New first-time buyer scheme could increase housebuilding with supply-side support

The launch of a new equity loan scheme to support first-time buyers could provide a welcome boost to the housing market if other supply-side measures are rolled out, BCIS has suggested.

Due to be confirmed in full at the Autumn Budget on 28 October, Your First Home could enable first-time buyers purchasing a new build property from a participating developer to buy with a deposit of 2.5%, supported by a 20% government-backed equity loan. The loan will also have an initial interest-free period⁽¹⁾.

The announcement was confirmed by Prime Minister Andy Burnham during his Labour conference speech on Tuesday, alongside new powers for councils to take control of empty homes. Councils may also be able to acquire poor-quality homes where landlords have refused to make improvements after a warning.

BCIS chief economist Dr David Crosthwaite said the first-time buyer scheme was positive for news housebuilders but cautioned that the scheme’s long-term success would likely depend on a holistic approach.

‘Concerns that this is a demand-side solution to a supply-side problem are valid,’ he said. ‘Recent government analysis estimates that the previous Help to Buy scheme increased new housing supply by 15%, although much of that impact came during the scheme’s early stages. It also contributed to higher house prices.

‘In other words, such schemes can stimulate demand and supply in the short term, but their effectiveness is likely to diminish if prices rise and the benefit to buyers is eroded.

‘In isolation, the Your First Home initiative risks encountering the same problems. Its introduction must therefore be accompanied by supply-side measures, including a review of overall development costs and continued planning reform.

‘Private housebuilders need developments to be commercially viable, particularly in an uncertain market. But for the initiative to work in the long term, it has to go both ways.

‘The government should consider improving development viability, while ensuring developers have the right incentives to deliver additional supply without fuelling unsustainable price growth. That balance is important for the health of the housing market, construction industry and national economy.’

Housebuilding costs in England are expected to come under further pressure in the coming months, with the Building Safety Levy taking effect in October and the Future Homes Standard due to come into force in 2027.

Figures published by the Ministry for Housing, Communities and Local Government in September suggest the government is still behind on its target to build 1.5 million new homes by July 2029.

Between 9 July 2024, when the current Parliament began, and 20 September 2026, 437,900 net additional homes were delivered in England. If the current pace of delivery continues, the government would fall short of its target by more than 500,000 homes.

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^{(1) GOV.UK – New first-time buyer scheme to be confirmed at Budget – here}