Written evidence submitted by Peter Williams, Honorary Departmental Fellow, Department of Land Economy, University of Cambridge, CB3 [AHO 006]

This is a very timely Call for Evidence on a key area which should be central to the Government’s emerging and evolving housing policy review.

There are a number of reasons why the government should be concerned about home ownership and its affordability:

• Across the UK, households have been very clear in numerous surveys that there is a strong tenure preference for home ownership (70/80% preference -it varies a little over the economic cycle, and this preference is clear across most age and income groups).
• Since the 1970s explicit government support for home ownership and not least for lower income home ownership has been a central plank in housing and economic policy recognizing the benefits it can generate in terms of a sense of security and control, the probability of lower housing costs in retirement and of course the potential wealth benefits.
• Home ownership retains privileged tax treatment despite the scrapping of mortgage interest tax relief in April 2000. For example, it is exempt from capital gains tax.
• Home ownership levels vary across the UK, eg, lower in Scotland but overall home ownership peaked at around 73% in  and now is around 65%.  At one point in the past there was an appetite to see it at 80%. At 65% the UK is in the middle rank of home owning nations. Across the developed world we have seen home ownership levels rise even in countries such as Germany where renting was more common. However, over the last decade a number of countries have recorded falls reflecting the turbulence in economies and interest rates alongside continued house price inflation
• The mortgage market has evolved over time to facilitate higher levels of home ownership – longer loan terms, higher LTV loans and more sophisticated risk assessment.

1. Main Barriers

The main barriers for first time buyers are;

• High house prices relative to incomes which in turn mean larger deposits if the debt service costs are to be sustainable.
• House price inflation has often moved faster than first time buyers have been able to save thus they have faced an ever widening gap
• This has put a premium on support from families to make this initial purchase. The Bank of Mum and Dad now supports over 50% of purchases but is clearly not available to all and especially from parents who rent. Linked to that is the rise of the Hotel of Mum and Dad for young adults unable to rent or buy a home for whatever reason. The latest ONS data (July 2025) showed that more young adults (3.6 million people aged 20 to 34 years) lived in a family with their parent(s) in 2024 than in 2014 (3.3 million), an increase of 9.9%.
• And now of course interest rates are relatively high compared to the recent past -even though they are coming down now and aided by easing regulation on borrowing capacity and stress tests.
• Recent reports by the Building Societies Association and the Intermediary Mortgage Lenders Association highlight the tensions and offer estimates of the backlog of would be first time buyers who have been unable to buy – somewhere between 2 and 3.5 million since 2008[1]

2. Policy Options

As the attached article[2] suggests the UK government has a long history of “experimentation” on low income home ownership policies (outside of taxation treatment). Indeed since the 1980s probably 25 schemes (and variants of schemes) have been tried in England.  Looked at globally the most common policy solution has been the use of mortgage guarantee schemes which allow mainstream mortgage lenders to offer significant numbers of higher loan to value mortgages[3]. Subject to the pricing of the new scheme, making the Freedom to Own guarantee scheme permanent is a very sensible step forward. We now need to monitor its usage and adapt it over time if needs be. 

In the UK and looked at historically since the 1960/70s it has been high loan to value mortgages that have underpinned higher levels of first time buyer numbers rather than specific low cost home ownership schemes. And at that time it was local authority who provided such mortgages, often at 100% LTV that were key. Those schemes were curtailed by the IMF interventions in the late 1970s. Mortgage lenders aided by government partly filled the resultant gap.

Alongside the Right to Buy introduced in 1980, shared ownership was also offered as a policy option both for those who wanted to use it to “climb the ladder” and for those who wished to remain shared owners in perpetuity.  Shared ownership is the longest running low cost home ownership programme in the UK and since inception has delivered 450,000 homes of which some 250,000 are currently in shared ownership, the remainder having been staircased out to full ownership and the mainstream market (see later section for further discussion of shared ownership).

Two other policies currently remain in place Rent to Buy and First Homes, this last being a discounted market price model). Neither scheme has achieved much traction, seemingly unpopular with both providers and users. Rent to Buy works via a higher rent which is used to buy shares of the home over time. In practice rising prices, rents and mortgage costs can make that a challenge. First Homes was prioritised in Section 106 agreements over shared ownership (over 50% of shared ownership output is derived through Section 106) but neither developers nor lenders have rushed to support it. The market expectation seems to be that it will be closed.

Other options then include Stamp Duty holidays (headline grabbing but ultimately unhelpful to most) and Help to Buy (helpful to developers and a segment of users – around 20% of those using the scheme which ran in England from 2013 to 2023 ( it survives in the smaller Help to Build scheme and the Armed forces Help to Buy scheme and of course Help to Buy remains in place in Wales) could not have bought a home any other way. However most users could have done so.

