Over the last 50 years we have seen plenty of initiatives designed to increase homeownership and housing supply. Some have worked better than others.
The recently announced Your First Home (YFH) policy has the potential to be one of the more significant.
The principle is straightforward. First-time buyers with a deposit of just 2.5% will be able to access a Government equity loan of up to 20% of the value of a new home. Albeit important details – including regional price and income caps, the interest-free period and developer contributions – are still to come.
But the basic proposition addresses two of the biggest barriers facing aspiring homeowners: raising a deposit and securing an affordable mortgage.
More importantly, YFH is being introduced at a time when Government is simultaneously reforming the supply side of the housing market. That combination could be particularly powerful.
Helping people into homeownership
For many first-time buyers the problem is not the ability to meet the monthly cost of owning a home. It is the deposit to enable them to get there in the first place.
For renters paying 30-50% of their gross income to a landlord, it is extraordinarily difficult to assemble a substantial deposit. Others remain living with parents well into their 30s because the deposit and mortgage requirements remain beyond reach. Some are putting off starting a family because they can’t access the security of homeownership despite being in decent employment.
Your First Home, as an equity loan scheme, addresses both the deposit problem and the monthly cost.
It reduces the deposit required from the purchaser and reduces the size of the conventional mortgage. And, because Government takes an equity share rather than simply lending a fixed cash sum, it shares any risks associated with in movements in the value of the property.
For households who want to own their home but cannot bridge the gap between renting and buying, that can be transformational.
We already have evidence that equity loan schemes work
Help to Buy provides a substantial evidence base.
Nearly 400,000 households bought homes through the scheme. More importantly from a housing-supply perspective, the Government’s recent independent evaluation estimated that around 15% of the new homes built during the scheme period were attributable to Help to Buy. 300,000 additional homes.
The evidence also challenges the suggestion that equity support simply gets absorbed into higher new-build prices. The evaluation estimated that Help to Buy purchasers paid only around 1% more than purchasers of comparable new homes.
So, the lesson from Help to Buy is not that equity loans are a substitute for increasing supply. It is that, properly designed, they can help create the demand confidence necessary for developers to increase supply.
More demand = more supply
Housing supply is sometimes discussed as though it is determined entirely by the number of planning permissions granted.
It isn’t. Housebuilders build homes when there is sufficient demand to sell them at a rate which generates an acceptable return on the capital employed.
Volume matters. If a developer sells more homes each month, fixed site costs are spread across more completions. Capital is recycled more quickly and land can be replaced sooner. That creates the commercial capacity and incentive to build more.
YFH therefore has the potential to improve both sales rates and capital efficiency. That is particularly important in parts of England where development viability is currently marginal.
Better viability = more stalled sites unlocked
Planning delays, infrastructure requirements, regulation, build-cost inflation, interest rates and affordable-housing obligations have combined to make many schemes difficult to deliver.
YFH will not solve every viability problem. Nobody claims it will. But increasing the pool of purchasers for new homes will improve the sales-rate assumptions within a development appraisal. Higher sales rates improve return on capital without a corresponding increase in many fixed costs.
On marginal schemes, that can make the difference between development proceeding or remaining stalled.
It could be particularly important in those markets in London and the South-East where affordability constraints are suppressing sales despite there being substantial underlying housing need. Albeit we obviously need more details on the local income caps and price caps before we can conclude decisively.
Planning reform and YFH will reinforce each other
Perhaps the biggest reason for optimism is that YFH does not sit in isolation. It follows substantial changes to the NPPF and the Planning and Infrastructure Act, with further reforms including the National Scheme of Delegation, model conditions and standardised Section 106 agreements intended to make the planning system quicker and more predictable.
Planning reform will increase the potential supply of developable land. YFH will increases the pool of customers capable of buying the resulting homes. Put the two together and there is the potential for a much stronger supply response than would arise from either intervention on its own.
That distinction is important. Demand support introduced into markets severely constrained by planning carries obvious risks. Indeed, it is fair to say Help to Buy performed weaker than hoped in London due to the constrained planning system. NPPF and Grey Belt, should remove this risk for YFH.
Demand support introduced alongside significant measures designed to increase supply is a very different proposition.
Government investment rather than Government spending
There is also an important fiscal distinction between an equity loan and a grant. Government is acquiring an asset.
Again, Help to Buy provides useful evidence. By March 2026, more than 213,000 Help to Buy equity loans had been fully repaid. HBF analysis indicates that loans originally worth around £11.98 billion had generated repayments of approximately £13.22 billion. Including interest receipts, it estimated a positive Exchequer return to date of around £1.74 billion.
That is before considering the wider economic and fiscal effects of additional housebuilding: Corporation Tax, PAYE and National Insurance, SDLT, Council Tax and taxation throughout the construction supply chain.
A policy which helps people own homes, supports additional housebuilding and ultimately recycles capital back to Government deserves to be viewed as an investment rather than simply another spending programme.
Beyond beyond first-time buyers
The advantages should not stop with the households using YFH. Housing is one interconnected market.
A renter purchasing an additional new home releases a rented property. Additional supply reduces competition for the existing rented stock.
The only meaningful way to alleviate every symptom of the housing crisis – high rents, poor affordability, overcrowding, homelessness, temporary accommodation and adults unable to leave the parental home – is to build more homes.
That is why the potential supply response matters so much.
Getting the detail right
There are, of course, important decisions still to be made. Regional price caps will matter. Income caps will matter. The interest-free period will matter. The structure of the developer contribution will matter, particularly for SMEs.
Those details will be scrutinised carefully when they emerge. But the starting principle is strong. Your First Home addresses genuine barriers faced by first-time buyers. The experience of Help to Buy provides evidence that equity loans drive substantial additional housing supply without simply being capitalised into new-home prices. And, crucially, YFH is being introduced alongside planning reforms designed to increase the industry’s ability to respond.
For decades housing policy has too often treated supply, demand and affordability as separate issues. They aren’t. A combination of planning reform which makes it easier to deliver homes and targeted support which enables people to buy them offers a much more coherent approach.
If Your First Home helps turn planning permissions into sales, sales into starts and starts into more completed homes, it could make a very significant contribution to solving the housing crisis. And, of course, it doesn’t remove the need for much needed reforms to SDLT – but that is another post!firs
