It was one of the biggest stimulus injections the housing industry had ever seen.
The Morrison government’s HomeBuilder program enabled eligible owner-occupiers substantially renovating or building a new home to apply for grants.
The amount handed to more than 137,000 Australians was big — a $25,000 grant if they signed contracts between June 4 and December 31, 2020, or a $15,000 grant for eligible contracts signed between January 1 and March 31, 2021.
Analysis from Master Builders Australia estimates that it boosted economic activity in Australia by more than $120 billion, with the value of building work supported by HomeBuilder at $41.6 billion. More than 374,000 jobs were created.
The scheme – together with record low interest rates that enabled more Australians to borrow money — saved the housing industry during the pandemic.
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Australians rushed into the market, bringing forward plans to renovate or build, in order to secure the grant.
Many tradies who had feared going under when the housing market came to a halt at the start of pandemic lockdowns now had a pipeline of work for 12 months and beyond. Builders, and building materials, became scarce as people rushed to sign contracts.
For many first-time buyers the grant was an avenue towards owning their dream home. For others, the lure of grants, which they never succeeded in getting, sent them into a world of misery and debt.
And the question now is, what happens when all this activity that sent building approvals skyrocketing comes to an end?
Australians rushed to buy land off the back of the grant
First-time buyer Isuru Thuduhena was one of the lucky ones.
She is single, and with only one income was struggling to afford buying an existing house in the area she wanted.
HomeBuilder gave her a chance to build a bigger and better home. She engaged a major builder in 2020, and they did the rest.
She says many people in the outer Melbourne area of Berwick rushed to buy land in order to secure a spot to build and get the grant.
“A lot of people, they bought land even before [it was] released and titled,” she says.
Ms Thuduhena was able to secure federal and state first-home buyer grants, as well as the $25,000 HomeBuilder grant, which she says made the extra costs of the build such as landscaping, driveways and fencing possible.
“I feel for people who didn’t get that grant because I know how much it helped me,” she says.
Ms Thuduhena was working as a registered nurse in the COVID ward of a hospital after the pandemic hit.
She says compared to other countries, Australia came out on top thanks to massive housing-related stimulus.
“I’m from a [Sri Lankan] background — people are really suffering because of COVID back at home,” she says.
“But in Australia … I think it [the HomeBuilder grant] helped the economy to grow within the pandemic.”
‘Everything went very smoothly for us’
In Lake Macquarie, in regional NSW, Brianne Buckley and her husband Grant Clark also have a happy story to tell.
They were able to build their family home thanks to the $25,000 grant.
They engaged a builder in February 2020, signed the contract in December 2020, and moved into their single-storey four-bedroom home last month.
Mr Clark proposed marriage to Ms Buckley the day they moved in.
“It was a really exciting day — it’s been a long time in the making for us,” she says.
“We may have been lucky, just getting in the right time frame. But everything went very smoothly for us. There were no hold-ups.
“We were much better off to build than to try and buy established.”
Federal Assistant Treasurer Michael Sukkar likes to describe the HomeBuilder program as “the economic gift that keeps on giving”.
At a cost of more than $2.5 billion to the federal budget (the final figure is yet to be determined as more projects roll out over the coming year), Mr Sukkar says it achieved its intended task of protecting tradies’ jobs and stimulating the economy.
“It’s played a huge role in the broader economic recovery that we’ve seen, which has led to the unemployment rate being now at 4.6 per cent.”
But not everyone sings its praises.
April 14 cut-off date sent some into turmoil
To be eligible for HomeBuilder, people needed to be under certain income caps – $125,000 annually for singles or $200,000 annually for a couple.
For the $25,000 grant, people needed to enter into a building contract on or after June 4, 2020, up to and including December 31, 2020. For the $15,000 grant, people needed to enter into a contract on or after January 1, 2021, up to and including March 31, 2021.
There were also minimum and maximum limits on the value of the renovations or new-home construction projects.
But when applications for HomeBuilder closed at midnight on April 14, 2021, it sent some Australians into turmoil.
