A missed opportunity to help first time buyers

The government's announcement to increase the threshold on inheritance tax liability to £600,000 for couples could have been designed to give thousands of people an opportunity to get a foot on the housing ladder, says the professional body for people working in housing.

The Chartered Institute of Housing is calling for this and any future threshold rises to be linked to a scheme to help would-be first time buyers.

In order to benefit from a reduced tax liability, people inheriting money from privately owned assets including property should be required to invest the tax they would have paid under current rules into a 'National Housing Equity Share Fund' for a fixed period of, say, 10 years. First time buyers who are assessed as being unable to afford the full cost of house purchase would be able to apply to the fund for an interest free equity loan for, say 25-50% of the value of the home.

In return for delaying access to the money, investors in the fund would receive a return equal to the increase in house prices, nationally, for the period of the investment. The fund would be managed so that individuals can cash in their investment after the 10 year period.

This would provide a strong financial link between those who have had the privilege of owning property in the past and first time buyers who would like to own but are currently priced out of the market.

The government already has several 'HomeBuy' schemes for low cost home ownership in operation - including a new Open Market HomeBuy - but is struggling to finance the equity portion on a significant scale. Income from inheritance tax could provide a long-term source of finance for shared equity housing schemes. First time buyers would benefit at the same time as the inheritance tax threshold is increased - a win-win arrangement.

Howard Farrand, CIH Chair of Policy and Practice Board said "One of the greatest emerging inequalities of our day is that between the children of people who own their homes and of people who don't, and inheritance is a key route by which these assets are transferred between the generations. This proposal would help to spread out the benefits of inheritance. At the same time, everyone will be a winner - inheritors would reduce their tax liability and first time buyers would get financial help to purchase their home" .

He continued "Inheritance tax is now an issue for parties of all political persuasions and we are likely to see further rises in the tax threshold in the future. We urge all parties to consider our proposal".