The government’s trumpeted new First Homes scheme proposes to give key workers and first-time buyers in England the chance to buy a home in their local area at a 30% discount….a saving of up to £100,00 in some cases.
The Coronavirus drama has, if nothing else, taught us who the nation’s heroes really are. Hopefully in the New Norm people will care a lot, lot less about reality TV stars, socialites and footballers and more about the people in society that keep what actually matters running – the key workers. Add onto that the first-time buyers, increasingly squeezed out of the market through simple supply and demand economics and, on the surface, the First Homes scheme is a sweet idea. Helping those that need the help most.
While the exact details of how the scheme will operate are still unclear, the Government has indicated that it will impose a price cap on the properties available through First Homes to ensure the initiative helps those who would benefit most from it – those at the bottom of the homebuying ladder.
On that level it’s a great idea…but real life rarely does what you want it to and there’s often a catch. Take a look at the Help to Buy scheme that’s been running for a number of years now. The government will proudly announce that the scheme has helped tens of thousands of first time buyers onto the ladder. And indeed it has…at the cost of a rise in house prices in the ‘affordable’ sector the scheme is intended to help.
Again, it boils down to supply and demand. Well-meaning schemes swell the numbers of would-be buyers; new housing delivery fails to keep pace; prices go up; some homeowners climb onto the ladder whilst others become even more marginalised or unable to move upwards; the biggest winners are the developers, able to charge higher and higher for their product.
Will the First Homes scheme have a similar effect on the market? I suspect it will. Great for those that can actually take advantage of it – and good luck to them – but not so good for everybody else.
Incentives to buy should be preceded by incentives to build. Get the housing stock there in the first place, then reward those that truly deserve it with incentives to buy. At Hilltop a large number of the units for which our developers are seeking property development finance qualify for the Help to Buy equity loan, which is great, but the age-old problem will remain for some time yet: not enough homes are being built. Deal with that and everything else becomes plainer sailing.