Proposal to extend home ownership scheme to the tune of £10bn is attacked as ‘economically illiterate’ and likely to lead to higher house prices

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Source: PA

Theresa May and chancellor Philip Hammond in Manchester this week

By David Blackman in Manchester

Senior Conservatives and built environment figures have criticised the extension of the Help to Buy programme proposed by prime minister Theresa May.

Against a backdrop of concerns in Tory circles that housing gripes fuelled Labour’s better than expected performance at June’s general election, May announced at this week’s Conservative Party conference in Manchester that the scheme will receive an extra £10bn to help more people buy homes by 2021.

Under the programme, first-time buyers can secure up to a fifth of the cost of buying a new home with a government loan as long as they can put down 5%.

The move will help an estimated 13,000 additional homebuyers over the next few years, doubling the number of people who had used the scheme to buy their own home since Help to Buy was introduced by former chancellor of the exchequer George Osborne in 2013.

But the government’s move was slammed by former London mayoral candidate Steve Norris at a fringe meeting during the conference.

While insisting that he supported home ownership in principle, he said: “It is simply economically illiterate: if you just increase demand without increasing supply, prices will rise.

“It helps a few people who might have had to settle for something smaller or saved for a couple of years to get a deposit at a huge cost.

It makes just as much sense to put that £10bn of extra money into shared ownership

David Montague, L&Q

“I am really horrified we are proposing to add another £10bn of public spending into this economically illiterate proposition.”

Norris’ concerns were echoed by Conservative MP Bob Blackman, who represents the London suburban constituency of Harrow East. “Help to Buy is brilliant and enables people to buy but it’s inflated prices,” he said.

“We want to ensure young people get on the housing ladder but we have to put restrictions on the cost of properties that are provided. It’s no good if we just increase the price of houses that people buy.”

David Montague, chief executive of housing association L&Q, said at a separate fringe meeting that Help to Buy had not been as popular in London as in other parts of the country, with just 9,000 of the 135,000 loans advanced to purchasers in the capital.

He said that would-be home owners in the capital were more likely to benefit from extra funding for shared ownership.

“If it makes sense for £10bn to go into Help to Buy, it makes just as much sense to put that money into shared ownership.”

Hew Edgar, policy manager at the RICS, told the conference’s built environment reception that there were “many avenues and other tenures” to support housebuilding.

He added: “Help to Buy is a demand solution and supply is the problem.”

But the extension of Help to Buy was backed by David Thomas, group chief executive of Barratt Developments. “Absent Help to Buy, UK housing supply would drop dramatically: housing numbers went up very, very sharply after its introduction in 2013.”