Bridging the Deposit Gap: Unlocking Homeownership for Young Australians

Rohit Kakanoor, Global Voices Fellow, IMF and World Bank Annual Meetings 2025

Executive Summary

Young Australians are increasingly locked out of homeownership as rising rents and living costs leave little capacity to save for a housing deposit. As of 2024, median house prices exceed $800,000, while typical 25-34 year-olds have only $0-$200 of disposable income after rent and essentials. Even if young Australians can fulfill monthly mortgage rates, the inability to save up for the initial deposits remains the main hurdle. This is one of the key drivers of decreasing homeownership rates, down from 51% in 2001 to 37% in 2021, hence deepening intergenerational inequity.

Existing measures such as grants, concessions, and deposit guarantees can reduce upfront costs but have limited impact at scale and, in some cases, fuel demand-side price pressures. A new approach is required to directly address the deposit barrier in a fiscally sustainable way.

This paper recommends establishing a National Shared Equity Scheme via amendments to the Housing Australia Act 2018. Housing Australia would co-purchase up to 30% of a property (40% for new builds), allowing buyers under the age of 40 to enter the market with a 2-5% deposit and smaller mortgages. The government’s equity stake would be repaid on sale or through gradual buy-back, with funds recycled into a dedicated pool to assist future buyers.

A national pilot of 10,000 shared-equity places per year would require approximately $5-6 billion in total upfront capital over a four-year period. This equates to an average annual capital allocation of approximately $1.25-1.5 billion. This funding is equity capital, not a permanent budget expense, with the Commonwealth taking a proportional ownership stake in each dwelling. The Commonwealth’s capital investment would return over time through participant buy-backs and property sales, allowing funds to be reused for future cohorts and reducing long-term fiscal exposure. Ongoing administration costs remain modest and could be absorbed within existing delivery agencies such as Housing Australia, which already administers Commonwealth housing programs including the Home Guarantee Scheme. The scheme therefore operates as a balance sheet investment in homeownership rather than a recurrent spending program.

Problem Identification

Young Australians are increasingly locked out of homeownership as they are struggling to save for a deposit while managing high rent and rising cost of living pressures. With median house prices exceeding $800,000 nationally (ANZ, 2024) and rents rising 4.8% from 2023 to 2024 (CoreLogic, 2025), individuals earning average full-time incomes are left with limited capacity to build savings. Along with this, the time to save for a 20% deposit has stretched from roughly seven years in the early 1990s to about 12 years today (Grattan Institute, 2022).  For example, a person earning around $80,000 per year - roughly the median full-time salary for a 25-34 year-old Australian (approximately $5,200 per month after tax) - may spend about $627 per week on rent (about $2,700 per month), plus other essential living costs. This leaves, on average, only between $0-$200 per month in disposable income (ABS, 2024a; Saarinen, 2024; Jolly, 2024). At this rate, saving even a 5% deposit on a $600,000 property would take over 10 years. This reflects a structural failure in the housing finance system to support viable pathways to ownership. Many young people are capable of servicing a mortgage but cannot cross the deposit threshold without external assistance. Without decisive federal action to reduce deposit barriers, the homeownership rate among young Australians aged 25 to 34, already down from 51% in 2001 to 37% in 2021, will continue to decline (Australian Bureau of Statistics [ABS], 2021). If the issue remains unaddressed, this will deepen socioeconomic inequality and weaken young Australians’ long-term economic participation, as prolonged exclusion from homeownership limits wealth accumulation and reduces financial security over the life cycle.

Context

Policy Landscape

The Australian market highlights why deposit support is critical. In the 1960s, a 20% deposit equated to around 60–80% of annual income, remaining at broadly similar levels through the 1980s before rising sharply to nearly 190% of annual income today (Yates, 2007; Whitten & Godfrey, 2025). National analysis shows the time to save a 20% deposit has stretched from around six years in 1990 to more than ten years by 2022, even for disciplined savers (Grattan Institute, 2022). This escalation demonstrates that while mortgage serviceability remains comparatively more attainable than deposit accumulation for many households, the deposit hurdle has become the decisive barrier to homeownership. 

Australia’s first home buyer support framework relies heavily on demand-side interventions to reduce upfront purchase barriers. State First Home Owner Grants and stamp duty relief provide immediate financial support and are widely accessed, particularly by first-time buyers with limited savings (AHURI, 2021; Productivity Commission, 2022). The First Home Super Saver Scheme takes a different approach. It uses the tax-advantaged superannuation system to help disciplined savers accelerate deposit accumulation, allowing voluntary contributions to be withdrawn for a first home purchase at concessional tax rates.

