University of Adelaide Business School


The Challenge 

The South Australian government provides mortgage funding to low and middle-income homebuyers through its Homestart Finance agency. Homestart lacked information about the social and economic effects of its lending practices.


Research Impact Summary 

  • The research shows that HomeStart shared equity loans improve social and economic outcomes for low income households
  • The research contributed to HomeStart Finance’s successful application for more funding — $355 million between 2011 and 2013. HomeStart’s funding increase resulted in higher ownership rates in low-income local government areas
  • The research reveals the value of HomeStart loans to the wider SA economy – $97 million in Gross State Product and over 850 jobs.

Assessing the Benefits 

HomeStart Finance, a South Australian (SA) Government agency, provides mortgages to low and middle-income households, including some that do not qualify for housing loans from mainstream lenders. The South Australian Government Financing Authority (SAFA) wholly finances the agency.

Between June 2010 and January 2013 HomeStart Finance commissioned studies from the International Centre for Financial Services (ICFS) at The University of Adelaide Business School.

The longitudinal studies were designed to measure

  • The social and economic benefits which accrue to households who purchase homes with HomeStart mortgages
  • The resulting flow-on effects for the local economy that could be attributed directly to HomeStart lending.

Comparative Studies

Following a review of HomeStart’s internal data, the ICFS research team designed an in-depth questionnaire to capture HomeStart clients’ financial decision-making data. The survey was further refined at a pilot workshop with 13 HomeStart customers and then administered by the ICFS to a population of HomeStart clients. Researchers followed HomeStart shared equity mortgagees for up to several years.

With above average response rates the ICFS research team was able to perform advanced econometric analyses to contrast the lifestyle and financial outcomes of HomeStart clients with those of renters and other homeowners from the general Australian population.[1] Researchers also performed cost-benefit analyses to discover any multiplier effects of HomeStart lending in the South Australia’s economy.

Showing Social and Economic Benefits

The study allowed HomeStart to demonstrate that their loans resulted in social and economic benefits for their clients – benefits that left the new homeowners better off than SA renting households. HomeStart clients reported greater neighbourhood satisfaction and community involvement after buying their home. Also, they saved on some of their non-discretionary expenditures in favour of increased spending on discretionary items like holidays and groceries.[2]

When applying for increased funding from SAFA in 2011 and 2013, HomeStart Finance used the ICFS research to demonstrate the positive social and economic impacts of their operations. Based partially on ICFS studies, SAFA increased HomeStart’s borrowing limit by $150 million in June 2011 and a further $205 million in June 2013.[3]

Shared Equity Loans

While these increases broadly funded all HomeStart lending, a portion of this funding was used to issue shared equity loans, which was the focus of the associated research. HomeStart issued a further 362 new shared equity loans between July 2011 and December 2016 which affected the living circumstances of more than 1,000 individuals – including children.[4]

Economic multiplier estimates suggest that the shift from renting to homeownership, the subsequent increase in demand for housing, and other flow-on economic effects of loan recipient spending, generate around $268,000 in Gross State Product (GSP) and approximately 2.35 new jobs per mortgage issued in SA.[5] The 362 new loans issued between 2011 and 2016 are therefore estimated to have generated more than $97M in GSP and the equivalent of more than 850 new jobs across SA over the period.

Deeper Understanding Due to Long-Term Study

This rigorous long-term study – uncommon across most residential mortgage lenders in Australia — affected HomeStart product development and other internal operations and allowed the agency to gain a deeper understanding of its clients and their mortgage-related outcomes. For proprietary and client confidentiality reasons HomeStart does not release research details but in a November 2017 signed testimonial HomeStart CEO John Oliver writes, ‘Our research partnership with ICFS has greatly informed and supported the further development of our innovative home finance products, particularly in the field of shared equity’. Oliver also states that, ‘… the research has enabled HomeStart to demonstrate the direct impacts of our lending activities on SA households, the indirect knock-on effects for the State economy, and our overall positive impact on homeownership rates’.

The Benefits of Equity Over Renting

The research found that 68% of surveyed households were renting prior to qualifying for a HomeStart shared equity mortgage. Homeownership meant that these borrowers no longer had to save for a loan deposit, they moved house less often and had greater flexibility to choose a home closer to their workplaces and other amenities. They reported further benefits such as additional discretionary income and more use of public transport.

Subsequent research shows that SAFA funding increases have seen HomeStart exert a significant impact on local homeownership rates across SA between 2011 and 2016. Census data reveals that SA suburbs with a significant HomeStart presence had, on average, a 3.5% higher homeownership rate relative to demographically similar Victorian suburbs, and an 8% higher homeownership rate than similar suburbs in New South Wales.[6] This is significant not only because lending agencies such as HomeStart did not operate in the eastern states over this period, but also because the research shows that HomeStart made the greatest difference for low-income local government areas — for example the cities of Salisbury, Playford and Onkaparinga.


[1] Household, Income and Labour Dynamics in Australia survey

[2] Mihaylov and Zurbruegg, 2010; 2013; 2014

[3] HomeStart Finance, 2011; HomeStart Finance, 2013

[4] HomeStart Finance, 2015; 2016

[5] Burgan, Mihaylov and Zurbruegg, 2010

[6] Li, Mihaylov and Zurbruegg, 2016

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