After several delays, the Government’s Housing White Paper was finally published, with Secretary of State for Communities and Local Government, Sajid Javid, promising a “bold, radical vision to fix the broken housing market”. The report was a lengthy 104 pages, looking at all kinds of issues, many of which affect first time buyers – such as the Starter Homes initiative, cash ISAs and even the growing rented sector accommodation – but will the proposed changes make any difference for the many still struggling to get on to the property ladder?
In his Autumn Statement last year, Chancellor Philip Hammond had already promised investment into all types of housing, but with details remaining vague whilst we eagerly awaited the Housing White Paper. The Government had already given the go-ahead for thousands of Starter Homes; 200,000 properties reserved for first time buyers, with discounts of 20%, which will be built by 2020, but the White Paper specified that these homes will only be available to those with household incomes of less than £80,000, or £90,000 in London.
Reactions to the detail can best be described as ‘mixed’, ranging from lukewarm welcomes and cautious optimism right down to a ‘slap in the face’ for buyers. Unravelling what the jargon actually means for the UK property market is challenging, but the White Paper certainly covered more ground than many previous initiatives, touching on issues rarely debated before such as downsizing and the booming build to rent sector.
Acknowledging housing need
Recognising the extent of the housing shortage is a start and many developers welcome the news that the Government has set itself targets to deliver 225,000 and 275,000 new homes each year, but many are concerned that previous pledges have failed to deliver. With only 163,940 housing completions in England in 2015-16, the Government is a long way off the target of providing one million new homes by 2020. At the moment, around 60% of all new homes are built by the UK’s 10 biggest housing developers and many experts would like to see changes to planning system regulations, freeing up the system, so that smaller housebuilders can deliver new housing. Last year the Government promised cash to help smaller companies compete in the market, but they want to broaden this and encourage local authorities and housing associations to play their part and build the UK’s much needed homes.
As house prices rise and salaries fail to keep pace with inflation, a lack of supply of affordable homes is making homeownership unattainable for many. Large-scale Build to Rent developments, specifically built to be rented accommodation, are increasingly being touted as ‘the answer to the housing crisis’. It was hoped that the White Paper would deliver a change in thinking for the UK, traditionally a nation of home owners, that renting – and therefore, mass investment into this sector – could deliver a promising set of initiatives. Again, response to the proposals were mixed. There were hopes for more security for renters, with options of longer term tenancies, but Sajid Javid restricted these to new, purpose-built, private rented housing – ‘the bare minimum’, as far as some experts were concerned – pointing out that these institutional investors building homes for rent are already keen to encourage long-term tenants, and it will typically be the better-off who can afford to rent them. A study by flatshare.co.uk found that 66% of renters would be happy to rent long-term, if there wasn’t the pressure to buy, an increase from 53% just two years ago. And, while the Government is starting to look at the long-term picture in terms of renting and affordability, the White Paper didn’t go as far as tackling the core of the problem – huge renting costs and stagnant wages.
Downsizing and empty rooms
Many property experts were hoping for a clear outline as to how the Government will shift from policies that subsidise living, to policies that affect long-term change in the rental sector and genuinely make housing more affordable for everyone. Flatshare.co.uk point out that there are 19 million empty bedrooms in owner-occupied homes in England alone. Building more houses is essential, they say, but making better use of existing stock is also crucial.
The Government reaffirmed its financial support for first timers, with a reminder about its Lifetime ISA. In April, they will launch the tax-free savings account, which rewards savers with a 25% bonus on savings of up to £4,000 a year.
There was disappointment that there were no changes to Stamp Duty, which many believe is deterring people from moving house. This is especially pertinent to older homeowners, often still occupying larger houses, yet with little incentive to move due to high Stamp Duty. There were calls across the industry for the Government to offer Stamp Duty incentives for downsizers and first time buyers, which many believe will help get the market moving. Last year, the Government imposed extra Stamp Duty of 3% on landlords and owners of second homes, but there are concerns that this could consequently deter landlords form entering the market, which could further limit the supply of rented homes and, therefore, drive up rents.
House prices are a key concern for first time buyers and, in 2016, there was a 7.2% annual rise in values over the year, according to the latest statistics from Search Acumen. There was some surprise over the increase, as 2016 was undoubtedly a year full of uncertainty, not least because of Brexit. Some warn that this is not the sign of a healthy market, but is really attributable to the failure to build enough homes to meet demand. Interest rates are at record lows and yet many young people still cannot afford to get on to the ladder, because prices are rising faster than incomes, with no hopes for the year ahead. There are some flickers of good news, however; first time buyers borrowed £53.2bn for homeowner house purchases in 2016, up 13% on 2015. This totalled 338,900 loans, up 8% from the previous year. First time buyers borrowed more in 2016 than any other year, since records began in 1974.