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The GLA housing committee is to debate what Help to Buy really means to London as the average annual income of Londoners receiving related loans tops around £72,000.

Stats show the greatest supply shortfall in London’s housing market is for rented tenures at sub-market or lower mainstream rents.

Homes for sale in London have fallen by 64% since 2017 and the number of properties available under Help To Buy across the capital has fallen to around 1,619 from 4,535 in December 2017, according to reports.

This afternoon, the committee is due to discuss how well Help to Buy programme has been working in London, with reference to the specific criticism of the scheme doing more for households already able to achieve home ownership without assistance.

Invited witnesses are:

  • Henry Pryor – Buying agent and market commentator
  • Professor Yolande Barnes – Chair of the Bartlett Real Estate Institute, UCL
  • Daniel Tomlinson – Research and Policy Analyst, The Resolution Foundation

Since 2016, a London Help to Buy Scheme has offered a 40% equity loan, recognizing the higher costs of home purchase in the capital.

And stats the average annual income of Londoners who have received Help to Buy loans is set just short under £72,000.

The Mayor of London has no direct involvement in Help to Buy schemes but does provide funding for the building of shared ownership homes, and is running a portal to help Londoners to find properties to buy or rent, including through Help to Buy.

Key issues for the committee’s consideration are:

  • Supporting new supply for home ownership in London

Many London renters would like to own their own home, and in recent years, public funding to support the housing market has been heavily weighted in favour of ownership.

This was particularly important to stimulate the new build ‘for sale’ housing market following the financial crash.

However, property agent data suggests that the greatest supply shortfall in London’s housing market is for rented tenures at sub-market or lower mainstream rents.

Nationally, developers are reported still to be heavily dependent on the Help to Buy Equity Loan Scheme for sales.

In London, a lower proportion of new build sales has been supported by Help to Buy than elsewhere, probably reflecting often unaffordable prices in the capital.

But a growing proportion of outer London new builds are supported by Help to Buy, accounting for over a quarter of sales in several boroughs.

And against this background are reports of major national developers making big profits building homes for sale under Help to Buy..

Questions have also been raised over the additionality of the homes supported by the scheme.

The Government’s own evaluation in 2016 estimated that 43% of the new homes built with Help to Buy were ‘additional’ to those which would anyway have been built.

However, it may be that some of the buyers of these homes would simply have bought a smaller or more affordable property, had the scheme funding not been available.

  • Effect on house prices

Critics complain that the schemes have contributed to the ongoing rise in London’s house prices.

GLA data from September 2018 suggest that Help to Buy is unlikely to be the primary factor influencing new build house prices in London.

However, the additional credit availability arising through the Help to Buy Equity Loans might well be expected to support some increases in new build prices.

Academic work also suggests there may be an inflationary London price effect.

  • Supporting Londoners to own homes

The Help to Buy Scheme in London tends to assist similar types of households to those who are accessing homeownership without the scheme’s assistance.

Average income of Help to Buy buyers is just under £72,000 in London while Shared Ownership is known to assist many households with significantly lower incomes than the average for all first-time buyers.

For instance, in 2015/16, the median income for households purchasing shared ownership properties was £41,000, similar to the median income for all working age London households, and around a third lower than the median income for all London first-time buyer households.

Help to Buy really took off in London after the upper loan limit was raised to 40% in February 2016. The first five years of the Help to Buy Loan are interest-free, but after that borrowers are charged 1.75% of the loan value. This charge rises annually thereafter by RPI plus 1%.

This is in addition to the cost of the buyer’s commercial repayment mortgage.

In the anticipation of questions as to the continuing affordability of Help to Buy homes- especially if interest rates rise in future – the committee is encouraged to consider:

  • How beneficial Help to Buy has been in London
  • Any negative consequences there have been
  • Who is benefiting from Help to Buy London and why
  • The value and nature of any successor scheme to Help to Buy London

As reported by 24housing, the number of properties available under Help To Buy in London has fallen to 1,619 from 4,535 in December 2017 – a 64% drop.

The number of properties available in London under Help To Buy has declined by 64.3% since 2017, modular homes provider Project Etopia can reveal.

The stats released by modular homes provider Project Etopia in March showed 20 out of 32 boroughs had fewer than 50 Help to Buy properties for sale compared to seven in 2017.