Two further options bear consideration both of which are in operation in other parts of the UK. The Open Market Shared Equity scheme in Scotland[4] helps buyers to purchase homes from the existing market ( rather than new build). This is effectively the equivalent of the very successful Do it Yourself shared ownership scheme that ran from  to in England. Clearly it has the downside it does not boost supply but it does give more choice and flexibility for would be home owners and there is considerable merit in that.  The other scheme is Help to Stay as operated in Wales[5]. This aids home owners in difficulty who can then sell down an equity stake in their home and thus reduce their mortgage payments. It is a small scheme but another example of a finer grained housing policy that can help meet aspects of need and demand in the market place and which can contribute to reducing volatility in the market.

3. Housing Supply

Substantially increased housing supply has the potential to assist first time buyers but of course this rather depends upon what is being supplied and where. In recent years supply in many areas has been dominated by the building of expensive larger detached and semi-detached homes which by definition may be beyond the buying capacity of many such buyers.  Of course developers will argue that the purchasers of such homes may release smaller homes which might then assist the first time buyer market. This trickle down or filtering theory of the market has been found to be wanting in recent years not least because some “second steppers” retain the home they are vacating and rent it out -reflecting the shift in property ownership towards investment.

It is also important to state that if we expect increased supply to drive down prices  and help restore affordability then at best this is a very long term possibility and of course is somewhat less likely given the developers’ focus on releasing homes onto the market in line with an absorption rate that leaves prices unimpacted (as the Letwin Review  in 2018 highlighted https://www.gov.uk/government/publications/independent-review-of-build-out-final-report).

The government’s proposals for speeding up build out rates may be helpful and  we can see that in some regions new build makes up a much bigger proportion of the homes on the market  and are therefore more likely to impact upon prices of second hand homes. This may be ever more so given the focus on energy costs and sustainability.

4. Mortgage Guarantees

This has already been touched up. Without doubt this could help expand the higher LTV mortgage market but much turns on the costs of use for lenders. In its earlier form most lenders took the view the pricing was too high and didn’t use it. In reality only a very few did and my understanding is that usage was dominated by one large lender. Relative to the size of the market take up was higher in Scotland than England. Most lenders simply took the risk on their own books rather than paying for insurance. But this would mean that they would place limits on the number of such higher LTV loans made ( as well as the regulator imposing limits as well). My hope would be the higher LTV market will expand  and mortgage pricing may improve although the new scheme seems to have a cut off at 95% LTV?

5. Rent record

This is a long time overdue and with a much larger rented sector payment record should be a part of the credit and affordability assessments. Of course this then raises questions about record keeping and access to data. If this information is to be used it needs to be accurate and up to date. Is It?

6. Financial Products

Savings schemes linked to home ownership and especially where government then pays a bonus are helpful but they do need to be uprated in line with house prices otherwise their utility falls away. However in areas with lower house prices and lower house price appreciation clearly they can make a material difference in terms of helping with the deposit gap and lower income home buyers.

In terms of mortgage products many lenders have named schemes focused on first time buyers albeit most are very coy about take up and use. There is some suggestion that some lenders use them as devices to attract people to that lenders website etc  to help the lender open up wider discussions about options. Lenders offer a variety of schemes  - linked to joint mortgages, parental contributions and guarantees, lower starting payments and boosted credit scores -all can assist particular categories  of buyers and of course many lenders also support the range of government ( and other) schemes for lowering the costs of home ownership. Lenders fully recognize the importance of first time buyers to the market as a whole and it is in their own interests let alone wider societal considerations to do so.

7. Stamp Duty

While most first time buyers in England do not pay stamp duty  as the home they buy is below the £300k threshold below which no stamp duty is paid that is not so in London and the South East where average FTB prices are higher (in 2025). Many governments have ushered in temporary stamp duty holidays to help bolster the market and assist buyers but though there are short-term benefits for some, the evidence is clear that such holidays stimulate demand and always lead to higher house prices. Thus the effects of such holidays are largely negative. At least now that SD is paid on a slice basis thus limiting its impact on buying higher priced homes up to say £500,00 ( a FTB would pay 5% on the £200k slice from £300k to £500k).  There are wider debates about the impact of stamp duty on mobility and it being a tax on moving home /adjusting to life changes. There is a case for root and branch reform around stamp duty, council tax and wealth taxes.

