Anthony Browne, the MP for South Cambridgeshire, is on the Treasury Select Committee and a co-founder of the HomeOwners Alliance.

The decline in homeownership rates, particularly amongst the young, is one of our most urgent national challenges: there are few issues that more directly affect people’s quality of life and aspirations. There is a simple political solution: build more homes. It is such an appealing thought – it has to be true.

But does building more homes actually lead to higher home ownership rates? The truthful answer is “not much”. We went on a massive national bonanza from 2005 to 2015, and homeownership rates still fell. All that rose were the numbers of properties that were privately rented “buy to lets”. As the report Resentful Renters by the Centre for Policy Study shows, the number of homes built in that period almost exactly matches the increase in private rented properties.

Clearly, building houses that are then sold as holiday homes or buy-to-lets does nothing to increase homeownership. Whole blocks of flats in London are sold off-plan to international investors, doing nothing at all to relieve the homeownership crisis.

The argument is often made that building more homes leads to a decline in house prices, putting them in reach of first time buyers. Supply and demand.

But there is an increasing economic consensus that the impact is marginal – the price is more determined by the vast secondary market in homes that have already been lived in, which makes up 99 per cent of homes, not the one per cent of new build.

And the prices in that secondary market are largely driven by the cost and availability of credit (aka mortgages) that finances the purchases. The restriction in access to first time buyer mortgages since the financial crisis roughly equals the drop in the number of first time buyers, and on its own could account for much of the drop in homeownership.

Again, look at the big picture: in the last few years housebuilding has been at record rates, but rather than falling, house prices have risen to record levels. That rather proves that housebuilding is not the driving force behind price changes.

So, if building more homes does not push up homeownership rates, what will? There are roughly a million residential property transactions a year, overwhelmingly of homes that have already been lived in rather than new builds.

The key to increasing homeownership rates is to make sure more of those million transactions (both of new build and already lived in) go to first time buyers. Identify the barriers that first time buyers face, and work out measures to remove them.

The Help to Buy scheme, where the Government guarantees deposits to overcome the deposit barrier, is one such scheme, and although beneficial, it can only ever be small scale. To move the needle, we need solutions that are sector-wide, for the new and secondary market.

In 2011, I co-founded the HomeOwners Alliance, to help aspiring homebuyers onto the property ladder. About a decade ago I led a campaign to push for a higher rate of stamp duty for people buying second homes or investment properties, to tilt the market in favour of those buying a home to live in.

Subsequently, the Treasury introduced the three per cent additional property stamp duty surcharge, and cut stamp duty for first time buyers, and the rate of homeownership has started rising again in the last few years.

That rise in homeownership in the last few years is nothing to do with housebuilding, since that housebuilding did not reduce prices, which is the supposed transmission mechanism between housebuilding and homeownership.

The rise in homeownership happened despite record house prices, because a greater proportion of the roughly million transactions a year have been first time buyers. Other things that the Government could consider to help first time buyers include:

  • Getting the Bank of England to allow lenders to offer higher loan to income ratios on long term (over 10 years) mortgages, as a new Centre for Policy Studies report proposes. That will not increase prudential risk to lenders, but would put homeownership within reach of many more first times buyers, by enabling them to take out long term fixed rate mortgages that are up to seven times income.
  • Increase the additional property stamp duty surcharge so that foreign buyers who do not intend to live in a property pay far more – there are even arguments to increase it to the same rate as VAT, or 20 per cent. The Government should also reduce the tax breaks given to buying properties through a company, and to those buying more than six properties in a single transaction. It is difficult to see any societal benefit in allowing so much of our residential property to be bought as investments for people who don’t even live in the country. It is also difficult to see why overseas buyers should pay a lower rate of tax buying a flat in the UK (which are limited in supply) than if they bought a car or computer here (which have no supply limitiations).
  • Give private landlords an incentive to sell their property to long-term tenants, for example by reducing the capital gains tax charge if they sell to a tenant who has lived in the property for more than 10 years.
  • Encourage building of more comfortable downsizing properties, for couples to move on from their family home after their children have fled the nest. The cost of moving, and the lack of available suitable properties, means there is massive so-called “property hoarding” where elderly people live in houses far bigger than they need.
  • Change stamp duty regulations to enable private shared equity, so that a company can buy a share of a property to enable the first time buyer to overcome the deposit barrier and buy the rest of the property. This must be done under a controlled regime so the first time buyer can staircase up to buy the rest of the property when they can afford to. At present, stamp duty is punitive if you buy a property using shared equity but not when using debt (mortgages), with the only very limited exemption being for shared ownership of social new build. [declaration of interest: I used to be on the board of a company that offers this].