The FT has a handy summary of the problems with the government’s Help To Buy scheme. In Scotland there is a different scheme, but it’s got the same aims and potential effects.
Let’s look at what that means locally, here in Edinburgh. I’m really concerned about the housing bubble that already exists in Edinburgh and the fact that we are making it worse.
The last figures I’ve found about typical pay in Edinburgh are published by the investment portal Inspiring Capital. In 2008, median pay was £26,623. Let’s say it has increased to £30,000 since then. The normal Edinburgh resident worker could therefore borrow £90,000 (3 x salary) and would typically need to have saved £10,000 (10% deposit).
For £100,000 you can buy a flat (no houses for that price!). You can choose between one bedroom in a nice area or more than one bedroom in a less desirable area. Hilariously, you could also buy a plot of land with planning consents but no actual building.
So imagine our £30,000 salaried worker is the parent of a family. What do they buy? Do they buy a flat with enough bedrooms for their children, but live in an area where their children are statistically more likely to suffer poorer outcomes, or do they cram into a one bedroom flat in a good catchment area? Or do they carry on renting? What a poor set of choices for someone setting out on family life.
This is because our housing is out of kilter with our incomes. There are inflated prices in Edinburgh because there is a severe shortage of housing. Schemes that help people to buy a home at the existing prices will just maintain or inflate the bubble further. Schemes that build more suitable housing will mean the government spending less on buying housing on behalf of ordinary people.
What we desperately need is a house building programme that suits the population size and mix.