Over the past few weeks, we have seen housebuilding and homeownership soar up the political agenda. 

Labour made the running by proposing to reinstate firm national and local housebuilding targets. The Conservatives responded by floating the idea of reinstating Help to Buy. Then, in an attempt to capture the housing policy high ground, Labour has talked about capping sales of new build homes to overseas buyers and giving first time buyers first dibs, perhaps for as long as six months.

Cue a lively debate about the virtues of Help to Buy, the need for increased housing supply and what makes effective housing policy. 

The virtues and vices of Help to Buy

Help to Buy had two key aims: to bridge the deposit gap facing first time buyers and to stimulate housebuilding by breaching the deeply entrenched link between housing delivery and underlying transaction levels. 

Judged against those objectives alone, it is hard to argue that Help to Buy didn’t deliver; quickly gaining significant traction when mortgage guarantees struggled to make an identifiable impact across the market as a whole.

Against that context and given the fact that it also delivered a reasonable return to the Treasury, you can see its appeal as a quick fix policy initiative. 

However, there were drawbacks: it couldn’t be perfectly tailored to people who would genuinely otherwise struggle to get on the housing ladder, and it has been difficult to prevent it from feeding into higher new build prices to a degree at least.

The supply conundrum

It seems clear that Help to Buy can’t simply be reintroduced in isolation. Any reincarnation would need to go hand in hand with increased housing delivery to avoid artificially stoking up demand, underpinned by a planning system that facilitates rather than frustrates this.

Help to Buy’s introduction in 2013 was supported by a sharp rise in planning consents thanks to the revised NPPF, enabling an expansion in housing delivery. Currently, planning consents are falling, down by 13 per cent against the 2019 peak, and development land is in short supply. Introducing a demand stimulus without tackling this supply problem risks inflating new build prices.

Indeed, increasing housing supply has to be at the heart of any initiatives to support home ownership, not least because our existing housing stock is inefficiently occupied, most evident in increasing levels of under-occupation among older existing homeowners.

De-politicising a deeply political issue

Consistent cross-party support on where to deliver new homes, how many and in what tenures would be a massive step forward. But, in the real world that is probably too much to wish for.

The best we can hope for is a consistent housing policy over the lifetime of a parliament, backed by a genuine mandate to deliver 300,000 new homes a year, and an understanding of the role that housing delivery and regeneration can play in driving economic growth.

As part of that, we need investment in planning resources at a local and national level. There has to be much greater accountability for the delivery of local plans – 20 per cent of local authorities still have not adopted an NPPF compliant plan. To ensure this, local plan preparation should be backed by central government resource and be accompanied by a more streamlined approach to handling minor applications at a local level.

De-risking the planning process would help bring smaller and medium size housebuilders back into the fold. Meanwhile, ensuring sums earmarked for infrastructure improvements via Section 106 or CIL are used in a timely manner would help give local communities more confidence that developments won’t put undue pressure on existing resources.

First dibs for first time buyers – a workable solution?

A blanket right of first refusal for first time buyers on all new homes wouldn’t fit with the need to provide housing across a wide spectrum of demand. At worst, it risks slowing housing delivery, particularly if it were to slow the rate of sale, thereby limiting developers’ ability to build out future sites.

Arguably, there is a stronger case for designating a number of “first time buyer only homes” within each development; properties of a limited size or number of bedrooms, that could only be bought - and sold on to - those looking to get on the first rung of the housing ladder.

Importantly, the stalled Starter Homes scheme and low adoption to date of First Homes tells us that that this doesn’t work where a mandatory price discount is applied to pricing. Instead, pricing would ultimately need to be dictated by local first time buyers, ideally underpinned by a targeted mortgage guarantee as a gateway to competitive mortgage terms.

To ensure a balance of supply, these homes should be additional to existing affordable housing requirements and delivered alongside other new build homes for the wider market.

And it doesn’t stop there

Issues that have built up over decades cannot be solved by one or two isolated policy initiatives.

So we would advocate other measures:

• Targeted tax reliefs to turbo charge modular construction, so it genuinely adds to housebuilding capacity.
• Measures to encourage downsizing, especially where sums unlocked are used to help younger generations get on the housing ladder. That could be delivered through stamp duty relief or possibly even enhanced inheritance tax allowances, though legislation would need careful drafting. The aim would be to free up more family housing, unlock greater liquidity in our existing housing stock and facilitate a more effective transfer of existing housing wealth between generations.
• Relaxing restrictions on the tax reliefs given to landlords, but only where it is linked to minimum accommodation and service standards. That would help to improve the supply of good quality rental accommodation and reduce pressure on rents, giving would-be first time buyers more chance of saving towards a deposit.

There’s no simple answer to a complex question, and a range of strategies will be required.

Further information

Contact Lucian Cook or Emily Williams