The Socioeconomic Impact of Shared Appreciation Mortgages on Borrowers : Empirical Evidence from South Australia

Shared appreciation mortgages (SAMs) realign traditional incentives in the lender-borrower relationship by substituting future capital gains for interest income. This makes them a potentially innovative solution to affordability and other homeownership crises. Taxation and regulatory barriers have impeded SAM development limiting empirical studies of their impact on households. This has not been the case in South Australia where State government implementation of SAMs has made available a unique and detailed dataset of low-income SAM-financed households. Examining this population, it is found that SAM borrowers benefit from increased budgetary expenditure on discretionary items following take-up, while simultaneously saving on some non-discretionary items relative to a control sample. Furthermore, SAM homeownership also seems associated with increased borrower levels of neighbourhood satisfaction and community involvement. Overall, these results indicate that SAM-financed homeownership leads to changes in borrower behaviour and deserves further consideration by the housing industry and research community