A few days before the beginning of his party’s annual conference, David Cameron pledged to create a scheme allowing 100,000 first-time buyers under the age of 40 to purchase homes at a 20% discount. David Kingman reports on this potentially exciting news for would-be first-time buyers
The Prime Minister David Cameron has pledged to do more to help would-be first-time buyers get on the housing ladder if he is elected for a second term. Under a new scheme he has recently announced, up to 100,000 of them would be able to purchase a new house at 20% below its market value.
Is this an idea that the politicians should build on? Or do they need to go back to the drawing board?
Tax breaks
The announcement of this policy will come as welcome news to the millions of young people who are forced to live at home, often delaying getting married or starting a family, while they wait to be able to afford somewhere to live.
Although the details of this new policy are still somewhat sketchy, it appears that this discount would only apply to new-build properties. It would be an extension of the Government’s controversial Help to Buy mortgage guarantee scheme, although that is UK-wide, whereas the new scheme would only apply in England.
According to the Prime Minister’s speech, the new homes would be built on a mixture of brownfield sites that have already been earmarked for housing development, and redundant land owned by the public sector. The developers who build these homes would also receive substantial tax breaks and exemptions from typical planning requirements, such as the community infrastructure levy and the requirement to provide social housing units as part of the development.
In announcing this policy, Mr Cameron emphasised that he believes it is crucial that young adults who aspire to get on the housing ladder should be able to do so more easily than they can now. As he said in his speech:
“I want young people who work hard, who do the right thing, to be able to buy a home of their own. So these starter homes will be sold at 20% less than the market value. They can’t be bought by foreigners, they can’t be bought by buy-to-let landlords, they can’t be flipped round in a quick sale. They can only be bought by hard working people under the age of 40.”
A step in the right direction?
In principle, this sounds like a good policy from the point of view of would-be first-time buyers, a proportion of whom may be able to start looking forward to the day when they can finally hold the keys to a home of their own.
However, the information which has been released so far leaves many questions unanswered as to how this policy might actually work in practice. To begin with, the Prime Minister made it clear that he wants all of these homes to benefit genuine first-time buyers rather than property investors, but this may be hard to guarantee in reality. For another, it will depend to a large extent upon private sector housing developers getting behind the scheme, but whether the incentives the Prime Minister mentioned will be enough to galvanise them remains to be seen.
Even if the scheme does work out in the way that the Prime Minister intends, subsidising 100,000 people to get on the housing ladder should only be seen as a small gesture in the wider context of Britain’s housing crisis, where millions of people facing all kinds of different circumstances are struggling to get the type of housing they need from Britain’s dysfunctional property market. Given that it will require the next government to invest significant political capital to get this scheme off the ground, it is worth asking whether it would be better spent trying to make more fundamental changes to the system.
Having said all that, the most interesting thing about this announcement is that it shows clearly that housing is going to be front and centre of the campaigns at the next general election. All the major political parties appear to have realised that housing is such a crucial issue for so many young voters that they are putting real effort into trying to appeal to them.
Given the low priority that housing has often had in the past for politicians, this is a positive development (and a triumph for the publicity campaigns led by groups such as IF, Shelter and Priced Out). Of course, whether it leads to concrete actions once all the campaigns have come to an end will be the real test of the politicians’ commitment.