Is the HomeBuilder scheme too limited?

Many Australians have been disappointed by how tight the eligibility criteria is for the new HomeBuilder scheme, writes Lynette Manciameli.

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The initiative will provide $25,000 for Australians to spend on building or upgrading their home, but the grants are restricted to larger renovations and the construction of new homes at a project cost of at least $150,000. Given the scheme is designed to stimulate the construction sector, these limitations don’t make much sense.

Permanent residents excluded

Even more confusing is the exclusion of permanent residents from the scheme. Only Australian residents are eligible for the grants, unlike the First Home Buyers Grant, which extends to permanent residents as well.

In 2018-19, over 160,000 permanent resident visas were granted, with a similar number admitted each year in the years prior.

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Excluding permanent residents from the scheme unnecessarily places further limits on the uptake of the scheme, especially in regional areas where many permanent residents reside. Permanent residents are often first home buyers as well, so to limit their access to the scheme makes very little sense for a scheme designed to stimulate the construction sector and create jobs.

HomeBuilder isn’t broad enough

It is estimated that for the scheme to actually generate construction jobs, it would need to deliver 60,000 new homes. At the moment it is projected that the scheme will fund about 25,000 projects. The scheme covers building contracts entered into between 4 June and 31 December 2020, with construction required to commence within three months of the contract date.

This tight time frame will make it difficult for someone to commence the process for a new build or renovation, and as such the scheme will largely cover projects that were already underway. That means the scheme is unlikely to do much to stimulate any additional activity, instead simply bringing work forward.

Should HomeBuilder be revised?

There are two simple and immediate changes that could be made to the policy which would make the scheme more equitable and more impactful as a stimulus measure. Expanding the scheme to permanent residents and extending the time frame would allow for more projects to qualify and more jobs to be created.

There is also an added benefit to extending the time frame. At the moment there is a danger that builders will be incentivised to enter into as many contracts as possible, potentially taking on an unachievable workload and cutting corners to complete projects. That could lead to issues with quality and an increase in building defects.

There are also other ways the scheme could be improved, such as revising the required project size below $150,000. Currently, in many locations where home values are within the acceptable range, a renovation over $150,000 would lead to the owner overcapitalising. Adjusting the $1.5 million property value limit would also open up the scheme more fully, for example, to large parts of Sydney and Melbourne.

HomeBuilder vulnerable to exploitation

With some tweaks, the HomeBuilder scheme has the potential to make a big difference to the construction sector and help consumers achieve their building and renovation aspirations.

However, there is still a risk that the promise of quick cash will bring unscrupulous builders out of the woodwork. Builders must have been licensed or registered before the announcement of the scheme; however, this won’t fully protect against dodgy behaviour.

Rather than feeling the pressure to select a builder quickly to meet the tight time frames, consumers should make sure they take the time to do their due diligence. Seek out testimonials, review past projects, and check credit reports and ASIC listings. Or work with a building broker who will undertake a more comprehensive due diligence process to match you with the right builder.

The last thing consumers need is to secure the wrong builder and see costs and times blow out. This can actually cancel out the value of the grant all together.

By Lynette Manciameli, director, Builder Finders

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