Help to Buy: has the scheme been a failure?
Spending watchdog finds the programme has pushed up property prices and handed cash to the relatively wealthy
More than half of the homebuyers who have used the government-backed Help to Buy scheme could have purchased property without help from the state, the National Audit Office (NAO) has found.
Launched by then-chancellor George Osborne in 2013, the scheme was introduced to “boost home ownership and housing supply by making it easier for people to get mortgages”, PoliticsHome reports.
Under the programme, buyers put down a deposit of as little as 5% on new-build homes worth up to £600,000 and receive an equity loan from the state to cover 40% of the property’s value in London, or 20% elsewhere, says the Financial Times. The remainder is covered by a traditional mortgage.
However, a report released by the spending watchdog this week has revealed that only 37% of the 211,000 people who have benefited so far from Help to Buy would not have been able to afford a property without the support. Around 4% of buyers handed a state-backed loan had a household income of more than £100,000, and one in five were not first-time buyers.
NAO chief Gareth Davies said: “Help to Buy has increased home ownership and housing supply, particularly for first-time buyers. However, a proportion of participants could have afforded to buy a home without the Government’s help.”
To some critics, the watchdog’s report confirms that the scheme has been a failure. Shadow housing secretary John Healey said the scheme was “poorly targeted and poor value for taxpayers’ money” and should be “tightly targeted on first-time buyers with low and middle incomes”.
The NAO also found that Help to Buy has boosted profits for big property developers including Redrow, Bellway, Taylor Wimpey, Barratt and Persimmon, while having a minimal effect in increasing the supply of homes, The Independent says.
As the newspaper notes, the chief executive of Persimmon, the largest beneficiary of Help to Buy, “resigned last year after outrage over his £75m bonus, which had been boosted by sales subsidised with public money”.
Fran Boait, executive director of campaigning body Positive Money, said it was “now beyond clear” that “rather than helping those who can’t afford to buy a home, Help To Buy has mainly been a subsidy for a housing bubble, benefiting property developers and existing home owners”.
But the Government insists the programme is a success. In the wake of the NAO report, the Department for Housing, Communities and Local Government issued a statement saying that the more controversial transactions were an “acceptable consequence” of designing the scheme to be widely available.
Housing Minister Kit Malthouse called the scheme “genuinely life-changing for first-time buyers across the country”, providing the chance to get onto the property ladder.
“Not only has it supported more than 170,000 first-time buyers, it has increased home building by nearly 15%, and is set to make a profit for the public. It’s been a win-win,” he added.
However, while the Government is defending the scheme as a whole, Chancellor Philip Hammond has promised some reforms. In last year’s Budget, he announced that Help To Buy will be restricted to first-time buyers from April 2021.