In last week’s Budget, Chancellor Jeremy Hunt “missed an opportunity” to assist tens of thousands of “would-be home buyers” as the subjects of housing and stamp duty were ignored, said the Homeownership Funding Association (HFA).
The Government has attempted to assist home buyers in recent times with stamp duty reprieves, deposit assistance and schemes such as Help to Buy. However, these are often temporary as Help to Buy ends this month. The government‘s data on Help to Buy shows that whilst the initiative has assisted 328,000 homebuyers in its eight-year existence, this represents less than the equivalent of one year’s first-time buyer purchases.
According to the HFA, a credible solution to the current homeownership crisis we face is by way of alternative homeownership financing. These solutions hail from the private sector, from institutional funding, and require no taxpayer subsidy or government guarantee. Various models, such as Gradual Homeownership or Rent to Own, can assist would-be buyers with the provision of a home that they part-rent and part-buy.
Chairman of the Homeownership Funding Association, Nigel Purves, said:
“As home purchase has become more and more difficult in recent years the private sector has responded with innovation that now assists would-be buyers onto the property ladder and without recourse to the taxpayer.
However, the growing gap in UK homeownership that our members’ efforts are solving are hampered by stamp duty legislation that has not yet caught up with our solution. It would seem churlish for the Chancellor to ignore our plea for change in respect of genuine first-time buyers being helped to buy and in numbers that would represent a significant uplift in UK homeownership.”
It’s estimated that alternative funding approaches could increase UK homeownership by 32,500 new homeowners each year, adding around 9% to the current annual rate of homeowners nationally.
However, according to HFA, these models are “alternative funding type purchases” and are treated as “multiple purchases” rather than a purchase by a first-time buyer. This means that each first-time buyer not only loses their first time buyer stamp duty relief but each provider of alternative purchase methods is also required to pay a 3% Government surcharge. This injustice alone is equivalent to an additional cost to each customer of almost £9000 plus the regular stamp duty cost on each purchase itself. Buyers are also unable to use their LISA (Lifetime Independent Savings Account) allowance towards a property deposit, said HFA.
The solution is to realign these purchases as equivalent to a first-time purchase so removing this artificial financial impediment, by amending the definition of a “financial institution” in section 73BA of the 2003 Finance Act (2003) to include these private sector providers.
“We, therefore, call on Jeremy Hunt MP to enter a direct dialogue with us so that we may encourage him to act in what is undoubtedly a win for him as it is for potential young homeowners and their families too,” said Purves.
