Critics say few likely to qualify for HomeBuilder grants
Criticism is mounting for Prime Minister Scott Morrison’s $688 million HomeBuilder package, with tight timeframes and the high minimum value of renovations needed to qualify likely to result in few people being able to access the grants.
Mr Morrison announced this week that $25,000 grants would be made available for new home builds and renovations worth more than $150,000.
Building industry groups roundly praised the stimulus package, saying it would be a timely boost at a time when housing starts are expected to plunge due to the economic wreckage of the COVID-19 crisis.
Further scrutiny of the package, however, shows the eligibility criteria may result in the grants being difficult to obtain.
To access the grants, individuals must sign a contract between now and the end of 2020, with work required to start within three months of the contract date.
Property Council of Australia chief executive Ken Morrison said that the timeframe would be too restrictive for the vast majority of apartment developments, with typically long lead times from contract to construction effectively excluding apartments from the scheme.
New Home Building Brokers managing director Tristan Kirkam told Australian Property Investor Magazine that the timeframe would also be likely an issue for detached houses.
“If you can get a DA in and get it done in eight to 12 weeks, it is going to work beautifully,” Mr Kirkham said.
“But if you haven’t got everything lined up, I think you’ll find you won’t qualify.”
Mr Kirkham said the big winners from the scheme would be those that decide to knock-down and rebuild their homes, which under the package has been classed as a renovation - allowing people to build a house worth up to $1.5 million.
Those that seek to build on a vacant block, however, can only build to a value of $750,000, including the value of the land, a limit Mr Kirkham said would exclude the vast majority of suburbs and likely only benefit those seeking to build on the urban fringe.
For renovations, Opposition Leader Anthony Albanese said the $150,000 minimum value was simply too high.
“There aren't too many battlers out there who have a lazy $150,000 who will see this announcement today and say, 'I'm going to go between now and December 31 and sign a contract for a project which is worth more than $150,000’,” Mr Albanese told reporters yesterday.
Queensland-based property developer Ian Ugarte also questioned the high minimum value for the renovation grants, saying it would put the scheme out of reach for many Australians.
“These ludicrous restrictions mean that at a time when the government is literally paying people’s wages through Jobseeker, very, very few households will be in a position to fund a $150,000 plus renovation through cash reserves or via an ever-tightening bank loan," Mr Ugarte said.
“Only the worried wealthy in Australia are going to be able to spend upwards of $150,000 on substantial renovations to their principal place of residence
“Setting the bar so high in a cash-strapped economy means very few people will be able to access the grant, meaning no one wins; not our out-of-work tradies, people looking for affordable housing, or Mum and Dad investors financially haemorrhaging from job loses and little-to-no rent coming in."
Mr Ugarte said investment properties being ineligible for the scheme was also a major shortcoming.
“What the grant should be designed to do is make existing homes and investment properties more resilient to serious economic downturns, like the one we’re experiencing right now," he said.
“This would create a more realistic cash flow for tradies, higher yields for landlords and affordable housing for those who need it most."
Grattan Institute household finances program director, Brendan Coates, said that the short timeframe between now and the end of the year would also be a significant hurdle for those seeking to renovate.
Mr Coates said a $150,000 renovation was not a simple undertaking, with plans needing to be drawn up, finance obtained and building and development approvals secured.
“Which means that anyone who signs a contract with a builder today was already planning to renovate,” Mr Coates wrote in The Conversation.
“And chances are that many who sign contracts over the coming months have already planned to renovate.
“The new grants will also encourage the in-demand tradies to raise their prices.
“They’ll add up to a lot of spending for few jobs saved.”