The Home Guarantee Scheme enables eligible buyers to purchase a home with as little as a 5% deposit by providing a Commonwealth guarantee that removes the need for lenders’ mortgage insurance. The scheme has supported tens of thousands of buyers, including strong participation from regional Australia in its first year. Despite this scale, buyers must still accumulate a meaningful deposit and carry higher leverage, increasing repayment sensitivity to interest rate changes and income shocks.

State-based shared equity schemes in Western Australia and Victoria allow governments to co-purchase a portion of a property, reducing both the upfront deposit and the size of the buyer’s mortgage. Evidence suggests these programs enable earlier entry and lower upfront costs, particularly for lower-income households. Their primary limitation is scale. Participation caps and jurisdictional fragmentation have restricted national impact, leaving shared equity as a proven but underutilised policy lever. Many of these programs operate through or alongside Commonwealth housing institutions, highlighting the importance of legislative frameworks such as the Housing Australia Act 2018 in enabling scalable national interventions.

Case Studies

International experience shows a range of approaches in reducing first-home buyer deposit barriers, with mixed success. The UK’s Help to Buy equity loan enabled over 300,000 purchases but was criticised for inflating new-build prices in supply-constrained markets, benefiting developers more than buyers (Collinson, 2017). Canada’s First-Time Home Buyer Incentive offered a federal shared-equity loan but achieved less than one-fifth of expected uptake due to restrictive price caps in high-cost cities (CMHC, 2023). Singapore illustrates a more supply-driven model, with subsidised Housing & Development Board flats and compulsory savings accounts producing one of the world’s highest ownership rates at ~90% (Phang, 2018).

Policy Options

A critical measure of success for this policy is enabling more first-home buyers to enter the market by significantly reducing the upfront deposit required. This includes reducing the time needed to save for a deposit, which is currently one of the most substantial barriers to homeownership.

Option 1: Amend the Housing Australia Act 2018 - National Shared Equity Scheme

This federally-backed program would allow Housing Australia to co-purchase up to 30% of a home with eligible first-home buyers. Eligibility would be focused on young Australians who can service a mortgage but are blocked by the deposit hurdle, such as first time buyers under 40 with stable incomes but limited savings capacity. For example, a buyer could make a 5% deposit, take a 65% mortgage, and the government would invest in the remaining 30%. This reduces loan sizes and avoids lender’s mortgage insurance (LMI) and other upfront costs, which directly addresses the deposit barrier.

The scheme also comes with real fiscal and market risks. The government would share in any fall in housing prices, meaning losses could occur during downturns even under a well-designed scheme, with poor targeting or weak limits amplifying this exposure. The rules needed to manage co-ownership such as resale conditions, refinancing, and equity buy-backs would add administrative burden and increase the chance of uneven or disputed outcomes. Results also depend heavily on scale and targeting. If the scheme is too small or tightly constrained, it will do little to materially lift homeownership rates (Huebl, 2024). If it is too broad or generous, it risks adding demand in supply-constrained markets and creating a sense of unfairness between supported buyers and those left out.

Option 2: Amend the Income Tax Assessment Act 1997 - First-Home Deposit Saver Tax Refund

This proposal would give first-home savers a refundable tax offset on amounts they deposit into a dedicated savings account (for example, a 50% match on up to $3,000 saved per year). It would be inserted into the offsets provisions of the Income Tax Assessment Act 1997 under Division 61 or a new subdivision for a “First-Home Deposit Saver Refund.” The measure effectively “matches” savings contributions, helping aspiring buyers build a deposit faster and rewarding financial discipline. Renters receive a government boost via their annual tax return, which aids in shortening the saving period. Since the offset is refundable, it is fully payable even for low-income savers (subject to income thresholds), which makes it broadly accessible. This is delivered through the tax system and support comes over time as individuals save.

However, the scheme has key drawbacks. It carries a large fiscal cost (estimated at $500-$600 million per year) since the government does not recover these funds. Participation is uncertain: for example, Australia’s First Home Saver Accounts (2008-2014) attracted only 48,000 accounts (vs 730,000 projected) under tight rules (HIA, 2020). Overall, the refund strengthens buyers’ finances without directly increasing housing demand, but its success depends on participation and budget.

Option 3: Amend Housing Australia Act 2018 - Deposit Matching Grant for Essential Workers & Regional First-Home Buyers

This scheme targets young essential service workers (e.g. early-career teachers, nurses, police officers, firefighters, and paramedics under 35) and young regional first-home buyers in designated areas by matching their savings toward a deposit (up to $15,000). Essential service workers are integral to the community: Teachers, for example, deliver education that underpins future outcomes; nurses, paramedics, and other health professionals provide frontline care; and police and firefighters maintain public safety. These roles are typically modestly paid relative to their importance, yet they require proximity to the communities they serve, making housing affordability a direct workforce issue.

