Labour leader Ed Miliband has announced that his party will attempt to help would-be first-time buyers by creating a new Future Homes Investment Fund to stimulate housebuilding if Labour forms a government after the upcoming general election. The party claims that this could unlock the development of an additional 125,000 new homes aimed at first-time buyers, making it a central plank of their pledge to get Britain building 200,000 new homes per year for first-time buyers by the end of the next parliament.
Money saved in ISAs
According to the details Labour have released so far, The Future Homes Investment Fund scheme would build on the new Help-to-Buy ISAs, which the government announced during the Budget speech in March.
Under that scheme, the government plans to reward young people who are saving to buy their first home by, in effect, giving them back the 25% tax they will have paid on the money they save in the form of a financial top-up (the government’s potential contribution is capped at £3,000 per person).
Labour is proposing that the Future Homes Investment Fund could be created by compelling the banks and building societies that offer these ISA accounts to direct the money held in the accounts towards providing development capital for private housebuilders. The party argues that this should unlock £5 billion worth of money that could be loaned to the housebuilders, which the government would underwrite.
The most positive aspect of this idea is that it would address one of the most frequent criticisms of the Help-to-Buy ISA scheme, which is that it will simply stimulate increased demand for housing without doing anything to improve supply. The party also says that the developers would have to give priority when selling homes financed through the Future Homes Investment Fund to first-time buyers who are saving through the Help-to-Buy ISA scheme.
The Future Homes Investment Fund has also clearly been designed to complement several of Labour’s other policies which aim to stimulate housebuilding, such as the creation of new housing growth areas and the promotion of new garden cities, alongside the party’s plan to give local authorities new legal powers to force housebuilders to develop land they own which has already been given planning permission.
Announcing the policy at a speech in Warrington, the Labour leader highlighted the intergenerational impacts of Britain’s housing crisis:
“There’s no bigger symbol that our country doesn’t work for working people than young people not being able to get a start with a home of their own. We’re going to turn it round and build the kind of country in which we can all be proud. Investing in our future, investing in the next generation, giving hope back to young people and restoring the promise of Britain.”
Another sticking-plaster solution?
The announcement of the Future Homes Investment Fund can be taken as the clearest indication yet that all the main parties have realised that housing is a major issue for large parts of the electorate, and that trying to fix Britain’s housing crisis is the best way of wooing younger voters.
However, the same criticism that has been directed at the government’s various Help-to-Buy schemes could also be levelled at the Future Homes Investment Fund: that they are merely expensive sticking-plaster solutions which attempt to help a relatively small number of voters by offering them access to the housing market at a discount, without really doing anything to challenge the fundamental problem that prices are too high.
Given that addressing high house prices would inevitably involve challenging the interests of today’s owner-occupiers, you can understand why no party is keen to do so before a general election. But until one of the parties is brave enough to say that the fundamental problem with Britain’s housing market is that housing has become unaffordable – and prices will probably have to come down in the long-run – we can’t expect any of the real issues to be solved.