The Help to Buy scheme has only pushed house prices up

According to a damning retrospective from the House of Lords, Help to Buy has made it even more difficult for those on low and middle incomes to secure a home, writes Hannah Fearn

Since 2013, 340,000 new homes have been sold through the help-to-buy scheme (Getty/iStock)

The government’s help-to-buy scheme had one goal: to help bring the dream of home ownership back within the reach of ordinary earners – even in a spiralling market, and even after an economic crisis that had caused mortgage lenders to become a bit, well, antsy.

Under the scheme, the government accepted that if it wanted anyone with an average income to be able to buy, it would have to start acting in loco parentis for first-time buyers who didn’t have a Bank of Mum and Dad to call upon.

There were two offers from the state for priced-out young people: a 95 per cent mortgage, guaranteed by the government, for those who could pull together the traditional 5 per cent down-payment; and an equity loan from the government on new-build properties, to help bridge the finance gap and start developers building again.

Cynics pointed out that the policy had two other surprising benefits, both of which a Conservative government might welcome. It could create a generation of homeowners where there may have been none, who would be statistically more likely to vote Conservative; and it could provide a clever way to fudge an appalling (and worsening) record on the number of new homes built. Since 2013, 340,000 new homes have been sold through the scheme.

From the off, critics also spotted that it might only support the relatively wealthy young graduates who would already be on the road to home ownership, but who might have had to put it off for another couple of years as they rebuilt their careers in the wake of the recession.

In short, taxpayers’ money was being spent making life a little more comfortable for those who were already on the route to financial and housing security. Those stuck on the lowest wages in poor-quality, and ridiculously costly, private rented accommodation – that is, those in the greatest need of a larger stock of social housing – rarely saw any benefit.

All that, and it was expensive, too, costing £29bn. So now, a decade on, what has it achieved?

According to a damning retrospective from the House of Lords, it has further inflated the cost of housing in England, making it even more difficult for those on low and middle incomes to buy a home, particularly in housing “hotspots” such as London and the southeast commuter belt.

The review of the policy from the Lords’ Built Environment Committee condemned it for failing to provide good value for money, and argued that the investment would have been better spent on boosting housing stock overall, including the provision of new social housing at very low rents for the poorest families.

The report stated in bald terms that the scheme “inflates prices by more than its subsidy value in areas where it is needed the most”, adding: “This funding would be better spent on increasing housing supply.” In summary: it would have been better spent on housing as security, not housing as wealth.

What makes this review even more troubling is that a review of where Help to Buy was marketed and used around the country found that not all new developments are equal for first time buyers. In November, analysis by the property company Just Move In found that in one in 10 of the largest towns in the UK, there are no Help to Buy homes available to purchase at all. Many of these locations with no availability, including Swansea, Rochdale, Lancaster, Halifax, Bootle and St Helens, were already in regions with less prosperous economies.

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Yet the effect of the scheme has been to push prices up across the board, with the lack of housing supply itself a prime driver of price inflation (along with the controversial stamp duty holiday offered by the government to stimulate the market during the pandemic). So if you live in an already deprived or marginalised town, where your job and career options are fewer and the potential to increase your income is lower, you’re also less likely to be able to use this government-backed scheme to improve your own housing prospects while you watch prices rise weekly. A depressing double whammy on aspiration – at a cost of billions of pounds.

As the Financial Times pointed out today, the UK’s top three housebuilders, who are all providing help-to-buy homes, have tripled their share price over the same period. They are making money, the state is losing it, and our common social housing stock is thinning away.

The early argument in favour of Help to Buy was that the market was in desperate times, after the 2008 financial crisis, and people needed help to stimulate it. The same was made in respect of the intervention on stamp duty in 2020-21. Neither has served ordinary households and their hopes of owning a property well. The Lords report ought to mark a full stop on meddling at the top of the housing ladder while leaving so many of our citizens poorly, insecurely and expensively housed in properties that will never be theirs, or collectively ours either.