A secret briefing to the then Labour leader Tony Blair revealed that a generation of first time buyers were being priced out of the market by buy to let investors, but the government chose to do nothing about it, claims a campaign group.

PricedOut, the campaign for affordable house prices, has released details of the briefing written by officials from Gordon Brown’s Treasury department after obtaining the report through the Freedom of Information Act.

The organisation says it shows that the government was complacent and poorly informed about the overheating housing market and the economic and social dangers it posed.

The briefing was requested by the then Prime Minister Tony Blair in April 2004 after he had read the article by Martin Wolf in the Financial Times 'A housing collapse draws nearer' which highlighted the author’s concerns about a bubble in UK housing and its vulnerability to a price correction.

PricedOut maintains that unlike government and Treasury public statements since 2004 and up to the present day, the briefing demonstrates the government’s knowledge that the new buy to Let sector was leading to the substantial displacement of First Time Buyers from the UK housing market.

The group has drawn attention to some key text from the Treasury briefing including:

1. “Another notable feature of the housing market has been the decline in the proportion of first time buyers taking out loans for home purchase. By the end of 2003 the proportion of loans for house purchase to first time buyers fell to an all time low of 28 percent, well below its post 1993 average of 46 percent.”
2. “First time buyers have become 'deposit constrained'. This may impinge upon rates of household formation. If first time buyers are unable to afford a home then they could remain within their parents’ household for longer than desired. However, the falling numbers of new entrants has not had the expected cooling effect on the housing market as the growing trend of buy-to-let may have taken up much of the slack.”
3. “The Buy-to-Let market has seen significant growth in recent years. The increase in activity may have the effect of crowding out first time buyers, as typically, rental properties and those being sought by first time buyers often have the same characteristics.”

Commenting on the briefing PricedOut spokesman William Griffith said: “As early as 2004 the Treasury recognised that buy to let was having a significant damaging impact on First Time Buyers, yet no changes to government policy were made.

“This shows a government more than happy to benefit from the feel good effect of rising house prices yet unconcerned about reigning in the negative social consequences.

“Government public statements to be helping First Time Buyers were in private being undermined by the government’s failure to act on its own analysis.

“There was a red hot and overheating UK housing market when this briefing was written. The role of the government should have been much greater caution – seeking to slow obvious excesses developing in mortgage lending and the buy to let sector.

“The Treasury’s failure has caused great damage to the UK economy and to society at large, damaging First Time Buyers and owner occupiers alike.

“Sadly little seems to have changed, even after all the damage inflicted on the UK speculative housing investment. The Treasury is currently planning further tax breaks to buy to let investors, which can only further push First Time Buyers away from the dream of ever owning their first home.”