Cancel student debt in exchange for first time buyer equity, housebuilders urge government
Cash-strapped graduates struggling to get on the property ladder should have their debt written off in exchange for giving over a stake of their first home to the government, a new report has urged.
The report, backed by more than 50 housing sector bodies including top housebuilders Vistry and Barratt Redrow, proposes offering a discount to the purchase price of a first home for graduates if they agree to swap up to 20 per cent of their student debt for government equity in the property.
The report, produced by a commission chaired by Labour MP Chris Curtis, is urging the government to increase young Brits’ access to home ownership and to revive the UK’s stagnant housebuilding industry. It will be presented to government figures this week, CityAM can reveal.
Housebuilders say the affordability barriers facing first-time buyers are slowing progress to Labour’s 1.5m homes target and more than half (56 per cent) of London renters have given up on home ownership, according to Enfield Council’s first-time buyer report.
Other members of the commission include Conservative peers Lord Bailey and Lord Banner KC, along with executives at housebuilder Weston Homes, estate agent trade body Propertymark and industry group Home Builders Federation.
Student debt exchanged for house price discount
The debt-for-equity proposal means graduates avoid paying expensive interest on their student loans, and the government gets up to 20 per cent of the value of the home once it is sold, according to Paul Rickard, chief executive of London housebuilder Pocket Living.
“So you’ve helped both the government, converting one uncertain cash flow into a more certain cash flow, and you’ve helped the first-time buyer,” Rickard told CityAM.
Many graduates spend as much as 10 per cent of their income on student loan repayments only to see the balance rise due to high interest, the report claims.
The commission is also calling on Labour to introduce a new equity loan scheme to support first-time buyers of new homes.
Many small and medium (SME) housebuilders, which say they are facing extinction due to rising costs, have called for a replacement to the Help to Buy scheme, which offered first-time buyers a 40 per cent loan but was ended in 2023.
One such programme suggested in the report would offer a 15 per cent equity discount to housebuyers, with the scheme to be part-funded by developers themselves, whereas the government had previously footed the bill.
SME housebuilders crave market confidence
Rickard said: “A healthy flow of first-time buyer transactions gives developers the confidence to commit capital, supports SME builders in planning and scaling their activity, and underpins investment decisions across the wider housing sector.”
Some housing experts have raised concerns that previous equity loan schemes artificially inflated house prices, but Rickard said this claim is unfounded.
Despite the government’s pledge to build 1.5m homes, net additions to the UK’s housing stock are set to fall from a 260,000 yearly average to a low point of 220,000 per year in 2026-27, according to the Office for Budget Responsibility (OBR).
The Treasury watchdog said earlier this year that planning reforms – designed to slash red tape and encourage building – are yet to speed up progress to this goal.
Other proposals included in the report include a shared ownership scheme to support first-time buyers and a rent to buy programme, proposed by former London mayoral candidate Lord Shaun Bailey.
Half of Londoners priced out of first-time homeownership
The report polled Londoners aged between 25 and 45 on their attitudes to homeownership, with 42 per cent saying they don’t want to leave the capital but feel they might have to – up from 22 per cent in 2023.
Nearly half (49 per cent) said the price of homes is their main barrier to homeownership, while nearly a third cited the cost of living crisis (31 per cent) and the cost of mortgages (29 per cent).
Ayten Guzel, an Enfield councillor behind the report, said: “This is not about a lack of effort or aspiration. People are working hard, doing the right things, and still finding the door to home ownership firmly closed.
“In a borough like Enfield, where demand is high and wages have not kept pace with house prices, rising upfront costs have made buying a first home feel out of reach for too many local people.”
Chris Curtis, MP for Milton Keynes North, said a “healthy” housing market drives economic activity, calling on his government to match its planning reforms with support for young buyers.
“Given the tough economic headwinds, we also need to think seriously about how to better support first-time buyers and manage the demand side more effectively,” he said.
The Ministry for Housing, Communities and Local Government has been contacted for comment.