Planning reform may be a key priority for government, but increasing housing supply also depends on giving more people the opportunity to buy. Tim Foreman, Managing Director of Land and New Homes at LRG, explores why stronger support for first-time buyers remains essential to unlocking new housing delivery.
Listening to politicians speaking, it could be easy to get the impression that first-time buyers are the beneficiaries of housing policy, but clearly much more needs to be done.
From a commercial perspective too, first-time buyers are one of the groups on which the market depends. If the first-time buyer market is weak, the consequences are felt by developers, landowners, funders and ultimately by the government itself, because homes that cannot be sold at the right pace are homes that become harder to build.
This is why the debate about Help to Buy still matters, even though the original scheme was far from perfect. The reported decision by Rachel Reeves to rule out a revival raises the question: if Help to Buy is not coming back, what will replace the demand-side support it provided?
This is important because planning reform alone will not restart the market, and on many sites, first-time buyers are the purchasers who help to get that first phase moving.
Why the first phase matters
The early phases of a new development set the tone for everything that follows. They influence cash flow, lender confidence, absorption rates and build-out decisions. Developers need to know that the homes brought forward can be sold at a pace that justifies the investment and risk involved.
That is where first-time buyers, as the natural market for smaller houses and apartments, play such an important role: they give a scheme momentum and help to create the evidence of demand that can support later phases.
Government figures show that between 2013 and 2023, 387,195 homes were bought with a Help to Buy equity loan in England. Of those, 328,346 were bought by first-time buyers. Regardless of the benefits or drawbacks of Help to Buy, it clearly brought a large number of households into the new homes market.
Yet only 10.4% of non-homeowners aged 20 to 44 are currently in a financial position to buy, according to Public First’s First Time Buyer Index. Furthermore, Halifax puts the average price of a home bought by a first-time buyer at £236,836, while UK Finance’s latest England data implies an average deposit of around £65,000.
These figures, showing a market in which aspiration still exists but purchasing power is too often missing, are a real concern not just to first-time buyers but to the industry too.
A more disciplined form of support
I do not believe that first-time buyer support by the government should recreate Help to Buy. A future scheme would need to be more disciplined, more targeted and more closely aligned with supply.
There are several ways in which that could be done.
First would be to build on the permanent mortgage guarantee scheme and the FCA’s current mortgage rule review. Higher loan-to-value lending is essential for buyers with stable incomes but limited savings. The test should be whether creditworthy households who are already paying high rents can access a mortgage without taking on reckless risk.
The second option is a targeted equity loan or deposit support product for new homes. It could include regional price caps, income limits and clear repayment terms, designed to help those who genuinely need support, not to subsidise buyers who would have purchased without it.
The third issue is stamp duty. The current first-time buyer relief means no SDLT is paid up to £300,000, with 5% paid on the portion from £300,001 to £500,000. In higher-value markets, that can still leave buyers facing an upfront tax bill at the point when every pound of savings is being directed towards a deposit. A targeted threshold adjustment, taper or regional relief would be more useful than a broad tax cut.
Shared ownership should not be treated as secondary
Shared ownership should also have a larger part to play. Although sometimes discussed as though it sits outside the mainstream ownership market, in reality it is one of the few routes available to households who cannot buy outright but who still want to build a stake in a home of their own.
For that to work better, buyers need clearer information. Rent, service charges, staircasing, resale and repair obligations all need to be explained in plain terms. Confusion damages confidence and confidence is essential in any tenure that asks buyers to make a long-term financial decision.
Lenders also need confidence, and housing associations need a funding model that supports affordable home ownership as well as social rent. The government’s £39 billion Social and Affordable Homes Programme is significant, but if the emphasis falls too heavily on social rent, the affordable ownership gap will remain.
Conclusion
Unless structural changes are made, those first-time buyers who are able to buy will be those who rely heavily on the Bank of Mum and Dad. That is commercially limiting and socially difficult.
The answer is unlikely to be a single policy by a single organisation: it should be a package: responsible mortgage flexibility, targeted deposit or equity support, a better role for shared ownership and stamp duty reform.
