By Louise Drew, partner and head of building communities at Shakespeare Martineau
With its aim of increasing housing affordability, the Government’s First Homes initiative is a positive step that will help to get young people onto the housing ladder. However, the UK’s housing crisis is a complex issue that will require a much broader approach, considering the demands and needs of all ages of the population, not just those initially seeking to get onto the property ladder. So, is this initiative sufficient to solve this issue?
With its first houses going onto the market in June 2021, the Government’s First Homes scheme is designed to encourage greater home ownership by providing local first-time buyers with homes at a discount of at least 30 per cent of the market price. By also ensuring that this same percentage discount is passed onto future first-time buyers at the bottom of the chain, the initiative aims to preserve the affordability for local communities, key workers and families who may qualify to purchase the property in the future.
However, the First Homes initiative alone will not be enough to help solve the housing crisis. Despite the merits of the scheme, it’s important to recognise that there is no one-size-fits-all solution to the UK’s housing crisis. In order to really make a difference, the Government will need to deliver policies targeting the needs of people in a range of different age groups and also turn its attention to addressing challenges around social care.
While all measures aimed at addressing the issue of housing affordability should be applauded, it could be argued that there are already other schemes in place which are more effective than First Homes. The main issue most buyers face is mortgageability – demonstrating affordability or saving a deposit. Schemes which facilitate this are likely to be more successful in alleviating the problems of supply for those not yet on the ladder. For example, research by the homeless charity, Shelter, found that across most of England, someone on an average salary or lower could not afford to buy one of the new build homes provided under the First Homes scheme. It also demonstrated that almost two thirds (63 per cent) of private renters in England have no savings at all towards a housing deposit.
One alternative model which is often overlooked, and which would seem to address these issues, is Rent to Buy. This provides people with a better route to housing affordability by bridging the gap between renting and owning, enabling people living in affordable rented accommodation to save towards a deposit, while also building up a credit rating.
The tenancy is for a period of between six months or five years, and the tenant has the option at various stages throughout the lease to purchase the freehold on a shared ownership basis (offering them another affordable option towards eventual full ownership).
There is also a private model which further refines this approach, offering the additional advantages that:
- The term of the lease can be up to 20 years (allowing longer to save); and
- 10 per cent is gifted back to the tenant towards a deposit once they confirm their intention to purchase
However, the end purchase is for 100 per cent ownership, not shared ownership.
Ultimately, one of the factors that has limited the Rent to Buy model is that tenants have failed to save their deposit. Similar initiatives, such as the Key Worker Housing initiative, which provided public sector workers with priority access to shared or low-cost ownership homes, also experienced limited take-up. In addition to the limited scope of purchasers who could utilise the scheme, many people experienced difficulties in securing a mortgage, due to the high level of risk perceived by high street lenders.
The Government must not lose sight of the fact that it’s not only young first-time buyers who are in need of housing. Policy should instead be designed around people’s needs, rather than their stage of life. For example, a sudden change of circumstances, such as retirement or the break-up of a marriage, may require people to re-enter the private rented sector in their 40s or 50s, or later in life. It is therefore important to re-evaluate and widen the criteria in delivering affordability for intended homeowners to ensure all those in real need are caught.
Retirement housing is a key element in this “wide delivery” approach and the first step is improving the perception of this as a viable option. For example, research from Shakespeare Martineau highlighted a significant gap between public perception and the reality of the retirement housing sector, holding many people back from rightsizing. In order to free up capacity within the housing chain, it will be important to ensure people are living in the right housing for their particular needs.
Part of this process will involve making retirement living a more aspirational and accessible option for older people, who may currently be under occupying large family homes. Such housing can be difficult and costly to manage and create health issues as a result of isolation and frailty. Instead, it’s important to focus on demystifying exactly what is meant by a retirement living scheme in the 21st century and the major benefits that come from modern, sustainable accommodation.
It’s also vital that people are better educated about their later living options while they’re still mentally and physically able and the media has its role to play in emphasising that by living in accommodation better suited to their needs, people can actually extend and improve their life. The public should also be provided with greater cost transparency and a positive, benefits-focused marketing approach must be adopted, to address the common misconception that moving into a retirement housing scheme is a sign of crisis.
The construction of more age-friendly homes, for example, with wider doors and electricity sockets positioned at waist height, will play an important role in improving accessibility and convincing people in later life that a move to retirement accommodation could be a good option for them. If all new homes were built to this standard, there would be no reason to target specific age groups and building new age-friendly homes would offer an alternative to retirement communities, increasing demand from older people to rightsize and unlock those under-occupied larger family homes.
While the First Homes scheme will play an important role in helping young people to purchase their first home, it’s vital that the Government doesn’t put all its eggs into one basket. By introducing a range of carefully-considered housing policies, focused on the needs of people at different stages of life, the UK is more likely to be successful in freeing up capacity within the housing chain and resolving its complex housing dilemma.
