Comment: First-time buyers are the lifeblood of the housing market
The Budget provides a vital first step, but the government must allow the free market to govern housing.
By Tim Collins
The budget announcement of a new scheme to help first-time buyers onto the housing ladder was a welcome one for house-builders and something the Home builders Federation (HBF) has been campaigning for since a similar scheme, Homebuy Direct, was scrapped last year.
To truly appreciate the potential impact of Firstbuy it is important to remember how deep in crisis housing is and the importance of first time buyers to the housing market.
Severely restricted mortgage supply has seen first-time buyer numbers plummet from around 800,000 to 200,000 last year. The average age of unassisted first-time buyers has soared and close to a fifth of women and a third of men aged between 20 and 34 are still living at home.
Government is limited in terms of what it can do to force lenders to increase lending and so helping first-time buyers needed to be in the form of direct assistance. First-time buyers are the lifeblood of the housing market with each transaction having knock on effects further up the chain and creating churn, something which is desperately needed at the moment.
First-time buyers are also crucial to house-building, itself in a slump. Last year saw the lowest number of house completions since 1923 – just 103,000 – in an industry which even in its current state is around three per cent of GDP and which helps maintain around one and a half million jobs. This completion rate does not compare favourably with government household projections – which state that 232,000 new households are being created each year – or industry experts who believe that the housing shortfall is already approaching one million.
So Firstbuy will help a significant number of first time buyers – around 10,000 – to buy their first home and stimulate house-building across the country. These homes could represent more than 50,000 desperately needed jobs, either directly or through the supply chain. Communities who welcome these new houses will also gain from the government’s financial incentive, the new homes bonus. Socially too, this scheme will allow young people to meet their aspiration of owning their own home enabling them to move out of their parents’ homes and start families.
Firstbuy is, of course, a relatively short-term sticking plaster for wider systemic problems in housing and planning. We need to see the government go further, faster in terms of planning reform and removal of the endless reams of regulation that are currently strangling housing construction. Just five per cent of planning applications go ahead without difficulties and the cost of red tape is currently as high as the cost of constructing a house. The introduction of Firstbuy has shown the government is listening and it has made some of the right noises about planning and regulation too but it needs to have the courage to follow through and allow a free market and competition to govern housing and tackle the housing crisis.
Firstbuy is a welcome first step but increasing housing supply in the long term is going to need radical, courageous government.
Tim Collins is deputy director of external affairs at the Home builders Federation.
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