Shortly before the Conservative Party conference in 2013, the then Prime Minister, David Cameron, said “talk of a housing bubble to people here in Manchester or Salford, and they would literally laugh in your face”. Just a 40 minute drive away in St Helens, house prices increased by 9.1% between 2012-2014. It is no coincidence that St Helens is one of the top twenty local authority areas where ‘Help-to-Buy’ has been used, according to research by the housing charity Shelter. As times goes on, it is becoming more and more clear that ‘Help-to-Buy’ is the wrong answer to the UK’s housing crisis.
The Help-to-buy Equity Loan Scheme reached its fifth birthday on 1st April 2017. According to statistics compiled by the Department for Communities and Local Government (DCLG), it has been used in the purchase of 138,558 properties. Under the ‘Help-to-Buy’ equity loan scheme, people in England trying to buy a new-build property that requires a 5% deposit can take out a 20% loan from the government (40% in London) and cover the rest with a mortgage. This may sound like cause for celebration or headline fodder for the right-wing press. However, a closer look at these statistics tells a very different story.
Shelter have criticised ‘Help-to-Buy’, saying that the scheme “barely helped the first-time buyers it is targeted at”. When you consider the household incomes of those who have successfully used ‘Help-to-Buy’ this certainly rings true. Between April 2013 and June 2017, Nearly three quarters (73%) of those who bought their first home with the’ Help-to-Buy’ Equity Loan, had a household income of between £30,000-£80,000. Two adults on minimum wage jobs would not fall into this income bracket.
Even with the assistance that ‘Help-to-Buy’ affords, it is likely that homeownership will stay out of reach for many in London and the South East for the time being. The UK government collates house price information and regularly updates the The Housing Price Index (HPI). In July 2017, according to the HPI, the average cost of a house in London was £488,729 for the South East it was £320,905. The vast majority (88%) of properties bought using ‘Help-to-Buy had a market value of less than £350,000.
Much like the ‘Right-to-Buy’ policy enacted under the Thatcher Government, in its present form ‘Help-to-Buy’ stands to further entrench the inequalities between the “have houses” and the “have-nots”. Take for instance Ashfield in Nottinghamshire, a former mining area that experienced a 9.5% increase in house prices between 2012-2014. In September 2015, Ashfield had the second highest use of ‘Help-to-Buy’ in property transactions in any local authority area in England. If this trend continues, will areas like Ashfield continue to have affordable housing for local people?
It appears that Help-to-Buy has done little to stymie the growth of the private rental sector. Currently five million households live in properties owned by a private landlord this is set to rise to almost six million by 2021. Renting in the private sector is lightly regulated and anecdotal evidence of abuse and poor practice by landlords are abundant. Most tenancies in this sector are for 6-12 months. However, Landlords can often decide to sell up and turf out tenants with less 12 weeks notice. This is not the case in other wealthy nations such as Germany, where thanks to rent-controls amongst other measures, renters are endowed with far greater security. This is why it so welcome and necessary that Labour argued for reform to the private rental sector in the General Election earlier this year. In their 2017 Manifesto Labour advanced progressive policies such as making three-year tenancies the norm and inflation cap on rent rises.
In the Autumn budget on the 22nd November, the chancellor announced an end to stamp duty on first-time buyers buying a home of up to £300,000. Much like to Help-to-Buy this is just a plaster over the wound and may even serve to make matters worse. As a country, we need to rethink the desirability of home-ownership and radically reform the rental sector. We need a Corbyn-led government.