SPECIAL FEATURE: If only the government saw it like this

Sarah Davidson

September 21, 2012

“The young woman used to think that she could never buy her own home.

“It would take years to repay her student loan and after paying her rent each month, she had nothing left over to save or contribute to a pension.

“She wanted to have children one day, but the thought of bringing up a family as a tenant horrified her. She knew that childcare costs would make it even more difficult to become a homeowner.

“Then a new housing minister arrived and took the initiative. By now the government had realised that the cost of first-time buyer exclusion would eventually total to tens of billions of pounds per annum for the millions adversely affected and the taxpayer.

“The government’s first actions were to raise young people’s awareness of the benefits of homebuying and to create a new tax-free plan to encourage potential first-time buyers to save for a deposit.

“In response, millions of young people began saving what they could. These funds were ring-fenced exclusively for first-time buyer mortgages, as was a proportion of the Treasury’s Funding for Lending allocations.

“Having raised awareness and facilitated some dedicated funds for first-time buyers, the government went on to review all the initiatives that had previously attempted to resolve the problem of exclusion but had failed to realise their full potential.

“Many were found to be addressing symptoms not root causes and they could be made to work better if they were refocused and applied in combination.

“A sense of purpose permeated all the government departments involved directly or indirectly and they began working more closely with each other and with local authorities and commercial stakeholders to resolve the problem of first-time buyer exclusion.

“As in the past with Kensington in sub-prime and Paragon in buy-to-let, specialist centralised first-time buyer deposit-taking lenders began to appear.

“They used the internet for day-to-day transactions but they relied on brokers to support the young people attempting to buy for the first-time.

“Broker numbers, which had fallen from 38,000 to less than 10,000, began to rise again as their clients used social media to communicate the value of the service they received to their friends and family.

“As the initiative advanced it became clear that the government needed to revise its non-interventionist policies and take charge where the stakeholders were unable or unwilling to effect the systemic changes required.

“But as young people became better able to buy, an acute shortage of housing stock became the problem.

“Although NewBuy had been scaled up and property developer and local authority collaborative best practices encouraged, it was clear that the UK could not resolve first-time buyer exclusion via new builds alone.

“However as the problem of exclusion was resolved, demand for rental property must fall, so the government, anticipating this change, implemented policies to retrieve properties from the buy-to-let sector.

“These policies included legislation that required that landlords with more than one property must incorporate into limited companies. Simultaneously, they regulated the smaller landlord sector.

“With buy-to-let now formalised as a true business activity building societies found they were unable to provide buy-to-let mortgages in this sector and this gave them an added incentive to resolve first-time buyer exclusion.

“Young savers welcomed this move and flocked to become their life-long customers.

“As building societies vacated the buy-to-let market, interest rates began to rise and this coincided with changes to end tax relief on loan interest and expenses in the newly regulated small landlord sector.

“Future changes to capital gains tax were also telegraphed. Aware of the benefits of homeowning and the possibility of getting a first-time buyer mortgage, many young people moved in with their parents to save a deposit and this, together with a rise in first-time buyer homeownership, increased buy-to-let voids. Rental arrears rose too, as housing benefit reforms began to bite.

“These initiatives caused many smaller landlords to sell their buy-to-let properties and bank their profits. This part-resolved the shortage of properties for prospective first-time buyers.

“At the same time the government began implementing carrot and stick measures to discourage property developer land-banking.

“In combination with real estate investment trust funding and rising first-time buyer demand, property developers increased their building activity to resolve the shortage of properties.

“The young woman accessed the internet on her iPhone 6 and noted several lenders had emailed her. On the advice of her broker she had ticked the box that allowed anonymised data about her tax-free savings scheme to be accessed by mortgage providers.

“They could see her regular savings and were prepared to offer her competitively priced mortgages.

“In addition there were special NewBuild deals from property developers in her local area. The system she was using allowed her to project different saving and repayment scenarios.

“She would need to discuss all this with her broker.

“The government’s affirmative actions were resolving first-time buyer exclusion and the young woman was reaping the benefits, as were many of her friends. She was grateful to the new housing minister. She knew how she would be voting at the next election.”

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