Home ownership barriers greater for Aboriginals, Torres Strait Islanders

Indigenous Business Australia (IBA) stressed the high number of Indigenous households in social housing and the importance of continuous work with governments in order to enable Aboriginal and Torres Strait Islander people to move into house ownership.

In their submission to the House of Representatives Standing Committee on Economics Inquiry into Home Ownership in Australia, IBA concluded that providing better conditions for home ownership for the Indigenous community is positive for the government as decreases the social help costs.

"For Aboriginal people at the margins of home affordability, having access to the First Home Owner Grant (FHOG) and stamp duty concessions has made the difference between being trapped as renters versus having home ownership. 

"The decisions by jurisdictions since 2011 to change their FHOG and stamp duty concession schemes, especially by reducing or abolishing the grant for the purchase of existing homes, has had a significant adverse impact on the ability of Indigenous Australians to obtain finance from commercial lenders and/or IBA. 

"IBA has observed that even in its traditional outer metropolitan and regional markets, our typical low to middle income customers are increasingly being squeezed out of the home buyer’s market. 

"In order that the gap in Indigenous home ownership does not increase it is critical that governments seek to augment existing market gap measures, such as the national Indigenous Home Ownership Program (IHOP) and state and territory government targeted programs. 

"The Indigenous Home Ownership Program (IHOP) provides Aboriginal and Torres Strait Islander people, who do not qualify for bank finance, with an affordable home loan. IHOP is targeted at first home buyers. 

"All jurisdictions should target application of the First Home Owners Grants and stamp duty relief to low to medium income Indigenous Australians regardless of whether they are purchasing an existing or new home. This will facilitate more Indigenous Australians being able to access home loans from mainstream financial institutions, in addition to those who may qualify for IBA assistance. 

"IBA recommends close collaboration between state and territory government programs and loan providers, including IBA, to strengthen the pathway between social housing rental and home ownership, building on the many initiatives already in place across jurisdictions. 

"The sale prices for government funded new houses and existing social housing stock (inclusive of land) offered for private sale in remote discrete Indigenous communities, should be set at realistic levels, so that there is reasonable security over a loan and there is a real chance of houses being bought and sold, enabling a housing market to evolve. 

The submission goal was to expose how barriers to achieving home ownership are greater or the Aboriginal and Torres Strait Islander segment. 

"In the 2011 census there were 209,000 Indigenous households, with 135,000 households not in home ownership. The statistics show that 65,000 new Indigenous households would need to move into home ownership to equal the wider Australian home ownership rate. 

"At the same time the Indigenous population is growing at a faster rate than the non-Indigenous population; expected to increase by 60 per cent from 2011 to 2031. The population is also relatively youthful, with 55.8 per cent less than 25 years of age compared to 31.9 per cent in the non-Indigenous population.

"The minimum annual income required to afford the median Australia house price is around $100,000 and much greater incomes would be required in many capital city markets.

"The average household annual income of successful applicants for IBA home loans in 2013- 14 was $75,000. The ability of IBA’s customers to afford a loan at these income levels is due to the extra concessional and other support provided by IBA and the purchasing of houses in more affordable markets (outer metropolitan and regional). 

"It is useful to categorise the affordability and broader challenges for Indigenous home ownership by geographical characteristics, such as remoteness, as this demonstrates the different strategies that are required to address the overall gap in Indigenous home ownership. 

"The table below shows the distribution of the Aboriginal and Torres Strait Islander population by remoteness classification, compared with the non-Indigenous population.

"Inner regional areas include the fringes around the major cities and larger regional towns/cities close to the capital cities or in the corridor between Melbourne and Sydney. 

"House prices are more moderate and in these areas there is also good access to employment opportunities. This is reflected in the high concentration of IBA home loans in inner regional areas (39% of the portfolio and 45 per cent of all new IBA loans). 

"Increasing Indigenous home ownership contributes to the broader picture of addressing Indigenous disadvantage. IBA’s own research, and research undertaken in the wider Australian community, have demonstrated that the broader economic and social benefits of owning a home are often as important as the financial benefits to the home owners.

"IBA’s research has found that owning a home and the responsibilities that this brings create: 

 A strong incentive for long term sustainable employment; 

 Higher wage growth for the main job-holder; and 

 Children of Indigenous home owners being more likely to have a job themselves and to aspire to own their own home.

"Of the 58 customers surveyed as part of the research (mainly in rural locations in Northern Australia), the household income of home owners increased on average by more than 50 per cent over the average period of six years since they had purchased their home. 

The survey revealed that 26 per cent of home owners intended to invest in other property, 9 per cent in starting a business and 9 per cent already derived income from their home (usually by basing a small business there). 

"The participation in Indigenous home ownership has positive long term cost benefits for government. The more economically independent Indigenous Australians can become, the less financial and other supports are required from government. For example, the cost savings from home ownership versus public housing costs have been estimated to be in the order of $167 million to $669 million per 100 households over a 20-year period.

"For Aboriginal people at the margins of home loan affordability, having access to FHOG and stamp duty concessions would make the difference between being trapped as renters of social housing versus having home ownership. Without this support fewer Indigenous Australians will be able to be assisted by IBA or other financiers."