Home Ownership Affordability

What, then, are the Government to do? First, as we know, more homes are needed. The Government are right to address the historical undersupply of homes, and we support their target to provide 1.5 million new homes by the end of the Parliament. At the same time, we are concerned that they might not meet that target and, even if they do, that 1.5 million new homes may not be enough. The last time homes in this country were built at the pace required to hit that Government target was over 50 years ago.

Back then, 40% of homes were built by councils, but those days are long gone. Now, 75% of home building is done by private developers, which are facing their own challenges. The costs of building are rising, and if private developers cannot make a profit, they will not build the homes in the first place. We are seeing that happen across the country, with developers such as the Berkeley Group scaling back operations because of the volatility caused by the conflict in the middle east.

In my constituency of Woking, over 2,000 homes in and around the town centre alone have got permission, but none is even under construction. The Government are right to encourage councils to build again, including through their social and affordable homes programme, but private developers are vital to building the homes we need. We have asked the Ministry to write to us twice a year about its actions and progress on increasing home building rates by developers.

The Government could do more, however, including using the hundreds of thousands of homes around the country that are lying empty. Those homes are an unused stockpile, representing a significant chunk of the 1.5 million new homes the Government want to build. Councils already have some powers to take control of vacant homes, but those powers carry risks and are rarely used. We concluded that the Government need to make existing powers easier to understand and use, and to provide new powers where necessary.

The evidence we saw during our inquiry shows that high loan-to-value ratio mortgages are important for first-time buyers, so it is good news that such mortgages are becoming more available because of the prudential and financial regulations affecting the property market. But there is more to be done, and we need to encourage lenders to change their affordability assessments so they are fair and mortgages are accessible to those who need them most. For example, it should never be the case that a renter is turned down for a mortgage because they cannot afford the repayments, when those repayments are less than what they are already paying in rent.

Other financial products besides mortgages can also be put towards the cost of a new home. Some products are even backed by the Government, such as the lifetime ISA. I will not go over all the problems with lifetime ISAs now; as part of our inquiry, we sat jointly with the Treasury Committee, which has published a separate report. Suffice it to say, the Government have promised to replace the lifetime ISA with a new product that is specifically designed for first-time buyers, and we support them in doing so.

The new first-time buyer ISA will be introduced in 2028. The Government launched a consultation on its design just two days ago. We are glad that, in line with our recommendations, the design is geared specifically towards first-time buyers and does not have a withdrawal charge that could cost people their initial investment. However, we also recommended that the Government should avoid a static property price cap that could make the product useless in some parts of the country. The Government have not yet set out the details of their property price cap for the new ISA, so we are still waiting to see how they will ensure that the product remains useful over time and in every region of the country.

As well as publishing our inquiry report, we also wrote to the Minister on 29 April to set out our concerns relating to the home buying and selling process. We found that it is a painful experience that reduces people’s motivation to move and slows down the housing market. Barriers and unnecessary costs should be eliminated to encourage more people to move, to increase the day-to-day supply of homes on the market and to reduce the number of transactions that fall through.

In particular, we recommend that the Ministry should mandate that necessary property information is provided earlier in the process, that conditional contracts should be used to make transaction agreements binding at an earlier stage and that there should be stronger regulation of property agents. The Government promised to address the first two of these in their reform road map, which was published last week. Although the Government have stopped short of regulating property agents, they have promised to publish a code of practice for them by the end of the year. I hope that, with the political instability, that is not lost.

Lastly, I turn to the stamp duty land tax. Stamp duty directly reduces the affordability of home ownership by increasing how much people need to pay to buy a home. More than that, it slows the property market, stops people relocating for work or downsizing, and ultimately damages the economy. I wish I could say that stamp duty was an isolated problem, but all property taxes in this country, including business rates and council tax, are a mess. Similarly to a previous report, which recommended that the Government should make changes to council tax, we recommend that stamp duty should be overhauled and replaced. It is fundamentally unfair and damages our economy. Those two taxes need to be changed, and I hope the new Government take that opportunity.

Stamp duty provides £14 billion of Government revenue each year, so the Government cannot just get rid of it outright, but we have called on them to consult by the end of the year on alternative to the current form of stamp duty, including replacing it with a revenue-neutral alternative, such as an annual property tax; reducing rates to stimulate more transactions; tying tax bands more closely to local house prices; and updating reliefs to better meet Government goals. I know the new Prime Minister is keen on a land value tax, and I hope this is a priority for his new Government.

It was on this day three years ago that I moved into the first home I have owned by myself, but for so many people, home ownership is beyond reach. In my constituency of Woking, more people are having to leave their home town to buy their first home, and some cannot buy a home at all. That is not acceptable.

To address housing affordability and to ensure that our young constituents can get a foot on the housing ladder, we need the Government to go much further and much faster. We need them to use a range of approaches to improve the supply of homes and the effective demand for those homes. We welcome the steps that they are taking in some areas, but in others they must be bolder to enact the policies that we have set out in our report, which can lead to real and long-lasting improvement in the affordability of home ownership for first-time buyers in this country.