Government launches new Help to Buy scheme

What?

Over the weekend, Andy Burnham announced plans to reintroduce first-time buyer support for new-build homes, combining a 2.5% deposit requirement with a government-backed equity loan of around 20%. The scheme will include regional house price caps and, unlike the previous iteration of Help to Buy, is also expected to introduce household income limits, with details due in the Budget on 28 October. Funding will come from existing government budgets and developer contributions.

So what?

Demand-side support remains one of the most important catalysts for increasing housing delivery, alongside planning reform. The previous Help to Buy scheme supported 387,000 purchases between 2013 and 2023, including 328,000 first-time buyers. Government analysis estimates that around 15% of new-build homes delivered over the period were primarily supported by the scheme, while 46% of participants could not have purchased without it.

The impact on supply was significant. Help to Buy transactions accounted for around 30% of new-build sales between 2013 and 2021 and around 15% thereafter. Importantly, c70% of HTB completions by FTBs during 2013-23 had an annual household income under c.£60k and the median household income of FTB applicants in 2023 was c.£53k for England ex London and c.£69k for London.

Now what?

Key details - particularly around house price caps and income eligibility - will determine the scheme's reach and effectiveness. If price caps are set too low or income limits are too restrictive, uptake may be limited in some of the areas where affordability pressures are greatest. If designed well, this initiative has the potential to play an important role in supporting demand in major urban centres, where a number of brownfield regeneration projects are struggling to get off the ground. In many cases, additional demand-side stimulus could be the catalyst needed to improve absorption rates and unlock delivery The challenge for Government will be designing a product that supports access to home ownership while recognising the significant differences in housing costs across the country.

The scheme's duration will also matter. A long-term commitment would provide greater confidence for land investment and development activity. Even at this stage, a credible and sustained demand stimulus has the potential to increase sales rates, encourage housebuilders back into the land market and reduce reliance on bulk sales, particularly among smaller and lower-value housebuilders that are likely to benefit most.

James Barton, Head of London & South East Land at Knight Frank, said: “Help to Buy support is without a doubt the single biggest catalyst the market needs to get building. Knight Frank has long been calling for the Government to use demand-side stimulus alongside supply-side support and today we seem to be one step closer. If the Government follows through, this will be a gamechanger for housebuilders and developers. Having spoken to many of my clients today following the news, all of them are hoping this will result in action and is not just empty words ahead of the Labour party conference this week.”

Oliver Knight, Head of Residential Development Research at Knight Frank, added: "This announcement suggests the Government has been listening to concerns from across the housing industry that planning reform alone will not be enough to achieve its housing ambitions. The focus over the last few years has been on increasing supply through planning reform but demand is an equally important part of the equation. A well-designed, targeted demand-side measure has the potential to support both home ownership and housing delivery, giving confidence to developers to build out sites and helping address affordability concerns for buyers. This announcement reflects a growing recognition that in order to have any chance of achieving ambitious housing targets will require action on both sides of the market."