Whether or not the Liberal budget proposal to implement shared equity mortgages will improve housing affordability for first-time homebuyers has been the subject of some debate since the budget was released.
The scheme came with some restrictions. Only newly built homes sold for 600,000 pounds or less were eligible. Borrowers were required to put up a minimum down payment of five per cent. Both first-time homebuyers and people moving between homes were eligible. However, the scheme did not support the purchase of second homes or investment properties. Also, the buyers were required to satisfy affordability requirements, one of which was a British version of the stress test.
Professor Benetton and coauthors compared 99,571 home purchases between April 2013 and March 2017 that benefitted from SEMs with 157,620 additional purchases that were eligible for the scheme, but in which the buyers chose not to participate.
The question to ask is the following: What would SEM borrowers have done in the absence of the shared equity programs? The researchers found that without SEM, the households would have either bought smaller, less expensive homes or they would have opted to rent.
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