An eligible buyer must first save at least an equal amount themselves (e.g., $15,000) to demonstrate personal commitment and financial capacity. The government then provides a one-off grant of the same amount (capped at $15,000) toward the home’s deposit. For example, a 30-year-old teacher who has saved $15,000 would receive an additional $15,000, giving them a total $30,000 deposit. This significantly increases their buying power and could bring home ownership within reach years sooner. 

Because the program is narrowly targeted, its scale and cost remain modest relative to broader subsidies. If each grant is at most $15,000, then 6,000-7,000 grants per year would amount to roughly $90-105 million annually in public expenditure. Limiting eligibility to a defined group also helps ensure the policy does not simply fuel general housing demand (and prices) across the entire market (Productivity Commission, 2022).

Policy Recommendation

Option 1, to establish a National Shared Equity Scheme via amendments to the Housing Australia Act 2018, is recommended as the most viable method to reduce upfront deposits at scale and drive first-home ownership among young Australians. In comparison with a savings tax refund (Option 2) or a narrow deposit grant (Option 3), a national shared-equity scheme directly bridges the deposit gap, is targeted and capped to limit demand-side inflation, and is fiscally recyclable, aligning with both public and homeowner incentives.

Under this scheme, the Commonwealth would authorise Housing Australia to co-purchase up to 30% of an eligible home, or up to 40% for new builds. The higher share for new builds incentivises additional housing supply by lowering entry costs more substantially, directing demand into construction rather than intensifying pressure on existing stock. Buyers would contribute a 2-5% deposit, take a mortgage for the remainder, and the government would register its equity interest on the property title. By significantly lowering the required deposit and loan, buyers, particularly those without family assistance, could enter the market much sooner. The government’s stake would be repaid on sale (with any accrued capital gain or loss), ensuring the program operates as an investment rather than a one-way grant. Help to Buy (HTB), an existing Commonwealth shared equity initiative, would have its funding redirected to seed the revolving fund, with HTB wound down over a 12-month transition to avoid duplication.

It is proposed that the Commonwealth be responsible for implementation and execution. The Minister for Housing, along with the Treasury, should develop and introduce amendments to the Housing Australia Act 2018 to explicitly authorise Housing Australia to take direct equity stakes in residential property and manage a dedicated revolving equity fund. Housing Australia would administer day-to-day.

Core eligibility criteria of the program would be:

• Residency status: applicants must be Australian citizens or permanent residents, consistent with Commonwealth housing programs.

• First-home/long-term renter status: eligibility limited to first-home buyers or long-term renters.

• Income thresholds: capped at $90,000 for singles and $120,000 for couples, indexed annually to CPI.

• Young buyer focus: targeted to young Australians that are first-time buyers under 40 

• Owner-occupier requirement: properties must be the principal place of residence.

• Regional price caps: property values must fall under regionally set limits to ensure affordability and avoid inflating high-demand markets.

  
  

Supporting governance settings would include:

• Titles offices: recognition of the Commonwealth’s equity interest.

• APRA (Australian Prudential Regulation Authority): guidance to ensure loans remain at or below 80 percent LVR (loan-value ratio) once the government share is counted, reducing borrower risk and maintaining financial system stability.

• Lenders: use existing origination and servicing channels integrated with Housing Australia.

• States, territories and community partners: optional alignment of concessions and outreach to priority cohorts.

The scheme would initially be capped at 10,000 places per year (40,000 over four years), with scope to expand to 15,000-20,000 annually if evaluation confirms equitable uptake and minimal inflationary effects. Capital of $5-6 billion would be appropriated over a 4-5 year period from the Commonwealth budget into a dedicated revolving equity fund, and recycled as participants sell or buy back the government’s stake. This estimate is based on places × average equity share × regional price caps, with a provision for administration. No further appropriation is anticipated within the initial 4-5-year period unless an independent review recommends scaling. The Commonwealth may realise capital gains if property values rise (and absorb losses if they fall), which would flow through the revolving fund. Indicative administration and staffing for assessment and servicing would sit within Housing Australia (estimated at approximately $10–30 million per annum) and leverage existing lender systems.

Key performance indicators will include: 

• Buyers assisted (10,000 in Year 1)

• Average deposit (5 percent) and time-to-purchase reduction from about 10 years to about 6 years

• Repayment affordability (no LMI, lower DTI)

• Equity recycling rate (fund self-sustainability)

• Inclusion of target cohorts (for example, first-generation buyers). 

  
  

An independent Productivity Commission review after three years would assess fiscal sustainability, market impacts, and distributional equity. It would also recommend adjustments to scale, eligibility, and price caps.

