Everyone wins? UK housing provision, government shared equity loans, and the reallocation of risks and returns after the Global Financial Crisis

Abstract

The 2008 Global Financial Crisis was an extreme shock to the UK housing market. Frozen international capital markets resulted in highly restrictive mortgage lending by UK retail banks, and the collapse in homebuying threatened the heavily indebted housebuilding industry. To counteract the threat, between 2008 and 2013, the UK Government issued shared equity loans requiring matching loans from housebuilders alongside retail bank mortgages and deposits from homebuyers. In 2013, it introduced a new shared equity scheme, Help to Buy (HtB), which no longer required matching loans from housebuilders. This article explores the distribution of the benefits of the UK Government’s issuance of shared equity loans for homebuyers to buoy demand through its effects on the UK’s three largest publicly listed housebuilders. The article found that the housebuilders increased their output by 29,000 homes and generated an additional £1.4 billion in cash between 2013 and 2017 as a direct result of HtB. Over the same period, the housebuilders paid shareholders £3.5 billion in dividends and their share prices rose by an average of 140 per cent, suggesting a clear transfer of income and wealth from taxpayers to housebuilders to shareholders and the emergence of a new mode of housing provision.