Help to Buy prices out six times more people than it helps

Nearly a quarter of a million private renters have been priced out of home ownership since the government announced its flagship Help to Buy scheme, according to analysis from PricedOut, the campaign for lower cost housing, as they launch a manifesto to fix the housing market. 

Around 18,875 households (many of which will have two earners) have used the scheme to date, but by stimulating a frenzy in the housing market which has pushed up prices for first time buyers by 8%, the government has made home ownership unaffordable for 245,000 people who could have afforded it before George Osborne’s announcement in March.

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PricedOut used the HMRC’s percentile breakdown of UK taxpayer incomes, the English Housing Survey’s income profile of private renters, and the Office for National Statistics’ latest House Price Index to work out how many people could afford the average first home, based on the assumption that a home is affordable if it is no more than 4 times household income. 

The total number of private renters who can’t afford the average home is now 3.48 million, or 66% of all private renters. With industry predicting a further rise of 8 percent this year, we can expect another 160,000 renters to be priced out by the end of 2014 – and that assumes that incomes rise by 2.5%. 

This is further evidence that the Help to Buy scheme is not the answer to a housing crisis where houses cost an average of 6.7 times income, and is ruining the chances of renters to access home ownership. 

PricedOut have today launched a new manifesto which calls for an end to rising house prices with a government target of zero percent house price inflation, a programme of housebuilding, tax reform to deter property speculation and better rights for tenants. 

Dan Wilson Craw, PricedOut spokesman, said:

“The Help to Buy scheme is an utter travesty. The government reckon they have a policy that will help me and other young adults, but it’s managing to achieve the exact opposite, condemning thousands of us every month to a lifetime at the mercy of landlords. 

“Help to Buy is just part of a wider addiction to rising house prices where the wealthy see property as the fast track to greater riches. We need urgent action to end rising house prices and allow incomes to catch up. If the government can start by setting a target of zero percent inflation, they’ll send a signal to speculators that this country will start treating houses as homes and not financial playthings.”

Ends

Notes to editors: 

The full report is available here

PricedOut (www.pricedout.org.uk) represents the millions of people who would like to buy their own home but cannot buy because of high house prices and high rents. The campaign is independent of any political party and supports initiatives to increase the supply of good quality housing in the priciest areas of the UK.

Summary of findings:

Month

Average first time house price

Income percentile that can no longer afford to buy

Joint income

Number of renters in percentile and below

Top up to account for rest of percentile

Total priced out

Total priced out since Help to Buy

% priced out

March 2013

£175,000

54

£43,660

3,289,440

-14789

3.24m

-

61%

December 2013

£189,000

58

£47,098

3,498,880

-16412

3.48m

245,388

66%

End 2014 (8% prediction)

£204,120

61

£50,774

3,655,960

-13246

3.64m

405,634

69%

By December 2013, 12,875 properties had been bought through the Help to Buy equity loan scheme, while another 6000 households had used the Help to Buy mortgage guarantee scheme. In comparing Help to Buy’s participants with our priced out numbers, we assume that there are two earners per household.

The PricedOut manifesto calls for: 

  1. A government target of zero percent house price inflation
  2. A comprehensive housebuilding programme in areas that need it most
    • Allowing councils to borrow to build houses
    • Green belt reform
    • New towns
    • Greater support for smaller builders
    • Homes that people want to live in
  3. An end to incentives which encourage speculation in house prices
    • Higher rate of capital gains tax on non-primary residences
    • Ending mortgage interest tax relief for landlords
    • Allow councils to levy punitive rates of council tax on empty properties
    • Revaluation of council tax
    • Better use of land registration to tackle tax evasion and rogue landlords
  4. Improved tenants’ rights
    • Abolition of no-fault evictions
    • Banning letting agent fees
    • Five year tenancies

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