Many low cost flagship Government backed home ownership schemes are most likely to benefit better off buyers, new research has found.
Those benefitting from schemes, such as Help to Buy, earn more than one and a half times the national working age median income, according to a new report published by the Social Mobility Council and carried out by researchers at the London School of Economics.
Around three in five first time buyers said that they would have bought anyway and that the scheme merely enabled them to buy a better property, or one in a better area, than they were originally looking for.
The report explains that in the UK, promoting ownership for first time buyers is a current Government priority. Since the 1990s, around 1.8 million properties have moved into ownership through Right to Buy with 200,000 provided through the affordable homes ownership route, and 300,000 households were assisted through reduced costs of attaining ownership.
The report builds on previous Government commissioned research which found that Help to Buy Equity Loans had generated 43% additional new homes over and above what would have been built in the absence of the policy, contributing 14% to new build output.
However that research found that the average income for these Help to Buy buyers was £41,323, similar to other first time buyers who had average incomes of £47,528. Fewer than half of all working age households have incomes over £30,000, meaning that this scheme is unlikely to be able to help those households without more specific targeting.
The research points out that the high cost of housing means many low cost home ownership scheme are beyond the reach of almost all families on average earnings. Only 19% of Help to Buy Equity Loan completions to date were for homes worth less than £150,000. If households put down a 5% deposit, the researchers found that this exceeded the 40% limit of affordability for a median income working age household.
The report recommends new action to help more low income buyers including targeting financial subsidies on households with incomes up to one and a half times median income and setting different levels for different regions.
It calls on the Government to provide more advice and guidance to households without a history of ownership to help them into ownership by managing risks and expectations. It also calls for restricting access to subsidies where a first time buyer has unfettered access to alternative sources of financial and other support to become an owner, such as capital from parents or other relatives.
Earlier this year, the Social Mobility Commission published research which found that the proportion of first time buyers relying on inherited wealth or loans from the bank of mum and dad had reached a historic high and the trend looked set to continue.
Increasingly, young people are relying on their parents to help them get a foot on the housing ladder. Over a third of first time buyers in England, some 34%, now turn to family for a financial gift or loan to help them buy their home compared to 20% seven years ago. A further one in 10 rely on inherited wealth.
For 25 to 29 year olds, home ownership has fallen by more than half in the last 25 years from 63% in 1990 to 31% most recently. Many of those who do manage to buy eventually can only do so at an older age.
‘While it is welcome that the Government is acting to help young people get on the housing ladder, current schemes are doing far too little to help those on low incomes to become home owners,’ said Alan Milburn, chair of the Social Mobility Commission.
The intent is good but the execution is poor. Changes to the existing schemes are needed if they are to do more to help more lower income young people and families become owner occupiers. Without radical action, particularly on housing supply, the aspiration that millions of ordinary people have to own their own home will be thwarted,’ he added.
