Rich Uncle Albo’s shared equity nightmare

For the worst-crafted, most ineffectual policy of this election campaign it would be hard to go past Rich Uncle Albo's shared equity housing scheme. (And I use the word 'rich' advisedly, because it's your taxpayer money he's using to flirt with the housing affordability vote.)

This scheme will put up to $380,000 in equity into the bidding hands of a lucky 10,000 Australian would-be house owners each year who do not own any other property and whose income is $90,000 pa (or less in the case of singles) and $120,000 in the case of couples.

The lucky applicants will not need to pay any interest on the equity until they sell the property, or earn more money, and will be underwritten against loss in the event of a sale.

The scheme does get one thing right – the problem of affordability is not so much repayments, which in most states are at similar levels to where they've been for the whole of the last 20 years, but saving for the deposit.

Various levels of government have been giving first home buyers some assistance for decades, a little first-up leg-up to get voters into the housing market, knowing that over time homeownership will make them more financially robust, and also attuned to the serious issues that govern how an economy is run.

These hand-ups are generally universally available to first home buyers, and at a set amount – somewhere between $10,000 and $30,000, depending on the state you live in.

If you're contemplating a first home in a market where average houses are worth over a million, even $30,000 doesn't move the decimal point on the purchase price very much to the left, so many have been dealing with the balance of the deposit gap through the Bank of Mum & Dad.

But if mum and dad are under-capitalised, wouldn't it be nice to have a rich uncle? Well, now you have Albo, and he's so well-capitalised he's not even too worried about you paying his money back.

How well-capitalised is uncle? Well, it was initially hard to tell from the official policy. Albo had the Parliamentary Budget Office cost it, but under the official accounting rules, that only involves working out the interest.

The office said the cost was $329 million, which ignores the $7.3 billion that will be the capital cost, not a profit or loss item, but it still goes on the total debt.

And the $329 million is a fudge too. The PBO only provides costings for the forward estimates, which is 4 years, but this scheme will be running much longer than that, even if it only exists for 4 years.

The average tenure in a first home is around 10 years, so some of the government's 'investment' is still likely to be outstanding in 20 years, even if the average recipient pays it out earlier.