in the UK where eligible households can purchase a minimum of 25 per cent of a property (and up to 75 per cent) and pay a rent of 3 per cent on the remaining share.

Over time the household can purchase the remaining equity in the property from the affordable housing provider partner (who owns the balance), or repay it when the house is sold. 

We need mortgage lenders to embrace shared ownership.

It needs superannuation funds to joint venture with banks in this product. 

This article was first published in the Saturday Daily Telegraph.