Budget Watch: (5) Home ownership: Reform of Right to Buy and Mortgage Support Schemes
Right to Buy may not seem like a budget issue, but the operation of the current right to buy programme directly affects the viability of new developments. For example, a council could build a new council home and take on long term debt to finance it, only to find themselves compelled to sell it after 3 years at a knockdown price.
The Housing & Finance Institute have called for Right to Buy reform in relation to new build council housing in its budget publication for the March Budget 2024. There are a number of further reforms that have been set out in our HFI Right to Buy reform short read "A Fairer Right to Buy" that could modernise the effectiveness and accessibility of home ownership for council and low income households.
Turning to Mortgage Support schemes, these have long been a feature of the housing markets. From MIRAS in the 1980s to the Help to Buy Family of mortgage support products in recent years, government support has been a key feature in the delivery of new homes and supporting access to the housing ladder for lower and middle income families.
The HBF's September report Broken Ladder sets out the challenges – and possibilities- for targeted mortgage support schemes for home ownership.
Access to home ownership directly affects the confidence of housebuilders in bringing forward new schemes. Put simply, if fewer people can buy a home because they can't access a mortgage due to high interest rates or lack of a deposit, fewer homes for sale will be built for the private sales markets.
Home Builders Federation (HBF) chief executive, Neil Jefferson has been calling for a new type of support scheme. He says: "This latest analysis [in HBF's research paper Broken Ladder] lays bare the reality of the affordability challenges facing younger generations struggling to access the housing market. The uncomfortable truth is that homeownership is being pushed out of reach of many – particularly those without the support of family wealth.
"Whilst Government's recent moves to tackle long-standing challenges within the planning system are welcome, action is needed to help people get a foot on to the property ladder. The lack of affordable mortgage availability is stifling the market and snuffing out homeownership aspirations."
The Labour manifesto contained a commitment to "work with local authorities to give first-time buyers the first chance to buy homes and end the farce of entire developments being sold off to international investors before houses are even built. And we will introduce a permanent, comprehensive mortgage guarantee scheme, to support first-time buyers who struggle to save for a large deposit, with lower mortgage costs."
Whether there is something for new homeowners and would-be buyers in the Budget is therefore an area to watch.
