Changes to affordable housing are afoot, but who do they actually help?

By Laura Sears

In December 2020, the average price of a home increased by 8.5% to reach a high of £252,000 - £20,000 higher than Christmas 2019 – the fastest rate of growth since 2014. 

As people spend more time at home, they’re increasingly aware of the challenges faced in their space, and many have taken the opportunity to speed up a move to pastures greener, or skip the first rung altogether and jump straight into a family home with more space to work and play. 

However, with the removal of many high loan-to-value (LTV) mortgage offers in the last year, products allowing purchasers to put down a deposit of 10% or less are now rare. They’re slowly returning, with 277 90% LTV mortgage products on the market, but that’s still a fraction of what was available a year prior. Enter stage right: affordable housing purchase schemes. 

In 2020, 17.2% of all first-time buyers used either a Help to Buy equity loan or Shared Ownership to get on the property ladder, with use of the former scheme doubling between Q2 and Q3, likely as a result of the reduced choice in mortgage products and a desire to move more quickly. 

Last autumn, the housing minister Robert Jenrick announced plans to alter both schemes, which will come into force at the beginning of April 2021, as part of the Government’s drive to get more people onto the housing ladder. 

The new Help to Buy (HTB) scheme will be restricted to first-time buyers, where it was previously open to all, and will operate with regional price caps instead of a blanket cap of £450,000 (or £600,000 in London, though this remains the cap after April). 

The shared ownership scheme, meanwhile, will allow purchasers to buy a small minimum share of just 10% compared to the current 25%, and will allow staircasing (buying more shares in your property) in instalments of 1%, rather than 5% or 10% as it stands today. Based on today’s average property prices, this could mean people can get onto the ladder with just £1,246 as a deposit, just 2% of the national average of £57,278 put down by a first-time buyer in 2020 – an attractive prospect for those hoping to get on the ladder in 2021. 

One of the previous criticisms of the HTB scheme in particular is that, in being open to all, second steppers and those higher up the ladder were taking up the stock meant for those lower down the rungs when either they had larger deposits and didn’t need to use the scheme, or were buying houses bigger than their needs allowed simply because they could now afford it.

Shared ownership, in my experience, typically has the opposite problem, being heavily marketed at those trying to get onto the ladder rather than up it. It has an image problem as being solely for first time buyers, when actually it’s open to all. Working with housing associations, we’re sensing that it’s Shared Ownership’s time to shine and fill the void being left by HTB when it changes next month.  

While I agree that more needs to be done to help those of us trying desperately to get into home ownership, I can’t help but wonder where this leaves the “squeezed middle”, those who bought their one-bedroom apartments a few years ago and are now stuck in a place too small for their needs (building quality issues notwithstanding), unable to afford to buy a bigger property for their growing families, for example. 

The Tory manifesto speaks loudly about aiding more of us into home ownership, which is great - more of that please Mr Jenrick - but then what? How do we move on up to free those properties for the next generation of buyers, if we can’t afford them? There’s only so many shared ownership houses to go around, and they’re very limited in London! It’s all well and good getting people on the ladder, but we cannot forget about those already on it.

If the cheers received for the two-month extension of the previous HTB scheme (for those already committed to buying) isn’t enough of a tell that something needs to give, I’m not sure what does.