In mid-April, Treasury updated their fact sheets about the program to state that “construction must commence on or after June 4 [2020], and within 18 months of the contract date”.
The initial rules had said that people had to commence construction within 12 months. But given the portals had closed on April 14, many people who thought they were now eligible under the 18-month commencement rule, now couldn’t apply.
Jonathan Warner was one of them. He moved from Melbourne’s suburb of Mentone to Lara in regional Victoria to build his dream home.
“After five years of saving, sacrificing and moving to regional Victoria for affordability, the HomeBuilder grant was my influencing factor, convincing me to make the largest purchase of my life as a first homebuyer,” he says.
“My eligibility was only restricted by the construction criteria, which at the time was three months, then 12 months (my land was titled on the 13th month).
“As advised by the State Revenue Office, I didn’t qualify, therefore, I didn’t submit an application before the portal closed on the 14th of April, 2021.
“On the 17th of April, 2021 – three days after the application portal closed — the government changed the construction criteria to 18 months, which meant I was now eligible.”
He says his neighbours did apply even though they were not eligible under the old criteria, hoping for the best, and because they were in the portal already, they succeeded in getting the grant.
“However, I followed the direction provided by Treasury and State Revenue Office and missed a life-changing $25,000 grant.”
Mr Warner says he built on the expectation he would have got the grant. Without it, he’s been left stuck with debt.
“Now I face a situation next month, where I am unable to complete post-handover work such as a driveway, fencing, a retaining wall, curtains and so on.”
He wants the government to reopen the portal for all applicants that meet the 18-month construction criteria.
Borrowed from parents, now unable to pay them back
Amanda Murdoch, a medical scientist in microbiology at the Royal Melbourne Hospital, was in a similar situation.
Off the back of the grant announcement, she set out to build a two-bedroom townhouse in Fawkner, Melbourne, for $589,000.
She says she borrowed the $25,000 from her pensioner parents with the promise that she could pay it back once the settlement had gone through.
“It was extremely distressing to find out about the portal for applications … closing in April of 2021 despite the range of builds fulfilling the criteria stretching until 2023 — and no mention or awareness that the rules would be changed with regards to applying,” Ms Murdoch says.
“I am 45 and this is my first home.
“The saving for a 20 per cent deposit has always been my stumbling block in purchasing a home on my own.
Natalie Sinclair, who is building in Donnybrook, Victoria, is another first home buyer that missed out on getting the grant.
“I actually borrowed the $25,000 from my dad and used it as part of my deposit so I could build a home quicker,” she says.
“When I was to receive the HomeBuilder grant, I was going to pay my dad back.
Ms Sinclair says the deadline wasn’t clear to the public “and in my opinion the portal closure date was unrealistic”.
“The government is allowing people who created profiles to upload documents until April 2023, so I’m not sure why they had to close the applications so early,” she says.
Ms Sinclair complained to the State Revenue Office in Victoria, but her complaint was dismissed.
In frustration over the whole situation, she started a petition on Change.org which has had more than 2,000 signatures.
“Some people who have all their information ready and who are eligible are only just finding out now that the application portals are closed and they are devastated, like I was,” she says.
What happens when impact of grant fades?
ANZ senior economist Adelaide Timbrell says the grant brought forward a lot of housing construction activity and shifted people who were looking at buying established housing to instead building a new home.
But she says it also helped push up the cost of building.
“The price of constructing a home went up 3.3 per cent in the latest inflation data,” she notes.
“But it wasn’t just HomeBuilder [that pushed up housing construction inflation] — very, very low interest rates, strong savings from households who were in lockdown, and more value in bigger homes [did too].”
Ms Timbrell says as the stimulus impact of HomeBuilder starts to wane, there obviously won’t be as strong construction activity, but it won’t hit a cliff either.
She thinks that global pressures that have seen the price of building materials shoot up will start to fade.
Ms Timbrell cites some structural changes that will help construction demand such as more people working from home wanting bigger and better houses.
“There will be less construction activity demand in the coming years compared to last year — but last year was a really huge peak for the construction sector,” she says.
