In Prime Minister’s Questions last week, the Prime Minister himself suggested Michael Gove’s Levelling Up White Paper was much awaited. Which seemed somewhat odd given that we’ve been waiting for his government to publish it, however the bigger question is, was it worth the wait?
I’ll keep my comments purely housing-related, specifically around the commitments the Paper appears to set out in terms of first-time buyer numbers, although you might well argue that ‘commitments’ is the wrong word.
However, it’s clear the government does have a mission or goal for first-time buyers in the UK and that is to increase their number in all areas by 2030, a target which it should be easy to measure. And to provide a secure path to ownership for UK renters, which may be rather more difficult to quantify.
My focus on reading the section around first-timer buyer number increases was to look for tangibles and specifics. Clearly, and I think few would argue with this, the government has pushed a ‘first-time buyer first’ agenda in recent years, with a number of schemes and measures designed to help them onto the ladder.
Indeed, the paper itself mentions the FTB-only Help to Buy Scheme and its own government Guarantee which kick-started the provision of high LTV mortgages within the market.
Few would argue the benefits both have brought to first-timers. The latter in particular has been something of a revelation, and I think it’s fair to say that without it, it’s doubtful we would have anywhere near the functioning 95% LTV mortgage market we have now.
Of course, both are due to finish over the next 13/14 months – the government Guarantee at the end of 2022, and the Help to Buy scheme at the end of March 2023. Whether that is truly the case remains to be seen.
Certainly, I believe the mortgage market is capable of standing on its own two feet when it comes to high LTV provision; indeed, most products available are not reliant on the government’s scheme. And, by the time we get there, the same could be said for Help to Buy – with schemes like Deposit Unlock and others, it is to be hoped that the momentum generated is not lost.
However, I’m also conscious of the impetus government support can provide, and while I firmly believe our industry has to be ready to stand on its own two feet, one does have concerns about what happens if it can’t.
With first-timers, the government is working from a relatively strong base – 400,000 people bought their first home in 2021, and high LTV mortgage provision had a lot to do with that, as did the stamp duty holiday, which remains in place for the vast majority of first-timers.
As is so often with our market, the big question is supply. We will all be acutely aware of how strong demand is, and the competitive nature of purchasing. It looks like the government will continue to try and put first-timers at the front of the queue – talking about how it will look at international comparisons to see how best to do this, and how it will bolster the First Homes Scheme which offers a 30% discount to local owner-occupier buyers.
The (much) bigger question is whether this will be enough in a market where demand still far outstrips supply. To that end, the government says it remains committed to its 300k new homes every year by the mid-2020s target without really looking like it’s going to meet it. It says two million new homes have been built since 2010 which works out at around 166k every year, a bit over half of what it wants to achieve.
It does say it will amend the planning system further, giving councils more power to greenlight developments, particularly on brownfield sites, but you might argue this is the case already, and we remain far off those numbers. The fact is that private developers produce most of the housing in this country, not councils or social housing providers, and that being the case it perhaps doesn’t suit them (or their share prices) to over-supply the market.
There is plenty more in the paper about housing, namely ensuring rental properties are of a ‘decent’ standard, but it feels slightly wispy in terms of actual commitments to meeting its somewhat vague targets. Plus, of course, 2030 is a long way away and we may well have a different government by then.
One suspects that it will keep pushing down this path, and hope that councils in the Midlands, and especially, the North, fully buy into its plans and increase the housing in those areas which it intends to offer to first-time buyers first. By doing this, it could well be able to claim a success by the time the next General Election comes around.
As always, the proof of the pudding will be in the eating. One thing is certain, for those ‘Red Wall’ seats the Conservatives bagged back in 2019, voters there are likely to want to see a tangible difference made over the course of the next two years before they vote again. They are highly unlikely to be willing to wait until 2030.
Patrick Bamford is head of international business development at Qualis Credit Risk, part of AmTrust International