The Labour party’s plans to fund housebuilding through Help to Buy Isas may be unworkable in practice, an industry trade body has warned.
The party says it will use Isa funds to generate a £5bn Future Homes Fund to drive investment in new sites where local first-time buyers will get priority over 125,000 new homes.
Savers will be guaranteed the same return on their investment and be able to withdraw their money at any time, while any bank or building society offering the Isas will have to invest the funds in housing.
A Labour government would additionally underwrite every pound of the Isa investments put into the Future Homes Fund by extending existing government guarantees.
Speaking last week, Labour leader Ed Miliband said: “There are now 11 million people who rent their homes, most of whom say they would like to buy. There are almost 3.5 million young adults living with their parents. If we keep going as we are, the average house price will be 14 times the average wage by 2020. No wonder people can’t get the start they need.
“There’s no bigger symbol that our country doesn’t work for working people than young people not being able to get a start with a home of their own. Our plan is the first real plan for housebuilding in a generation.”
But Intermediary Mortgage Lenders Association executive director Peter Williams says: “There are already a lot of complexities in starting with the Help to Buy Isa schemes, like how you link the savings that people bring in with their mortgage, but these Labour proposals are a step further.
“Are people naturally agreeing that they want their savings to be used to fund housebuilding? You would also need agreement from the lenders to deposit that into some kind of a fund and both of those are questionable.”