The Prime Minister couldn’t have been clearer to the Labour Party conference hall: he intends to end our broken housing system. Just as he said on the steps of Downing Street, he remains committed to ending rough sleeping. But he went further and more personal, sharing the legacy of his parent’s decent home in Keble Drive in Old Roan. How that home ensured his family could fulfil the aspirations that led him to that conference hall.
He outlined more policy on building council homes, helping councils access public land, reforming Right to Buy and restoring the quality of our social housing stock. He indicated going further on the Renters’ Rights Act, with new powers to allow councils to acquire rented homes from slum landlords.
It’s worth noting how his policies are now in complete contrast to the Opposition. Ahead of her own party conference, Kemi Badenoch pledged to end the requirement for developers to contribute to affordable housing when building their penthouses. She also committed to removing rules that made those homes easy to keep warm and cool in. As Burnham is showing how Labour can bring hope back, the Tories are embarking on a relentless raid on aspiration.
That said, there was one potential fly in the ointment of the Prime Minister’s vision for housing. He also announced the new Your First Home scheme, explaining it would “reduce the size of the deposit you need.”
On the surface, this seems an inherently sensible policy. Too many young families are stuck in the private rented sector – something which should be a choice has become their only option. Each month they pay their rent which, often, then pays off their landlord’s mortgage. Why not help them into ownership?
But is this scheme a new idea, or is it a reheated programme from the George Osborne era? And if so, how can past mistakes be avoided?
Is this Help to Buy 2.0?
In 2013, Help to Buy constituted £3.5bn of the government’s spending on housing, dwarfing all other measures. Most critically, it arguably contributed to the loss of 260,000 social homes over the following decade by diverting away the funds that would have paid for more social homes.
Evaluations from the IFS and Shelter, have shown the failings of the scheme. The money often helped those ‘almost owning’ at the expense of the ‘almost homeless’. If Help to Buy’s 2013 spending commitment had been invested in social housing it could have resulted in around 35,000 new homes for homeless young people.
Help to Buy may have been a loan rather than a grant, intended to boomerang back to government coffers in the end, but it still took up most of the Cameron-era housing budget. Worse, as the loan was linked to the house prices, many of the supposed beneficiaries had to pay more for their loan as the scheme inflated their home’s worth without benefiting them. Some defaulted and lost their home.
But didn’t Help to Buy work?
A recent Government-led evaluation of Help to Buy, claimed the policy added value. But it is critical to know what question the paper was answering. It was tasked to see if Help to Buy added value in isolation of other policies. Yes, Help to Buy did subsidise some first time buyers. But that doesn’t make it a more efficient use of limited Government funds than other schemes would have been. When I eat a Mars bar, I take calories on board. It doesn’t mean that was the most healthy or efficient choice for my dinner or my budget.
Building our way to affordability?
Help to Buy made more sense if you look at the challenge the Cameron Government set itself. This Government, like many before it, has made a commitment to increase the raw supply of homes in this country over the kind of genuinely affordable homes needed.
The argument for raw supply has come from think tanks and developers, and think tanks funded by developers. It is a simple one – build more homes, and homes will begin costing less. But it doesn’t follow the logic of supply and demand. Last year, according to Savills, over 200,000 new homes were delivered in England. But there are almost 36 million dwellings in England. What happens to the price of goods when the supply of it is increased by 0.5%? Nothing whatsoever.
Homes don’t work like the iPhone. People rushing out to buy a fancy foldable model may well then put their old phone on Backmarket for thrifty folk to snap up at a discount. That’s not what happens when a Saudi investment company unloads its Mayfair property assets. They are traded off to someone else, holding or increasing their value, and over 170,000 children in England remain without a home.
Is the Government repeating past mistakes?
It’s clear the Labour Government is not suggesting a copy and paste of Help to Buy. Critically, they’re not betting the house on it. As Burnham’s speech made clear, Your First Home sits within an array of progressive policies to fix the Private Rented Sector and grow back our quantity of social homes. The offer will also have more sensible caps on who the offer is for based on their income as well as the price of the home it can be used on.
But this does not mean the scheme is without risk and not in need of careful thought. Taking on a mortgage with only a 2.5% deposit is something first time buyers should consider carefully, particularly in a time of global economic uncertainty and the risk of high inflation. In the end, this scheme’s role must be recognised as limited and specific. It’s clear this Government has the right ambition for solving our housing crisis, and because of that, the Your First Home scheme should always be seen as the support, not the headline, act.
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