Chancellor Jeremy Hunt is being asked to consider allowing first-time homebuyers to use their pension savings to fund a deposit on a house. This bold suggestion is part of a comprehensive package proposed by the Housing and Finance Institute (HFI), a cross-party organisation, aiming to bring the dream of homeownership within reach for thousands of young Britons currently sidelined in the property market.
The HFI’s report, submitted in anticipation of the Chancellor’s Budget announcement on March 6, outlines several key strategies to rejuvenate the housing market. Besides pension fund access, it advocates for government-backed housing deposit guarantees and innovative housing deposit loans, repayable through the tax system akin to student loans. These measures, the Institute argues, could see an additional 30,000 individuals climbing onto the property ladder annually.
A Growing Concern
The report highlights a worrying trend: the average age of first-time buyers is on the rise, signaling an increasingly inaccessible market for younger generations. Sir Steve Bullock, HFI’s chair and former Labour Mayor of Lewisham, emphasises the breadth of the housing crisis, from homelessness to the challenges of home ownership and construction. “The measures in this report are practical steps that can be taken in the Budget to end the housing crisis,” Bullock asserts.
Natalie Elphicke, a Conservative MP and the HFI’s head of housing delivery, echoes this sentiment, stressing the importance of assisting first-time buyers with mortgage deposits as a Budget priority. She believes that the proposed schemes would invigorate the sluggish housing market and restore the possibility of home ownership to tens of thousands of under-40s.
Voices of Caution and Critique
However, the proposal has been met with skepticism. Industry experts warn that encouraging the withdrawal of pension funds for home purchases may lead to long-term financial insecurity for individuals, as these savings may not be replenished. Furthermore, there is a concern that such policies, while facilitating home ownership for some, could exacerbate the problem by inflating house prices further, disadvantaging future buyers.
Peter Bill, a property expert, and Jeremy Leaf, a North London estate agent and former chairman of the Royal Institution of Chartered Surveyors, both highlight the risks of over-reliance on property investment and the potential for exacerbating the housing shortage and price inflation.
Additional Measures and Proposals
The HFI’s report doesn’t stop at pension access and loans. It also suggests the construction of 100,000 new affordable homes, a move that could save the government and local councils over £3 billion a year in private rental costs and simultaneously stimulate the economy with a £15 billion boost. The report argues that such an initiative could significantly reduce the housing benefit bill, which currently exceeds £20 billion annually.
Moreover, the report advocates for the redevelopment of underutilised ‘brown belt’ land within the green belt, such as disused airfields or factories, for new housing. This approach aims to alleviate pressure on green belt areas while addressing the need for additional housing.
As the Budget announcement approaches, the debate intensifies around these proposals’ potential to offer a lifeline to first-time buyers or inadvertently fuel further market challenges. What is clear is the urgent need for innovative solutions to the UK’s persistent housing crisis, with the HFI’s report contributing to a crucial conversation about the future of housing in Britain.