This House of Commons Library Briefing Paper describes the specific Government initiatives which have been developed in order to assist first time buyers into home ownership and, in some cases, to help existing owners who are seeking to move. The paper includes some comment on these schemes.Jump to full report >>
Home ownership rates in England have been falling since 2003 despite the fact that it remains the tenure of choice for a majority of people. The 2014 British Social Attitudes survey found that, given a free choice, 86% would prefer to buy their own home rather than rent.
Younger households are facing particular difficulties in accessing home ownership: the percentage of young adult householders owning their own home decreased from 55% in 1996 to 30% in 2015 for 25 to 29 year-olds; and from 68% to 46% for 30 to 34 year-olds.
The financial crash and the subsequent fall in house prices after the end of 2007 had only a limited impact on affordability for first time buyers. Lenders have tightened their criteria for mortgage approvals and require buyers to have substantial deposits. Mortgage products themselves are more expensive. There is also an issue of incomes failing to keep pace with house price increases, this is particularly acute in London.
Within this context the Department for Communities and Local Government has said “Our department has a driving focus to increase housing supply and make it easier for the 86% of people who say they want to own their own home, to achieve that aspiration.” The Government has developed a number of schemes which are aimed at fulfilling this commitment. Constituents interested in checking their eligibility for these schemes should contact their local Help to Buy Agent.
Low-cost home ownership schemes are not new, they have existed in various forms over many years. Commentators have generally supported interventions to support home ownership in challenging market conditions, but have emphasised the need for an overall increase in housing supply in order to prevent subsidised home ownership from simply adding to house price inflation.
Significant concerns were voiced over the 2015 Government’s emphasis on home ownership. For example, the Chartered Institute of Housing’s response to the Housing and Planning Bill 2015-16 said:
…we must make sure that the new homes we build are a mix of tenures (home ownership, shared ownership, private and social rent) so that people on lower incomes are able to benefit too. The government has made its commitment to home ownership very clear – but what about people who can’t afford to buy, even with government support?
The Treasury Select Committee’s report on the Spending Review and Autumn Statement 2015 (February 2016) questioned the 2015 Government’s focus on the promotion of home ownership:
The Chancellor’s characterisation of problems in the housing market as a “home ownership crisis” is reflected in the policies of the Summer Budget and Autumn Statement, which are likely to reduce the supply of properties to let at both social and market rates, while continuing to subsidise demand for owner-occupation, including through outright discounts on the market value of homes.
While they clearly stimulate demand for owner-occupied housing, it is far less clear, despite the promises to the contrary, that the measures contained in the Summer Budget and Autumn Statement will materially increase the supply of homes. This is likely to lead to a rise in house prices, sharply curtailing any overall increase in owner-occupation. Changes to housing association grants to meet a commitment to provide 135,000 shared ownership homes will alter the tenure of dwellings being built by housing associations, but not the overall number. In any case, the Government has allocated money to subsidise the purchase of only 60,000 of a planned 200,000 Starter Homes.
The Committee is concerned about the focus of the Government’s housing policy. Addressing the “home ownership crisis” must not come at the expense of a shortage of homes to rent. The Chancellor should make clear what he intends to do to help those who want or need to rent, and to ensure a healthy supply of properties in the private rented sector.
Ministers rejected the charge of a disproportionate focus on home ownership during debates on the Housing and Planning Bill 2015-16; for example:
Some noble Lords suggested that the provisions in Chapter 1 mean that we no longer believe in anything other than home ownership, which is not the case. As I have said before, there is a gap in the market. An additional product is required to fill that gap and that is why we are legislating for starter homes. We are helping people to access homes that they can afford in a number of different ways and this Bill should not be seen in isolation. The Government have committed £4.1 billion in spending reviews to deliver 135,000 shared ownership homes and £1.6 billion to deliver 100,000 affordable homes for rent. [HL Deb 3 March 2016 c954]
The Government’s Housing White Paper, Fixing Our Broken Housing Market (February 2017), confirmed the Government’s continued commitment to extending home ownership:
The Government will help people save for a deposit, buy with a smaller deposit, buy at 20% below the market price, buy the home they are renting from a social landlord, buy a share of a home or save a deposit while paying a below market rent…
However, the White Paper also marked a shift in focus from delivering discounted starter homes for first-time buyers, to delivering a wider range of affordable housing, including for affordable rent.
Alongside measures intended to increase the supply of housing, the Autumn Budget 2017 announced two specific measures aimed at extending home ownership:
Commons Briefing papers SN03668
Authors: Wendy Wilson; Hannah Cromarty; Antony Seely; Cassie Barton