NAO: Help to Buy of little benefit to homebuyers

13 Jun 19

Around three fifths of those who bought a home through the Help to Buy scheme would have been able to buy a property without the government’s help, according to the National Audit Office.

In a report out today, the watchdog found that 63% of buyers could have bought a property – though not necessarily a property they wanted – without the scheme, while almost a third of all buyers could have purchased the property of their choice.

Over four fifths of the scheme’s beneficiaries were first time buyers. However, about 4% of those who bought homes under Help to Buy, which was demand-led and had no income-based eligibility restrictions, had household incomes over £100,000.

The scheme had also exposed the government to “significant market risk” if property prices fell, and by 2023 would have tied up £29bn in investment which could have been used elsewhere.  

Among those who benefitted from Help to Buy had been five of England’s largest developers, including Persimmon, Barratt and Taylor Wimpey, who together accounted for over half of all properties sold under the scheme, and all of whom had seen their profits rise since the scheme began.

Help to Buy was introduced in 2013 by what is now the Ministry of Housing, Communities and Local Government to increase both home ownership and housing supply by helping people to get mortgages.

By the end of last year, Homes England, which delivers the scheme, had made around 211,000 loans, amounting to £11.7bn. Almost two fifths of all new-build property sales – 4% of all house purchases – had been supported by loans under the scheme over its lifetime.

Gareth Davies, head of the NAO, said that although the programme had boosted home ownership and housing supply, especially for the first time buyers, it was too early to assess its overall success.

“The government’s greatest challenge now is to wean the property market off the scheme with as little impact as possible on its ambition of creating 300,000 homes a year by 2021,” he said.

“Until we can observe its longer-term effects on the property market and whether the department has recovered its substantial investment, we cannot say whether the scheme has delivered value for money.” 

The NAO said the department should expand the scope of its next evaluation to examine the effects of the scheme on the wider housing market and identify lessons learned for any future interventions.

But minister of state for housing Kit Malthouse said the scheme had been “genuinely life changing” for first-time buyers across the country, helping them to secure their first step on the property ladder.

“Not only has it supported more than 170,000 first-time buyers, it has increased home building by nearly 15 per cent, and is set to make a profit for the public: it’s been a win-win,” he said.

He added that from 2021 the scheme would be extended and strengthened to make it exclusively available for first-time buyers.

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