09 Jun 2021

The government launches ‘Own Your Home’

Ever since Margaret Thatcher declared her belief in a ‘property-owning democracy’ and introduced the Right to Buy in 1980, we have been a nation increasingly obsessed with homeownership. The idea of a home as an investment and a way to make money rather than as a place to live is pervasive, as is the idea that home ownership as a tenure is somehow ‘superior’ and what we should all be aiming for.  The pressure to get on the housing ladder is significant and given the exponential increase in house prices (particularly in certain areas) over several decades, getting onto the ladder is also utterly unattainable for many. Successive conservative governments have been ‘homeowner focused’ and Boris Johnson’s government is no exception.  Providing schemes for first-time buyers to get onto the market is a vote winner, despite perhaps sometimes being dislocated from the reality of where the real ‘need’ in housing lies in this country.

Own Your Home 

The government recently launched the ‘Own Your Home’ campaign with the key objective of raising awareness and understanding of the different government schemes available. The campaign directs the public to the new Own Your Home website which provides details on a variety of avenues available, including  First Homes, Help to Buy, Help to Build, Shared Ownership, Lifetime ISAs, plus much more. It also offers advice, tips, and buyers’ stories.

The country is experiencing a chronic undersupply of new homes to buy and to rent. For many years, the level of house building has fallen short of the numbers needed to keep pace with demand. ‘The bank of mum and dad’ is a term we have all become familiar with as the deposits required to get on the housing ladder have risen outside the reach of many first-time buyers.  In recent years there has been a significant increase in young adults living with their parents for longer, and an increase in long-term renting with people in their 30s and 40s being three times more likely to be renting than 20 years ago.

Will generation rent become generation buy? 

The government’s ambition to increase housing supply, tackle affordability and help first-time buyers to become homeowners feels like a good thing. The Own Your Home website is easy to navigate and a helpful way of pulling together all the schemes to a single point of reference. However, there are also some fundamental questions to be asked. Will all of this actually help generation rent become generation buy and support those it claims to be aimed at? We have seen that despite the good intentions of First Homes, the scheme, whilst undoubtedly benefiting some people, actually exacerbated some of the factors it was trying to overcome. In the case of Help to Buy, it elevated prices through a new-build premium. New-build properties typically cost about 15-20 per cent more than the equivalent lived-in home, so buyers who want to sell their property soon after purchase are often in negative equity as this premium drops away. The National Audit Office review also found that the scheme’s broad participation criteria allowed many people (around three-fifths of buyers) who did not need financial help to buy a property to benefit from this scheme.

The gap between average wages and affordability is staggering in some locations. In some local authority areas house prices are more than ten times average incomes. Discounted market schemes will still mean that home ownership is well out of reach of many potential first-time buyers and key workers in these areas even if the depth of the discount is 30 or even 40 percent. For example, in London’s Kensington and Chelsea, the average house prices are estimated to be 39.6 times average annual earnings. Also, if the depth of the discount is too great, first-time buyers find themselves trapped in their first property unable to move on to a larger home as their family grows because the jump to the next property without a discount is too great.   

The need for more homes at genuinely affordable rents

Government investment is unfairly skewed towards the private sector. Whilst the UK Housing Review 2021 shows that this has improved to more than 40 per cent of investment being for affordable housing, most of this is aimed at promoting low cost home ownership.  But it is the need for homes at genuinely affordable rents which is most pressing. The latest research shows that we need to build 90,000 homes for social rent each year in England over the next 15 years to address housing need, a need which is likely to increase as a result of the coronavirus pandemic. The National Housing Federation’s 'People in housing need' report published in September 2020 shows that nearly eight million people in England have some form of housing need. For more than 3.8 million of these people, social rented housing would be the most appropriate tenure to address this. Investing in new homes at social rents would not only meet those identified housing needs it would also deliver a much-needed boost to the post-COVID-19 economy. Building 90,000 new social homes a year would add £4.8bn to the national economy and support 86,000 jobs.  Unlike market housing, social housing is particularly suitable for rapid build-out.  Research by Lichfields has shown that housing sites with a larger proportion of affordable homes deliver more quickly.

The supply of social rented homes (council housing and housing association homes let at genuinely affordable ‘social’ rents) has fallen by almost 210,000 in England between 2012 and 2020. Despite 70,000 new social rented homes being built, over 280,000 have either been sold, converted to higher rents, or demolished since April 2012, creating a net loss of 209,351. The biggest reasons for this loss being the Right to Buy.  Suspending the Right to Buy for a period of time would allow replacement to catch up with losses, and yet the government is pressing forward promoting this scheme.

The government could provide increased support for other forms of housing which would, in turn, provide more homes for families and first-time buyers, therefore easing the current situation. For example, if independent living and extra care were better resourced and supported, more older people would be moving out of their family homes and this would free up their houses for younger people. This would help the flow through the housing market, aid affordability as these would be homes without the new homes premium, and would likely be within existing communities where there is already infrastructure.

Own Your Home will initially run from 24 May until end of July. The aim of making home ownership more affordable and accessible is to be applauded. However, I can’t help but wonder if many of these schemes will actually just provide a helpful leg up to those who would have probably gone on to home ownership eventually anyway, rather than really benefiting those whose need is greatest in our society.