Barriers and Risks

Implementing a National Shared Equity Scheme will require navigating practical barriers that could limit its effectiveness if not properly addressed. Housing Australia, lenders and state land title offices will need to coordinate systems for managing co-ownership contracts, registering government equity stakes and handling buy-back or resale arrangements, all of which demand careful design to avoid delays or confusion. Without targeted communication, participation rates may fall short of the program goals. Property price caps must be carefully calibrated. If thresholds are set too low, access will be restricted in expensive markets; if too high, the scheme risks fuelling demand-side pressures, as evidenced by Canada’s First-Time Home Buyer Incentive.

In addition to the barriers, there are broader risks that must be weighed. Politically and socially, the scheme may attract criticism for creating perceived inequities between those who qualify and those who do not, potentially undermining bipartisan support. Economically, the Commonwealth will share exposure to housing price downturns, limiting the recycling capacity of the equity fund, while localised inflationary effects in supply-constrained areas remain possible. Legal and technological risks may emerge if lenders or state titling digital systems are slow to adapt, delaying rollout. Finally, an environmental dimension exists: by increasing access to ownership, the scheme could encourage fringe development and contribute to urban sprawl unless paired with adequate planning measures.

References

ANZ. (2024). ANZ CoreLogic housing affordability report - November 2024. ANZ.

Australian Bureau of Statistics. (2022). Housing occupancy and costs, 2019-20. ABS.

Australian Bureau of Statistics. (2024a). Personal income in Australia, 2021-22 financial year. https://www.abs.gov.au/statistics/labour/earnings-and-working-conditions/personal-income-australia/2021-22-financial-year

Australian Housing and Urban Research Institute. (2021, July 13). How are governments supporting first home buyers in Australia? https://www.ahuri.edu.au/analysis/brief/how-are-governments-supporting-first-home-buyers-australia

Collins, J. (2023, October 2). More than 10,000 helped into home ownership in regional Australia by Albanese Government [Press release]. Australian Treasury, Ministers Media Centre. https://ministers.treasury.gov.au/ministers/julie-collins-2022/media-releases/more-10000-helped-home-ownership-regional-australia

CoreLogic. (2023). Regional market update. https://www.corelogic.com.au/news-research/news

CoreLogic. (2025). Quarterly rental review: December 2024. CoreLogic Australia.

Grattan Institute. (2022, February 20). Levelling the playing field: It’s time for a national shared equity scheme. https://grattan.edu.au/news/levelling-the-playing-field-its-time-for-a-national-shared-equity-scheme/

Housing Industry Association. (2020). Autumn 2020 Australian housing outlook (Housing policy initiatives timeline report).

Jolly, W. (2024, March 15). Australian household spending statistics 2024. Jacaranda Finance. https://www.jacarandafinance.com.au/blog/australian-household-spending-statistics-2024

Productivity Commission. (2022). In need of repair: The National Housing and Homelessness Agreement review. Canberra: Productivity Commission. https://www.pc.gov.au/inquiries/completed/housing-homelessness/report/housing-homelessness-overview.pdf

Randolph, B., Holloway, D., & Troy, L. (2018). Options to improve key worker access to home ownership (Report for Teachers Mutual Bank). City Futures Research Centre, UNSW Sydney. https://cityfutures.ada.unsw.edu.au/research/projects/options-improve-key-worker-access-home-ownership

Saarinen, N. (2024, May 6). Australia’s median rent surges to record heights with regions and outer suburbs feeling the heat. ABC News. https://www.abc.net.au/news/2024-05-06/australia-rent-median-costs-record-high-corelogic/103831094

Canada Mortgage and Housing Corporation (CMHC). (2023). Evaluation of the First-Time Home Buyer Incentive (FTHBI) Program: Final Report. Government of Canada. https://www.cmhc-schl.gc.ca/en/professionals/housing-markets-data-and-research/research-reports/evaluation-first-time-home-buyer-incentive

Collinson, P. (2017, October 21). Help to buy has mostly helped housebuilders boost profits. The Guardian. https://www.theguardian.com/money/blog/2017/oct/21/help-to-buy-property-new-build-price-rise

Phang, S. Y. (2018). Policy innovations for affordable housing in Singapore. Housing Studies, 33(5), 761-777. https://doi.org/10.1080/02673037.2017.1408771

Smith, N., & McClay, T. (2013, July 1). KiwiSaver first home buyer stats soar. New Zealand Government, Beehive. https://www.beehive.govt.nz/release/kiwisaver-first-home-buyer-stats-soar

Whitten, R., & Godfrey, J. (2025, August 22). Buying a house in the ’80s versus today. Finder.com.au. https://www.finder.com.au/buy-a-house/owning-a-home-in-the-80s-vs-today

Yates, J. (2007). Affordability and access to home ownership: past, present and future? AHURI Research Paper No. 10. Australian Housing and Urban Research Institute. https://www.ahuri.edu.au/research/research-papers/affordability-and-access-home-ownership-past-present-and-future

The views and opinions expressed by Global Voices Fellows do not necessarily reflect those of the organisation or its staff.