Singapore is an island city-state with about 300,000 more residents than greater Sydney, but far less than 10 per cent of its land area.
Yet, according to economist Cameron Murray, it has managed to boost home ownership for 25-34-year-olds from 60 to nearly 90 per cent over the past four decades, at a time when the percentage of Australians that age who own a home has plunged from 60 to 45 per cent.
So, how have they done it?
"What Singapore has that Australia does not is a public housing developer, the Housing Development Board, which puts new dwellings on public and reclaimed land, provides mortgages, and allows buyers to use their compulsory retirement savings [what Australians call superannuation] for both a deposit and repayments," Murray says.
The HDB is so dominant in Singapore that it built eight out of 10 dwellings in the city during the past half century, and so effective, that Murray wants to replicate it here, in a scaled-down form.
He calls his proposal HouseMate.
"What it would do is offer an option outside private ownership and private rental markets for Australians for housing," he argues.
Murray proposes the scheme would be open to Australian citizens aged over 24 for couples and 28 for singles where no household member currently owns property.
As part of the package, HouseMate buyers would essentially get the land for free from the government agency and only have to pay for the cost of construction, hence the massive saving.
In addition to a lower purchase price, Murray suggests that HouseMate would also provide the finance, with government loans priced at the cash rate plus 1 per cent.
At the moment, that would be a 1.1 per cent variable rate home loan, way below the typical bank rates of 2.4 per cent.
Despite the very low interest rate, Murray estimates the scheme would only cost the federal budget about $1.7 billion a year at its peak, with the cost reducing to $640 million over time as the government received mortgage repayments and proceeds from future sales.
The real economic cost would be much higher, as the government would effectively be gifting public land to private home owners, and therefore would no longer own that as an asset that could be used or sold for a profit.
There are some catches
There are catches to a scheme that might sound too good to be true for would-be home owners.
HouseMate buyers would have to live in their property for at least seven years, with limited rights to rent it out or re-sell it.
If they did sell after seven years, it would have to be either to another person eligible for HouseMate or it would incur a fee of 15 per cent of the sale price.
Murray estimates the scheme could build 25,000 to 35,000 homes a year, with a mix of inner-city apartments, middle-suburban townhouses and outer suburban stand-alone houses, priced at an average of $300,000.
Another likely limitation would be the capacity to build enough HouseMate homes to meet demand, especially at the start of the scheme when it was ramping up.
Murray suggests a lottery would be needed for each oversubscribed development to determine who got the right to buy in.
'The challenge comes down to land'
The Grattan Institute's economic policy program director, Brendan Coates, says a potential roadblock is that the scheme relies on governments — federal, state and local — having enough vacant or under-utilised land to build the homes on.
"I'm not quite sure there's enough land sitting there to make this thing work. Governments would need to do due diligence on other uses for the land," he explains.
Ray White chief economist Nerida Conisbee says it's a key difference between Australia and Singapore.
"The challenge comes down to land. Singapore's government does own 90 per cent of the land in Singapore, our governments own substantially less," she observes.
Cameron Murray says that needn't be a problem.
"You could also compulsorily acquire land, just as we do for roads and other important infrastructure that we invest in for our community."
However, fair compensation has to be paid for any land acquired this way, either increasing the cost of the HouseMate homes or the cost to the budget.
Conisbee says the other issue with available land is whether it's in the right places.
"One of the challenges in Australia is that there is affordable housing, but it is often in places where people can't live or find it difficult to live, or find it difficult to find employment," she adds.
Worth a go?
Despite their reservations about the details of Murray's HouseMate scheme, neither Coates nor Conisbee are dismissive of it, or similarly radical housing policies.
"There is no doubt affordability is a huge issue in Australia. The multiple of household income to house prices has risen in Sydney from about a four times multiple in the early '80s to around a 15 times multiple," Conisbee observes.
Coates agrees that we need a more radical solution to housing affordability than the various grants and subsidies that have mostly just further pushed up the price of homes.
"It's worth thinking about more out-of-the-box solutions for housing affordability," he argues.
"Most solutions will probably involve greater state involvement.
As for Murray, he doesn't necessarily expect his idea to feature as a policy of the major parties in the upcoming election, despite the pandemic surge in house prices that's put housing affordability firmly back onto the political agenda.
"I am putting it out there to start the conversation," he says.
"It is a long road between an idea and something being implemented, but I have had success putting ideas out there historically.
"The windfall gains tax that Victoria introduced is an idea I put out in 2016 in a report and it got implemented last year."
