When taking a profile of the average Conservative voter, there is one demographic that drives Conservative votes and was the key to victory in the Red Wall in 2019, and one demographic that by the same rate, opposes the party.
In 2019, 57% of owner-occupiers, those who live in a home that they own, voted for the Conservatives. In contrast, the party struggled to gain the votes of those between 18 and 24 years, who voted 56% for Labour. Recently, these social groups have become much more mutually exclusive, as house prices have risen faster than wage growth for years, making it unaffordable for first-time buyers to get onto the housing ladder. As the data shows, this is unsustainable in the long term. This provokes a strong argument for the next Conservative leader to ensure it is much easier for first-time buyers to make those first steps, shoring up long-term rent and hastening the decline of the so-called ‘generation rent’.
Since the 1980s, the number of houses built by local authorities has declined and never picked up. In contrast, those built as private housing have stayed constant, leading to housing stock being unable to keep up with population growth. Therefore, while the Right to Buy Scheme was vital in ensuring financial security for millions of families, it has led to a much-reduced availability of affordable housing. This, combined with increased demand because of population growth, has increased the average deposit to nearly £70,000. Given the current squeeze on incomes because of inflation and high energy prices, alongside long-standing concerns about the cost of private renting in large cities, it is almost impossible for a young person to save this much.
Previously, the government has tried many different policies to solve these issues. During Covid, a cut in Stamp Duty allowed the housing market liquid despite the overall turn-down in the economy due to lockdown. While successfully achieving this aim, the policy has negatively impacted the housing market through the hike in prices, over 10% in 2021, because of a rush of transactions in the weeks prior to the schemes winding down last year. Since the main issue for first-time buyers is the difficulty in raising a deposit, this scheme had a detrimental effect on their ability to purchase their first home.
In the future, a reform of property purchase taxes could help improve housing availability for first-time buyers. A more regionalised property taxation system, with higher taxes on larger value transactions in areas where demand outstrips supply, would allow further availability. Furthermore, increased taxes on second homes in areas such as Cornwall and the Isle of Anglesey, where residents struggle to get on the ladder, would also contribute to the resolution of the overarching issue. These increased tax revenues can then be used to subsidise house building in these areas where first-time buyers want to live, to bring prices down and make it easier to get onto the housing ladder.
A popular policy, especially amongst young people, was the Help to Buy ISA. This enabled buyers to save tax-free, with a contribution from the government included. This scheme has helped nearly 500,000 people get onto the property ladder and so can be seen to be a success on the surface. However, there were issues with the scheme that would hinder it in the environment we are living in. Primarily, the value limit of the properties included in the scheme was £250,000 outside of London. With the average UK house price for first-time buyers being £223,000, this does not leave much wiggle room for those purchasing property in more expensive parts of the country outside of London.
Furthermore, to enable these buyers to maximise the deposit they will be able to put forward, the amount of capital allowed to be placed into these ISAs should be increased. Previously, only £200 a month could be placed into the ISA. While not every home buyer has more than this available to place into an ISA, the limit should be raised to enable greater flexibility for buyers to put in as much as possible to purchase the property they need. Furthermore, greater limits mean an individual could purchase a property they are much more likely to stay in for the long-term instead of having to purchase a larger home only a few years later.
Therefore, to secure the party support over the coming years, the government needs to start seriously addressing the issues that exist within the housing market for first-time buyers, namely the struggle to raise a deposit. Property taxes need to be rethought-out, as there is not a one-size-fits-all approach for such an important asset, with redistributive power increased to ensure the correct incentives are there for the building of starter homes in desirable areas. While government, through an improved ISA scheme, needs to give those individuals greater flexibility to raise the necessary deposit to purchase a first home in the UK.
