Low-cost home ownership schemes are not benefiting low- and middle-income households, according to a report from the government’s Social Mobility Commission.
The Low Cost Home Ownership Schemes report found that unless housing supply increases and reduces prices, schemes will be constrained and are unlikely to increase ownership among low income groups as the gap between their incomes and house prices is too great.
The report found that schemes such as Help to Buy are being used by households that would buy anyway, not those on lower incomes.
There are a number LCHO initiatives, including: Help to Buy, Right to Sell, grants to reduce prices, subsidised saving schemes, subsidised construction schemes and lower deposit programs.
The social benefits include wealth accumulation, better outcomes for children and higher levels of social capital for neighbourhoods. They are also important to allow universal household aspiration.
However, many LCHO schemes are merely fuelling current house price inflation.
The report said that while working families’ household income is classified at £30,000 per annum, 80% of beneficiaries of LCHO schemes had incomes above £30,000 pa.
For Help to Buy, the average household income for a loan purchase was £47,050. This compares to a mean household income for owner-occupiers first-time buyers of £47,528. Meanwhile, 48% using Help to Buy loans paid more than £200,000 for their home, which is not affordable for a person on median earnings.
The report conceded that shared ownership was better for low-income households, and is taken by many with near median incomes, but it “can be difficult to ‘staircase’ up to buying further shares of the property when house price rises are outstripping wage rises.”
It suggested targeting the schemes more effectively at groups who have the potential to own but actually need the support of LCHO schemes to buy – notably those on lower incomes and those with less experience of the housing market.
It said targeting mechanisms should include limiting financial subsidies to households with 1.5 times median income, and providing more advice and guidance to appropriate working households.
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