Habitat empowers through equity scheme

FOR more than 30 years, Habitat for Humanity has operated internationally as a non-denominational Christian community organisation with a charter to build simple, affordable and sustainable entry-level housing in partnership with low-income families.

Founded in the US in 1976, the not-for-profit organisation has built 300,000 homes in 90 countries, including Australia, but is in its infancy in WA.

As a registered housing provider, Habitat operates like a bank with the capacity to offer interest-free mortgages and loans to families, who are chosen according to their need and ability to repay the loan.

Habitat's business model promotes home ownership through a vehicle called 'sweat equity', where after paying a $500 deposit the family must invest at least 500 hours of their own labour into building their home.

By acquiring land through a private developer, church group, or the government, and by obtaining money and building materials in-kind, Habitat uses volunteer labour to build and renovate houses.

The average cost of a Habitat house in Australia is about $175,000 but can vary greatly depending on location.

Loan repayments are less than 25 per cent of the family income and mortgages usually last up to 25 years.

Habitat WA development manager David Beyer said homes were sold to eligible families at 95 per cent of the market value.

"The other interesting thing is that because it's a home ownership model, we talk to people quite a lot and they still think that we're providing rental housing, but Habitat does not provide any rental housing at all, it's about getting people into home ownership," he said.

"There are provisions in place so [families] can't make a financial windfall in the short-term but they can eventually sell that house, but within the first five years the majority of that money will come back to Habitat.

"After that it's more of a differential type scheme where over time if they make any significant capital gains on that then that amount is shared simply on the amount that they might have repaid."

Habitat executive director Peter Preece said the sweat equity model, which could include a family helping with unskilled labour like painting, landscaping or bookkeeping, ensured potential clients were committed to gaining a foothold into the home-ownership market.

"The poverty trap is also an element of this, specifically talking about Homeswest tenants, and there comes a point under that model where if they improve their income they end up paying the market rent, so there can be an incentive to not actually improve themselves or their financial position," he said.

"In our situation it's the exact reverse; they come to us and say 'we've actually improved our income, can we repay the mortgage more quickly?' So they have full ownership in a shorter period of time.

"We take first refusal if they want to sell the house and there's a sliding scale of which the equity they have accumulated in our house, their house, is transferred to them over time."

Community Housing Coalition of WA executive officer Colin McClughan said anything that was going to get people into housing was worth looking at.

"Obviously people are struggling and the full effects of the economic downturn aren't being felt yet, like job losses, but all the economic news continues to get worse," he said.

"Fortunately through the stimulus package coming through from the federal government, which relates to $20 million for Western Australia, that's certainly a big plus in building more affordable housing in this state and Habitat complements that."