For those of us struggling with the squeeze of day-to-day living, yesterday’s Budget was just another reminder of a grim economic reality. Not even the Chancellor’s Twitter debut could distract from disappointing growth and more austerity to come: the rallying cry of #AspirationNation barely made it out of the House of Commons before getting crippled by the world of job centres, service cuts and relentless internet mockery.
It’s no surprise that the Chancellor’s big announcements focused on crowd-pleasers like cheaper booze and, of course, the ‘dramatic’ Help to Buy scheme.
From April, homebuyers will be able to get an interest-free loan for up to 20% of the value of a property. The government also plans to guarantee £130 billion of mortgages, to encourage banks to lend to those with small deposits.
It’s a policy designed to catch the attention of people who are desperate to get out of the private rented sector. But what does it actually mean for us?
Not a lot, suggests Robbie de Santos at Shelter. The government estimates the scheme will help 76,000 people over three years: a tiny proportion of the 5.4 million private renters who want to buy but can’t. And with rents still eating up so much of the average income, most tenants will find it hard to save enough to take advantage of the deal at all.
Could the policy have a positive effect on the bigger picture? By helping people buy, it’s designed to stimulate demand in real estate and thus encourage developers to build new homes. But in the midst of a housing crisis, it seems unlikely that it will go far enough. The UK has suffered from a huge lack of new building for decades: each year 230,000 new homes are needed, but on average only 100,000 actually get built. That’s what makes property prices – and the ever-increasing rents we know all too well – so unaffordable.
In fact, the policy might even make this problem worse: if it become easier to raise a deposit for a home, demand could quickly outstrip the number of new houses available. That would make prices rise fast – a housing bubble. To afford these crippling prices, ordinary people would just have to take on even more debt. It’s hardly the ‘radical’ solution Osborne’s rhetoric suggests. In stimulating demand while failing to materially increase supply, Ed Howker told Channel 4, the government could be pursuing a ‘galactically stupid’ path.
Thus isn’t the only thing the government are doing for renters, however. In a barely-noticed Budget backstreet, it was also announced that build-to-rent funding is to be quadrupled, to £1 billion. On paper, that will increase the supply of rental properties, and thus reduce prices. But whether it’s enough to address the huge shortfall in homes enough to cut rents, rather than just increase the number of overpriced properties on the market, is doubtful.
So the new reform might help a few people buy a home. But will it really tackle the chronic lack of housing in the UK and the pricey stranglehold that’s trapped millions of us? it doesn’t seem likely.