For many first-time buyers, saving for a deposit remains a major obstacle to homeownership. In September, the government announced Your First Home, a proposed scheme allowing eligible buyers to purchase new-build homes with a 2.5% deposit and a 20% government equity loan.1 The aim is to help more people onto the property ladder while encouraging housebuilding, with further details expected at the Budget on 28th October. But the experience of Help to Buy raises a question: how much of this support will translate into additional homes, and how much might end up benefiting developers?

How Subsidies Can Benefit Developers

Housebuilders already offer financial incentives to attract buyers, including deposit contributions and temporary mortgage payment support. By bringing more buyers into the new-build market, Your First Home could allow developers to reduce these incentives while maintaining sales. Stronger demand could also push up house prices, providing another way for developers to capture some of the government's support.

A developer could, for example, withdraw a £10,000 cash contribution while leaving the advertised price unchanged. The buyer would effectively pay £10,000 more, even though the property's listed price had not risen. Some of the government's support could therefore find its way into developers' margins. Such changes could easily go unnoticed in house-price data, since the advertised price would remain unchanged.

How far developers benefit will depend partly on the price elasticity of housing supply. In highly constrained markets such as London and the South East, planning restrictions and limited developable land make it difficult to increase construction in response to stronger demand. Additional purchasing power is therefore more likely to be reflected in higher prices or reduced buyer incentives. In less constrained areas, where developers have greater scope to build, additional demand could instead make developments commercially viable or allow construction to proceed more quickly.

Lessons from Help to Buy

Help to Buy, which ran from 2013 to 2023, offered government equity loans to buyers of new-build homes, making it a useful comparison with Your First Home. Carozzi, Hilber and Yu (2024) studied the expansion of equity loans in London, where the maximum government contribution increased from 20% to 40% in February 2016.2 Their preferred estimate found that new-build prices rose by around 8%, with no statistically detectable increase in construction. Along the England–Wales border, however, they found greater housing development without a significant rise in prices.

A government-commissioned evaluation published in September 2026 reached a more favourable assessment of Help to Buy nationally.3 It estimated that around 15% of new-build supply during the scheme was attributable to the policy, using evidence from the England–Wales border alongside assumptions about wider construction effects. Its central estimate put the net present social value at £25.1 billion in 2024/25 prices, including projected equity-loan repayments through 2039/40. When additional construction outside the scheme was excluded, the estimated benefit fell to £2.3 billion.

The evaluation also found that 54% of surveyed recipients believed they could have bought a home without Help to Buy, although some would have needed to compromise on size, quality or location. Meanwhile, its own analysis of the London expansion found no strong evidence of a large price increase or additional construction. These conflicting findings make it harder to judge how much of the subsidy ultimately benefits buyers.

How Housebuilders Are Likely to Respond

Bellway's chief executive, Jason Honeyman, has suggested that Your First Home could increase the company's housing volumes by around 10%, based on its experience of Help to Buy.4 Yet Bellway expects completions to fall in its 2027 financial year, partly amid concerns that prospective buyers may delay purchases while waiting for the scheme's details.

However, Your First Home will operate in a very different interest-rate environment from Help to Buy. When the earlier scheme began in 2013, Bank Rate stood at 0.5%, compared with 3.75% today.5 Higher mortgage rates increase monthly repayments and constrain how much buyers can borrow, potentially weakening the scheme's impact on demand. The proposed 20% equity loan would partly offset this by reducing the mortgage required, with an initial interest-free period. 1 However, the duration of this period and subsequent charges remain unconfirmed, making it difficult to assess the longer-term costs for buyers.

There are reasons why additional demand could eventually translate into more construction. The Competition and Markets Authority's 2024 housebuilding study found that developers typically stagger construction to avoid releasing more homes than they can sell at prevailing prices.6 More potential buyers could allow them to build and sell homes faster. Where supply is more restricted, however, the benefits may be more likely to appear in higher prices or reduced buyer incentives.

My prediction is that, during the first two years of Your First Home, any increase in effective new-build prices relative to comparable resale homes will be more pronounced in supply-constrained areas such as London, despite higher borrowing costs limiting demand. This includes changes in developer incentives and property quality, which advertised prices alone may overlook. I expect a stronger construction response elsewhere, where developers have greater scope to increase supply. Comparing incentives, quality-adjusted prices and completions across regions would help establish whether this happens.

A Better Approach: Targeting Housing Support

The government should concentrate equity loans in areas where developers can realistically increase construction, while directing more affordable housing investment towards places where supply remains constrained. Planning approvals, housing completions and available development land could help identify suitable areas.

The government's £39 billion Social and Affordable Homes Programme, running from 2026 to 2036, offers one route for expanding supply.7 At least 60% of the homes it funds are intended for Social Rent, alongside support for Shared Ownership and Rent to Buy. Outside London, Rent to Buy generally allows eligible households to rent at 20% below market rates while saving towards a deposit.8 For those unable to afford homeownership even with an equity loan, expanding affordable housing may provide more meaningful support.

Councils and housing associations could also help bring forward construction by agreeing to purchase homes before building begins. Such commitments would give developers greater certainty that completed properties will find buyers, although their success would depend on the funding and capacity of housing providers.

There are financial trade-offs, however. Equity loans allow the government to recover money through repayments, although they also carry financing costs and financial risks. Direct grants require upfront spending, and Social Rent typically needs more public funding per home than other affordable tenures.9 Nevertheless, these grants can support lasting affordable housing and reach households for whom purchasing a home remains unrealistic.

Geographical targeting would come with difficult choices. First-time buyers in expensive areas could lose access to equity loans despite facing some of the greatest affordability pressures. The government would need to show that targeting produces enough additional homes to justify excluding buyers elsewhere.

Will More Homes Actually Be Built?

Your First Home should ultimately be judged by the additional housing it generates as well as the buyers it assists. Where developers can respond to stronger demand, equity loans could help bring forward construction. In more constrained markets, some of the support may instead be absorbed through higher effective prices. Without an expansion of supply, Your First Home risks making it easier to buy a home without making homes any more affordable.

Footnotes

  1. MHCLG, New first-time buyer scheme to be confirmed at Budget (opens in a new tab), 26th September 2026. 2

  2. Carozzi, Felipe, Hilber, Christian A. L. and Yu, Xiaolun, On the Economic Impacts of Mortgage Credit Expansion Policies: Evidence from Help to Buy (opens in a new tab), 2024.

  3. Ministry of Housing, Communities and Local Government, Evaluation of the Help to Buy Scheme: Evaluation Findings Report (opens in a new tab), 15th September 2026.

  4. The Guardian, Burnham’s Your First Home scheme ‘could boost Bellway’s house output by 10%’ (opens in a new tab), 13th October 2026.

  5. Bank of England, Bank Rate history (opens in a new tab), 2026.

  6. Competition and Markets Authority, Summary of CMA market study final report into housebuilding (opens in a new tab), 26th February 2024.

  7. Homes England, Social and Affordable Homes Programme 2026 to 2036 (opens in a new tab), 15th April 2026.

  8. HM Government, Rent to Buy: Pay Lower Rent to Save for a Deposit (opens in a new tab), 9th March 2023.

  9. Homes England, 2021 to 2026 Affordable Homes Programme: Summary to End of March 2025 (opens in a new tab), 5th November 2025.