8. The buying process

Work is underway to reform and improve the buying process, improve the use of technology and access to datasets and by so doing  reduce costs and improve efficiency[6]. This is very welcome. The system in England is cumbersome and costly and this can mean some first time buyers do not have an adequate understanding of the implications of their purchase and the mortgage that goes with it or the home they have bought, eg, a leasehold property. 

In relation to those using government backed schemes the research evidence suggests that awareness and understanding of the schemes can be quite patchy amongst advisers, lawyers and indeed users.

There is a certain inevitability that deficiencies exist as all buyers and notably first time buyers are focused on the home they are buying rather than the complex transaction they are entering into. That is a means to an end -the home is the end.

9. Right to Buy

In many respects the Right to Buy has been the most significant government scheme to boost home ownership. In England some 2,057,159 homes were sold under the RTB over the period 1980 to 2023/4, mainly by local authorities (but also New Towns and Housing Associations). It has probably boosted home ownership by up to 10% points. It is estimated that some 40% or more of the homes sold under the RTB are now in the private rented sector[7].

Further reform of the rules for the Right to Buy is sensible and the government’s recent consultation responses set out a sensible direction of travel. Clearly there has been exploitation of RTB and working to eliminate that is necessary. There is however a trade off to be considered around incentives for sales and the likely length of tenancies if sales are discouraged. Local authorities benefit from the receipts for sales and can reapply that to build new homes which can be let to new tenants. By contrast if there is no sale the existing tenancy remains in place and no new homes are built. In 2006 Professor Steve Wilcox[8] calculated that, for the UK as a whole, because Right to Buy purchasers stayed for an average of 15 years – and during that time society had the use of the proceeds from a sale, instead of having to subsidise the occupier – then discounts of about 30% could be justified on financial grounds (ie, by looking at the costs and benefits).

10. Existing routes

As is evident from the 200,000 shared ownership homes that have been staircased out to full ownership this tenure has provided a route into affordable home ownership. It remains a popular and successful tenure albeit there is room for further improvement in the way it is run and managed. Shared Ownership’s inherent flexibility  in terms of the balance of rental and mortgage payments does mean that as a scheme it reaches further down the income scale than other schemes as assessed by Walker in 2016. However, it was also the least generous in terms of government

support. This led him to comment  ‘the most affordably challenged are treated the least generously’.

Over time as house prices have risen alongside service charges and other costs shared ownership in high pressure markets such as parts of London has become more challenging. Typically SO developments in London are flats, in contrast to houses in most other parts of England. Blocks of flats can mean high service charges and this in combination with cladding issues, rising rents and higher mortgage costs has clearly put some shared owners under extreme pressure.

While such cases may dominate MPs postbags it is important not to overlook the many successful moves into full ownership across a spectrum of markets and housing cycles. The tenure is well supported by mortgage lenders and this is now a competitive mortgage market. Moreover recent research has highlighted how choosing shared ownership can produce significant benefits in contrast to renting privately[9].

The government is already moving forward to reform service charges and leasehold tenure both of which can cause problems for shared owners.  The recently created cross industry Shared Ownership Council[10] has championed a Code designed to standardise best practices and consumer protection for shared ownership and this is being taken up amongst providers. There is an emerging appetite to rebalance the benefits of shared ownership between providers and shared owners and to put in place an overdue reform programme. There is an opportunity for government to re-invigorate shared ownership and by so doing draw in significant new investment from the private sector.

By contrast to shared ownership, the other affordable home ownership schemes currently on offer are very small scale and with low levels of support from both potential users, providers and funders. Efforts to re-instate Help to Buy should be resisted – it served its purpose. The creation of a permanent Mortgage Guarantee scheme is to be supported as is unlocking more of the potential of the mortgage market not withstanding the need to continue to bear down on the inappropriate risks that might be taken.

Government and the Bank of England need to be far more pro-active in relation to smoothing out the housing cycle, thus curbing some of the risks that go with that and taking on board more fully the realisation that the housing market has major implications for the economy as a whole. A recent paper looks at this in more detail[11]

11. New legislation

Both of these pieces of legislation have the potential to impact the affordability of home ownership. The Renters Rights Bill is a welcome rebalancing in that market but it may result in fewer rental homes and thus more demand for a diminished stock, which in turn will trigger higher rents. Safeguards have been built in but over the longer term we could see rents rise in relation to earnings. This will need closely monitoring.

Likewise leasehold reform is very welcome and this has the potential to assist first time buyers in that charges and rights related to leasehold property will be tackled.  Reform to leasehold will have a big impact on shared ownership. The question now is how quickly reform related to this and the 2024 Act can be rolled out and implemented. It will make shared ownership more competitive  and attractive -a further reason why an expansion of its provision should be planned for.

August 2025