A recent report by the McKinsey Global Institute identified four necessary actions to improve housing affordability: 7

  • unlock land supply
  • reduce construction costs
  • proper maintenance of homes once they have been built
  • lower financing costs for buyers and developers.

It is clearly not possible to achieve all of this through local action alone, nor will these interventions address the significant loss of social housing into private ownership that is occurring in the UK through recent housing legislation.

A recent review of the social and economic impact of government capital investment in affordable housing found that it improved a wide range of outcomes for local residents in areas including health, crime, education, employment and community cohesion. 8

Successive national governments have offered shared ownership schemes and low cost home ownership support for first time buyers, through a number of different models. Around 95,000 people were assisted into home ownership under these schemes between 1997 and 2008. 9 Further efforts have been curtailed somewhat following the financial crisis in 2007. Current schemes include Help to Buy, an equity loan scheme. In the first 30 months of this scheme (to 30 September 2015), 62,569 properties were bought, 81% of which by first-time buyers. This scheme has been much more successful in other parts of the country, outside London, where house prices are lower. In over three years of the scheme, between April 2013 and June 2016, just 60 equity loans were taken up in Hackney. 10

A national evaluation of the Help to Buy scheme concluded that:

‘the empirical evidence would support the view that it has provided an important stimulus to generate a not insignificant increased output in the housebuilding sector, as well as a stronger recovery in the mortgage market along with higher confidence among all these players and consumers.’ 11

This does not mean it has been universally popular however. Among others, Shelter has raised concerns about its impact on house prices. Their analysis of these mortgages suggests that Help to Buy has added around £8,250 to the average house price, and that in the places where Help to Buy loans and guarantees have been used most, house price inflation has run above regional trend rates. 12

References

  1. McKinsey Global Institute, “A blueprint for addressing the global affordable housing challenge,” October 2014.
  2. Frontier Economics, “Assessing the social and economic impact of affordable housing investment: a report prepared for g15 and the National Housing Federation,” September 2014.
  3. House of Commons library, “Extending home ownership: Government initiatives,” March 2016.
  4. Department for Communities and Local Government, “Help to Buy Equity Loan Scheme, by district (Total Equity Loans & Equity Loans First Time Buyers),” September 2016.
  5. Department for Communities and Local Government, “Evaluation of the Help to Buy Equity Loan Scheme,” February 2016.
  6. Shelter, “How much help is Help to Buy? Help to Buy and the impact,” September 2015.
  7. McKinsey Global Institute, “A blueprint for addressing the global affordable housing challenge,” October 2014.
  8. Frontier Economics, “Assessing the social and economic impact of affordable housing investment: a report prepared for g15 and the National Housing Federation,” September 2014.
  9. House of Commons library, “Extending home ownership: Government initiatives,” March 2016.
  10. Department for Communities and Local Government, “Help to Buy Equity Loan Scheme, by district (Total Equity Loans & Equity Loans First Time Buyers),” September 2016.
  11. Department for Communities and Local Government, “Evaluation of the Help to Buy Equity Loan Scheme,” February 2016.
  12. Shelter, “How much help is Help to Buy? Help to Buy and the impact,” September 2015.