House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer, Minister for Housing and Minister for Homelessness, Social and Community Housing, the Hon Michael Sukkar MP)

Chapter 2 - Family Home Guarantee

Outline of chapter

2.1 Schedule 2 to the Bill amends the NHFIC Act to expand the objects of the Act in establishing NHFIC to improve housing outcomes for Australians by assisting earlier access to the housing market by single parents with dependants. The amendments to the objects of the NHFIC Act enable the Minister to issue directions to NHFIC concerning the Family Home Guarantee through the NHFIC Investment Mandate.

Context of amendments

2.2 The NHFIC Act establishes NHFIC and its functions. Directions to NHFIC regarding the performance of its functions are given by the Minister in the Investment Mandate.

2.3 In giving a direction through the Investment Mandate, the Minister must have regard to the object of the NHFIC Act in section 3 of the Act and any other matters the Minister considers relevant. Further, the Minister must not give a direction that is inconsistent with the NHFIC Act, including the object of the Act (see paragraph 14(b) of the Investment Mandate).

2.4 One of NHFIC's functions is to issue guarantees to improve housing outcomes. Directions regarding this function are set out in Part 5A of the Investment Mandate which establishes the First Home Loan Deposit Scheme.

2.5 The Government intends to establish the new Family Home Guarantee to support single parents with dependants seeking to enter, or re-enter, the housing market sooner to build a new home or purchase a new or existing home. The Family Home Guarantee recognises the importance of housing in providing a foundation for social, economic and emotional wellbeing.

2.6 The Family Home Guarantee will allow NHFIC to issue guarantees where the buyer is an eligible single parent with dependants, regardless of whether the single parent is a first home buyer or previous owner occupier. Unlike the First Home Loan Deposit Scheme (including the temporary New Home Guarantee), it is intended that single parents with dependants who have previously owned property in Australia may be eligible. Accordingly, single parents with dependants will be able to qualify for the Family Home Guarantee, subject to satisfying the eligibility criteria including the participating lenders credit and serviceability assessment.

Summary of new law

2.7 Schedule 2 to the Bill expands the objects of the NHFIC Act to make clear that the Minister's power to issue a direction to NHFIC includes the power to issue directions regarding assisting earlier access to the housing market by eligible single parents with dependants. The intent of the amendments is to enable the establishment of the Family Home Guarantee.

Comparison of key features of new law and current law

Detailed explanation of new law

New Object

2.8 Schedule 2 to the Bill amends section 3 of the NHFIC Act to expand the objects of the Act to include NHFIC improving housing outcomes for Australians by assisting earlier access to the housing market by single parents with dependants. [Schedule 2, item 1, section 3 of NHFIC Act]

2.9 The purpose of adding this new object to the NHFIC Act is to enable the Minister to issue a direction to NHFIC for guarantees to be issued to eligible single parents with dependants, regardless of whether they are first home buyers or previous owner occupiers. This would include situations where a single parent jointly owned a residence prior to a relationship breakdown and has ceased to own or have an interest in a residence.

2.10 The Family Home Guarantee is designed to support single parents with dependants on a pathway to homeownership. Over recent decades, the average household size has decreased and the number of single parent households has increased, with single parent households tending to have lower home ownership rates than other household types.

2.11 The Family Home Guarantee recognises the importance of housing in providing a foundation for social, economic and emotional wellbeing, and expands current support beyond first home buyers. By establishing the Family Home Guarantee, the Government is providing a pathway to homeownership for single parents with dependants who have struggled to save enough for a deposit while paying rent and/or restarting their lives, allowing them to build or purchase a modest home sooner, subject to their ability to service a loan.

The Investment Mandate

2.12 The Investment Mandate will be amended to establish the Family Home Guarantee to apply to eligible single parents with one or more dependants who live with them either exclusively or on a shared basis. In shared custody arrangements this may enable both individuals in a former couple to separately access the Family Home Guarantee. The Investment Mandate will enable the Family Home Guarantee to assist eligible single parents with dependants who are first home buyers or have previously owned a home but do not currently hold a freehold or leasehold interest in real property in Australia, a lease of land in Australia or a company title interest in land in Australia.

2.13 The Family Home Guarantees will be provided through participating financial institutions to allow eligible single parents with dependants to build a home or purchase a new or existing dwelling with a deposit of at least two percent. Participating financial institutions will be required to assess an applicant's capacity to service their loan according to their lending processes and policies. It is expected that participating lenders will not charge eligible customers higher interest rates than equivalent customers not accessing the Family Home Guarantee.

2.14 The deposit requirement for the Family Home Guarantee will be set at a level that recognises the circumstances faced by single parents with dependants. Accordingly, the Government's guarantee on eligible loans will cover up to 18 per cent of the property purchase price, provided the borrower has a minimum 2 per cent deposit and meets the lender's credit and serviceability criteria.

2.15 The Family Home Guarantee will make available 10,000 guarantees from 1 July 2021 to single parents with dependants to build a new home or purchase a new or an existing dwelling.

2.16 The caps on taxable income of individuals and the property price caps under the Family Home Guarantee Scheme will be consistent with the First Home Loan Deposit Scheme.

2.17 The Investment Mandate will require NHFIC to undertake additional reporting requirements to the Minister and consult with the Minister on any rules or policies related to the Family Home Guarantee.

Application and transitional provisions

Commencement

2.18 Schedule 2 to the Bill commences on the later of 1 July 2021 and the day after Royal Assent. [Clause 2]

2.19 The commencement provision ensures that NHFIC is able to start to issue guarantees under the Family Home Guarantee on 1 July 2021 subject to Royal Assent of the Bill. Where Royal Assent has not occurred by 30 June 2021, guarantees under the Family Home Guarantee can be issued from the later date of commencement of Schedule 2 to the Bill.