The Help to Buy (HTB) equity loan helped almost 40,000 first-time buyers across England access home ownership in the year to March 2017, accounting for around one in five new homes.
Take-up was highest in the East Midlands, where it supported sales equivalent to 29 per cent of all new homes built. By contrast, in London, where affordability pressures present the greatest challenge to first-time buyers, fewer than 3,000 buyers used the scheme, just 7.5 per cent of the total up-take across the country and accounting for only 10 per cent of all new homes built in the capital.
As the graph below shows, the earliest few months of HTB in 2013, first-time buyers using the scheme had the same average household income as first-time buyers as a whole. Since then, the gap has widened up a bit, and it seems likely that users of HTB increasingly include households needing family homes, with higher incomes than younger first-time buyers.
The average first-time buyer purchase using HTB in Q3 2017 had a household income just under £49,000. This is some £6,000 higher than the average for all first-time buyers across England at just under £43,000.
Source: MHCLG, UK Finance
As the graph below shows, it’s a different story in London. The doubling of the equity loan to 40 per cent in Q1 2016 triggered a decrease in applicant household incomes from £75,000 in Q1 2016 to £63,000 in Q3 2017, a 16 per cent drop. This shows that increasing the size of the equity loan opened access to HTB – and home ownership – to less wealthy households.
Source: MHCLG, UK Finance
There were 1,902 HTB sales in London the year before the Government extended the loan to 40 per cent. The year after, there were 2,993 HTB sales: an increase of 57 per cent. But does this mean the scheme is just helping high earners buy bigger and more expensive homes than they need? We believe it’s much more nuanced than that.
Just because someone can afford a home without support doesn’t mean the house they can afford will meet their needs. A couple with a child, for instance, might be able to afford a one-bedroom flat, but that’s clearly not ideal. The choice for that household is buying a two-bedroom (or larger) home with HTB or continuing to rent. In cases like this, HTB provides a real benefit.
The Government has put housing at the top of its domestic policy agenda. To date, much of the attention and funding has been to support home ownership. But fixing our broken housing market will take more than just Help to Buy, which can only help those earning enough to secure and service a mortgage. We need a range of policies that support housing delivery across a range of tenures if we want to see an end to the housing crisis.