Radical report calls for student loans to be swapped for housing equity for young buyers

The report says this would make sense for the government because “a large share of the student loan book is already expected never to be repaid in full”, and so this instead gives the Treasury a stake in an asset that would likely appreciate over time.

The report also calls for the introduction of a five-year interest-free 15% or 20% government equity loan for first-time buyers of new build homes who meet eligibility requirements. Such a scheme would be part-funded by developer contributions.

Other proposals include greater innovation in the mortgage market, such as the exemption of first-time buyers from the current loan-to-income cap, the creation of a new ‘Rent to Own’ fund paid for by capital gains tax receipts from existing landlords, a stamp duty holiday for first-time buyers, reform of inheritance tax, and wider changes to the discount market homes and shared ownership sectors.

The report found the need for major reform, particularly in London, where there is an increasing level of hopelessness around being able to access the housing ladder.

While 85% of renters want to own their own home, Pocket Living’s survey of 1,000 Londoners aged between 25 and 45 found that more than half (56%) believe this is impossible.

This has led to more young people feeling they need to leave the capital to achieve housing security. A total of 42% of those surveyed said they do not want to leave London but feel they may have to, up from 22% as recently as 2023.

The First Time Buyer Commission was chaired by Milton Keynes North MP Chris Curtis.

Writing in the report’s foreword, he said: “There is no doubt that it has become harder for younger generations to buy a home, with the average age of a first-time buyer now sitting at 34, and many relying on support from the bank of mum and dad.

“And there is no doubt about why: Britain has catastrophically failed to build enough new homes. Supply has simply not kept up with demand, and prices have risen as a consequence.”

Ayten Guzel, cabinet member for housing at Enfield Council, said: “Our findings show that affordability pressures, mortgage constraints and existing debt burdens are increasingly preventing otherwise creditworthy buyers from entering the market. Something needs to be done.

“Our report sets out a series of targeted proposals designed to expand access to homeownership while supporting the delivery of new homes. By bringing together expertise from across local government, housing, finance and development, the commission aims to inform national policy discussions and help shape a more effective framework for supporting first-time buyers.”

Paul Rickard, chief executive of Pocket Living, said: “From converting student loan debt into equity, reforming the mortgage market, and giving greater certainty to developers to develop, all of these strong recommendations have the potential to make a meaningful difference to hundreds of thousands of would-be first-time buyers across London and the wider UK.”

The report has been endorsed by more than 50 developers, house builders, trade bodies and local authorities, including Barratt Redrow, Vistry Group, L&Q and Zoopla.