Residential Property Focus

Residential Property Focus
 
From Generation Rent To Generation Buy?

24 February 2016, by Lucian Cook

The Government wants a million new homes built in England by 2020, but its current policies risk undermining this stated goal

 

There is nothing like a target to focus the mind. Last year, the newly elected conservative government set themselves several in an attempt to tackle the housing crisis and get more new homes built over the course of this parliament.

The numbers are ambitious. The Government says it wants a million new homes built in England by 2020. Of these, 400,000 will be “affordable” homes focused on turning ‘generation rent’ into ‘generation buy’.

A number of new policies have been announced with the intention of delivering these aims. There is a target to deliver 200,000 Starter Homes, which will be sold at 20% discount to first-time buyers under 40. The criteria for shared ownership schemes, where buyers purchase a portion of a home and pay rent on the remainder, will be broadened to enable the building of 135,000 new homes under this tenure.

In London, the Help to Buy scheme has been beefed up to enable buyers to obtain a 40% equity loan on their purchase, up from the previous limit of 20%. In England, the scheme has been extended for the second time until 2021.

These are headline grabbing announcements. But will the changes deliver more housing?

FIGURE 3

Help to Buy Equity Loan in London

 
Figure 3

Source: Savills Research using HM Land Registry

Details on how these schemes will function and interact are still scant. However, our initial analysis suggests that there is an overlap between the parts of the market likely to be served by Help to Buy, Starter Homes and shared ownership.

Replacing homes that would have been delivered anyway through existing routes will not provide additional homes. Furthermore, there is a risk that Starter Homes could distort the new homes market. Development schemes where there are a large number of Starter Homes for sale may have an impact on values of competing homes nearby.

In the year to March 2015, we delivered 170,000 new homes in England, including conversions. This is well below the 245,000 new homes we need a year compared to the Holmans assessment for the TCPA. The best way to boost housebuilding is to encourage a diversity of tenure, including homes for rent. Current policy takes us in the opposite direction.

For more information see Policy Response: The Impact of New Housing Measures on Development

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