Home Builders’ Federation claims 18,400 sales will fall unless government extends support scheme
The lockdown construction hiatus means housebuilders will lose thousands of sales unless the government extends the current Help to Buy scheme beyond the end of March next year, according to housebuilders.
The Home Builders’ Federation (HBF) has released data which it says shows that 18,400 sales across the industry are at risk if the government sticks with its current policy to switch to an entirely new Help to Buy scheme from the start of April 2021.
The policy means in effect that housebuilders must complete homes by December 31 this year in order for the sale to qualify for help under the existing scheme. Housebuilders have been told by government agency Homes England that December 31 is the latest date they can submit sales, in order to allow time for the agency to process the equity loan prior to the ultimate cut-off date of March 31.
With most construction sites shut for at least eight weeks following the announcement of lockdown restrictions on March 23, and construction now on go-slow to meet social distancing regulations, housebuilders have started informing thousands of customers that have reserved homes under Help to Buy, that they can no longer guarantee completion prior to the end of December.
The issue is compounded because the new scheme being introduced from April 1 2021 has much tighter eligibility requirements, with sales restricted to first-time buyers and subject to regional caps on prices. The HBF said that of the 18,400 sales anticipated to affected by the cut-off, 7,700 are from buyers who won’t be eligible under the new scheme, even if they were able to delay their purchase.
As well as the issue of those who have already reserved homes having their purchases cancelled, the HBF is concerned that Homes England’s decision to effectively stop taking orders under Help to Buy for three months prior to the introduction of the new scheme will lead to a hiatus in sales just when the industry needs help.
The Help to Buy equity loan scheme, under which buyers are lent a 20% deposit to aid the purchase of a new-build house, accounts for more than 50% of sales at some major housebuilders. The 18,400-home figure from the HBF covers both the estimated number of actual reservations which will fall away as well as the number of potential sales lost by the anticipated hiatus.
The data comes as the UK’s largest housebuilder, Barratt, today called on the government to extend the existing Help to Buy scheme, which has been credited with restoring housebuilders’ fortunes in the wake of the global financial crisis. The firm said that the reduction in the availability of high loan-to-value mortgages since the covid crisis meant that many of its buyers would now be unable to afford a home without the government support scheme.
The news also comes as chancellor Rishi Sunak (pictured, right) is expected to introduce a stamp duty cut designed to boost the housing market in his expected economic statement this week. However, there has been little speculation he will also extend Help to Buy, and an industry source said Treasury officials had until very recently been seemingly unaware of the industry’s desire to see the Help to Buy scheme extended.
David O’Leary, policy director at the Home Builders Federation, said Help to Buy had transformed the lives of people all over the country as well as providing businesses with the confidence to invest in housing delivery, resulting in a doubling in housing supply over recent years.
O’Leary said: “Coronavirus forced the home building industry to shut down and while builders are now back on site, working within strict safe operating guidelines, completions have inevitably been delayed.
“As a result of inflexibility of the rules, thousands of home buyers look likely to miss out on the opportunity to use Help to Buy and so be able to purchase a new home. With mortgages for first-time buyers now few and far between, Help to Buy is more important than ever. Reducing the availability of Help to Buy will have a knock-on effect, undermining attempts to increase the delivery of new homes at a time when the economic benefits that the industry brings are desperately needed.”
Alastair Stewart, research analyst at Progressive Research said there was now a strong possibility the support scheme will be extended. He said: ”The possibly coordinated lobbying from the housebuilders indicates they believe an extension of the current scheme may be a runner.”