Property market questions pace and funding of PM's housing reforms

Property professionals and MPs were left wanting more after Prime Minister Boris Johnson’s much-anticipated housing announcements yesterday.

Johnson yesterday promised a review of the mortgage market to report this autumn and changes to housing benefit rules to help more people to get on the property ladder.

He also confirmed that Right to Buy would be extended to housing association tenants.

While support was broadly welcomed, there were concerns at the pace of changes and how they would be funded.

Tim Bannister, Rightmove’s director of property science, said: “The next generation of first-time buyers currently need to raise a deposit that’s over 50% higher than ten years ago, while average salaries have only increased by 35%. 

“That’s before you factor in if you’ll be able to get a mortgage, as right now if you’re buying on your own you’d need a hefty deposit of more than 30% to be able to borrow enough to buy a typical first-time buyer home. 

“If a review of the mortgage market could help with the challenge of needing such a big deposit then it would be greatly welcomed by those who are able to demonstrate that they can afford monthly payments, but who are currently locked out of home-ownership.”

Although competition among buyers is now starting to ease, Bannister said demand is still massively outstripping supply in many areas of the UK.

He added: “This has already pushed prices to record highs so the challenge for first-time buyers of raising a deposit is not going to get easier. 

“The review will take time and so any solution won’t help in the short-term, so as the cost of living increases more people are likely to look further afield at cheaper areas to get on the ladder.”

Iain McKenzie, chief executive of The Guild of Property Professionals, said:  “We welcome any change from the Government that will help get more people in a position to be able to become homeowners. 

“As the Prime Minister has said, prospective first-time buyers have been aiming at a moving target with rising housing prices, interest rate hikes and the cost-of-living crisis taking its toll on their ability to be able to get a foot on the property ladder. 

“Many are already paying rent that would equal their mortgage repayments, however, many have been hindered by deposit requirements and meeting mortgage approval criteria. Wider access to low-cost, low deposit finance options will help pave the way for more buyers to purchase their first home.”

Clive Betts, chair of the Levelling Up, Housing and Communities (LUHC) Committee, said more clarity was needed on the Right to Buy measures.

He said: “The Prime Minister needs to make clear that if the government presses ahead with extending the Right to Buy for those renting housing association properties, it is vital the money goes back into the system of social housing so that new homes can be made available for low-cost rent and purchase.

“The success of an extended Right to Buy policy will surely depend upon the homes sold being replaced and the housing supply being maintained. I hope the Government will explain how this policy will safeguard the provision of accessible and affordable housing, particularly affordable rented property.”

Betts said detail was needed on how extending Right To Buy and replacing housing association homes would be funded.

He added: “The government should commit to ensuring current social housing is replaced on a like-for-like basis - a house that is sold should not be replaced by a flat.

“The government will also need to explain how it will overcome the legal hurdles of forcing housing associations, who are independent bodies, to sell their assets.

“The government should also indicate whether they intend to require the agreement of housing associations in implementing this policy.”

David Woolman, director at housing developer Woolbro Group, suggested these plans barely qualify as a sticking plaster.

He said: “Reactionary, short-term thinking has led the government to draw on Thatcherite policies in an attempt to emulate electoral successes of the past. In real terms, however, extending Right to Buy will do next to nothing to tackle the UK’s severe housing shortage. 

“We are simply not building new homes to keep up with demand. Serious, long-term solutions to turning Britain into a nation of homeowners seem to have been abandoned. 

“More worryingly, the government continues to turn a blind eye to the crisis in construction. Material costs are soaring to a point where it is becoming perilously close to impossible for developers to make new housing projects viable. 

“Unless a support package for Britain’s housing sector is forthcoming — particularly for small to medium-sized developers — the number of new homes coming onto the market over the coming years will dwindle to damaging levels.

“The government would do well to consider how future generations of voters will interpret today’s inaction when they are all but completely priced out of the housing market.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: "In theory, I understand the logic behind trying to reduce the benefits bill. But this is predicated on house prices continuing to rise fairly rapidly, which is no comfort for those not on the ladder who are aspiring to get on there at some point in the near future.

"The other point is that it relies on lenders taking on borrowers who are on benefits, as they are often the ones who are struggling not just with raising deposits but making repayments.

"They are often on lower salaries and struggling to make ends meet, so would lenders take them on from a commercial point of view without some sort of guarantee from the government that they will meet their repayments?

"I think this is bluff and bluster; as is often the case, what we need is a lot more detail.

"There has been mention replacing housing association properties that are lost but we want to see more details as to where they will be, what type of property and will it be one-for-one?

"There also needs to be a commitment to longer-term rentals which are never going to be sold as those with families and young children should have a guarantee that they have a place for life, providing longer-term security.

"Politically people say to us the two things that matter about voting are jobs and homes. If they have trouble finding or keeping either, the government tends to get the blame rather than the employer or the lender. Clearly, homes need to be a priority for the government."

JLL also had its own concerns.

Marcus Dixon, director of UK residential research at JLL, said: “It is unlikely that Housing Associations will be able to offer sufficient discounts and replace stock like for like without government support. 

“Even without Right to Buy Housing Associations are under significant financial pressure. 

“Alongside investment to improve their current portfolio they will need to ensure any remediation works are carried out to deal with cladding and fire safety as well as initiate plans to hit zero carbon targets by 2050. 

“Not to mention additional investment in increasing the size of their rental portfolio.

“At JLL we are committed to promoting the delivery of more homes across all tenures. Offering greater access to home ownership certainly shouldn’t be discouraged, but the UK needs improved delivery and funding of affordable homes for rent too.”

Karen Noye, mortgage expert at Quilter, said it is not the mortgage industry that needs fixing but the housing market and its sky high prices, which could be helped by building more homes.

She said: "We have seen time and again government housing schemes falling very far from the mark even if well-meaning. A good example is Help to Buy, which has for some been disastrous and contributed to lining the pockets of housebuilders while not actually helping as many people as hoped.

"Ultimately we just need to build new homes in areas that people actually want to live rather than soulless out of town developments.

"Doing this would be far more powerful than tinkering around with ways to help people finance their first home."