Possibly more by accident than design, the current patchwork of eight Government housing schemes aimed at home buyers and owner across the income spectrum, are helping more get on the housing ladder, new research suggests.
But there are very different levels of ‘generosity’ in the programmes with the Right to Buy and Starter Home schemes offering more than others, according to the research commissioned by the Council of Mortgage Lenders.
One of them, the Help to Buy Mortgage Guarantee scheme ends in in December, and the seven remaining schemes all also specifically promote and deliver new housing supply, which the CML report says is clearly helpful in addressing this most pressing structural housing market problem.
The report analyses how each of these schemes works for different types of households and says that, aside from the Right to Buy, Starter Homes are by far the most generous offering from the financial perspective of the household.
Shared ownership, particularly when only a minority share is acquired, is the least generous although the report points out that it is the scheme that allows the greatest ‘stretch”’ in terms of the value of the property that the household can acquire.
The research looks at the different schemes from a variety of angles, perhaps the most interesting of which is from the perspective of the household potentially using the scheme and it concludes that all the schemes appear to be coherent and they are at least fulfilling the government’s key strategic objectives.
It examines the difference in original property value that a household with a deposit of £10,000 and a maximum monthly payment of £1,025 could live in under each scheme. This varies from £160,000, under Help to Buy Mortgage Guarantee to £308,000 under a 25% shared ownership scheme.
Taking the same assumptions, the research looks at one scenario in five years’ time for each household, working on the assumption of a 10% rise in house prices. The report finds that a household acquiring a Starter Home would experience an implied £37,500 net financial gain, after housing costs, after five years, whereas a 25% shared owner would experience a £36,300 net financial cost, a significant anomaly.
The report concludes that it is hard to conceive that the current array of schemes, particularly the mix of shared ownership and shared equity, would exist if the Government was starting from scratch.
‘We commissioned this research not only to describe the current schemes and how they fit together, to help stakeholders understand them in a holistic way, but also to identify where there might be gaps or anomalies that government might wish to address,’ said CML director general Paul Smee.
‘As we look ahead to the imminent housing white paper, we hope this report makes a useful contribution to the evolving landscape, and helps to focus policy thinking on the best way of allocating resources to achieve the government’s strategic housing objectives as effectively and fairly as possible,’ he added.
