Single parents are getting a housing lifeline, but will it simply widen the gender divide?

 In Home News Section, Uncategorized

Single mother Verity Ikin has just made a successful offer on a house in the Huon Valley, outside of Hobart.

It was a bit of a gamble because she only has a small deposit saved and is relying on being a successful applicant to the federal government’s Family Home Guarantee scheme to avoid paying costly lender’s mortgage insurance (LMI).

“That could be up to $20,000 on insurance that I would rather spend on my kids. And it’s money that is added to my purchase power,” she says.

The Family Home Guarantee scheme is scheduled to open on July 1 and is budgeted to help 10,000 single parents over four years buy a house.

The scheme can also be used in conjunction with other grants and incentives available in different states.

Single parents (who earn no more than $125,000 a year and have dependents in their care) need to have saved at least a 2 per cent deposit.

The federal government will guarantee the remaining 18 per cent of the deposit, which means single parents have a chance to get into the property market sooner without paying LMI.

Legislation for the scheme is currently before the Senate but it is expected to pass without any significant changes.

Advocacy groups, such as the National Council of Single Mothers and their Children, have welcomed the initiative, saying it will help more women like Ms Ikin become financially secure.

But Jenny Davidson, the CEO of the Victorian-based Council of Single Mothers and their Children, is sceptical about how many single mothers will actually benefit from it.

“It’s a really positive step, but how many women will be able to actualise it?” she says.

Price caps on properties could be restrictive

To be eligible, single parents must stick to a budget, and the scheme has the same property price caps as the First Home Loan Deposit program.

Ms Davidson says while the scheme is set up to increase accessibility, it does not address the issue of housing affordability.

“The price caps are not realistic when you look at the homes families need, like three-bedroom properties in markets like Sydney and Melbourne,” she says.

In Sydney, the median house price is $970,355 and in Melbourne it’s $740,562.

When Ms Ikin used the price cap for her state in a quick online real estate search, she could only find two properties in the 25 suburbs closest to where she currently rents.

She was forced to widen her search and has since made a successful offer on a house 25 kilometres away.

“Instead of walking to school, it’ll mean my kids will take at least a 40-minute bus ride,” she says.

Ultimately though, proximity is a sacrifice she is willing to make to have a home of her own.

“I feel really secure thinking that we are going to move into a place we can pay off because chasing the market at its current pace is mentally debilitating,” she says.

Ms Ikin points out that in big cities such as Sydney or Melbourne moving 25 kilometres away is almost impossible.

“It only works because it’s regional and we are at the end of the school bus catchment area and we still have support near us,” she adds.

Ms Davidson says many single parents forced into outer suburbs and regional areas would lose connection with their existing support networks.

And many single parents simply cannot move from their communities because shared-custody arrangements often dictate they must live within a certain distance of the other parent.

Single parents could struggle to get finance

Price caps are a mechanism to protect lenders and borrowers, as well as the federal government, from the risk of bad debt, Sarah Sinclair, an economist at RMIT University, says.

The Australian Banking Association supports the Family Home Guarantee scheme and says the risk of bad debt is very low because banks still need to assess whether a single parent applicant can actually service the loan.

But Dr Sinclair says in reality many single parents will be priced out of the market or have difficulty obtaining finance from one of the 27 participating lenders.

“About 25 per cent of single-parent households live in poverty, and the median income for single-parent households is $34,000 — and that’s a conservative estimate,” she explains.

“If you punch that amount into a mortgage calculator, you can borrow about $106,000, and we know that won’t buy you much.”

Banks also reduce the loan amount for each dependent child, and don’t always include child support when assessing an applicant’s income.

Ms Davidson is concerned single mothers, who often do the bulk of the child care and work part time, will miss out.

“I have fears we might see a gender disparity and the result will be that many more single fathers will jump on this [Family Home Guarantee], because of their earning capacity,” Ms Davidson says.

Dr Sinclair agrees.

“I don’t see this as a big boost for single-parent households. Instead it will likely push prices up in this segment of the market popular with first home buyers, which is already heated,” she says.

By business reporter Rhiana Whitson (Original ABC Article)