Theresa May pledged at her opening conference speech on Monday that Government would invest a further £10 bn by 2021 in the Help to Buy scheme which allows people to purchase homes with five percent deposits supported by twenty percent equity loans from the state. The Government claims this will help an additional 135 000 to buy homes by 2021.
Some young people currently unable to afford deposits will no doubt be assisted by this new investment. Around 130,000 have already bought through the scheme since 2013, and the Government claims 80 percent of these are first-time buyers.
However the major beneficiaries of the initiative will be existing home owners – who will see their property values rise once again – and housebuilding companies which, according to Aime Williams of the FT, saw £1bn added to their market value on Monday after the announcement. Shares in companies across the sector rose by an average 2.6 percent at the same time.
Although some young people will benefit from the initiative it will be at the cost of the majority who will find home prices rising further out of their reach as a result of the new hike to the property market.
According to research by the Resolution Foundation, previous recipients of Help to Buy Equity loans had median household incomes of £43,000, way above the £23,780 median for low to medium income households in the 2013 -2016 period. Only one in five of the recipients came from this household income bracket. The median disposable income for all households headed by young people aged 25–29 was just of £31,000, as reported by ONS in 2015, and the figure has been declining in real terms, and by comparison with retired household incomes. So relatively few will benefit from this measure, while prices will continue to rise beyond the reach of most.
The measure might seem like a win-win to Tory supporters since it will appeal to home-owners, estate agents and lenders and building companies alike, whilst giving some hope to a portion of young people, whose votes the party desperately needs to win back. However, it will do nothing to alleviate Britain’s housing crisis overall, while raising private debt closer to the levels that detonated the last financial crisis in 2007/8. At the same time it will do little to reassure the majority of those voters under 45 who have little confidence that the Party serves their interests.
The recent survey by Opinium for the Social Market Foundation found that only 19 percent of voters under 45 think the Tories are on their side (as against 50 percent thinking Labour is). The results have apparently finally woken up Conservative strategists to the problem of intergenerational inequality and the younger voters. Hence the new pledge on Help to Buy and a new announcement in May’s Conference speech yesterday pledging £2bn for “new generation” council housing and affordable homes to rent.
But they are going to have to adopt much more radical and politically controversial policies on housing if they wish to win back the trust of the younger half of the electorate. As my recent book, The Crisis for Young People: Generational Inequality in Education, Work, Housing and Welfare, argues, only reforms to property taxation will bring down property prices and enable the majority of young people to become home owners again. Only a radical re-regulation of the private rental sector is going to help the others.