The government’s Help to Buy scheme was rolled out in 2013 by George Osbourne with two goals to accomplish:
the first was to help first time buyers onto the property ladder while the second was to increase the supply of new homes. The flagship policy of the scheme was the Help to Buy ISA which offered buyers a grant equal to 25% of the amount saved (capped at £3000) towards the purchase of their first home. A low interest equity loan worth 20% of the property price is available to those purchasing a newly built property meaning that buyers would take a mortgage for 80% of the asking price and owe the remaining 20% to the government. This loan is available until 2023.
In theory, this loan was to increase demand and, therefore, the production of new homes although its usefulness has been criticised across the political spectrum by bodies such as Morgan Stanley, Vince Cable (the 2017 Lib-Dem leader) and the right wing Adam Smith institute who described it as a ‘scam’ and like ‘pouring petrol on a bonfire’, respectively.
So what is the matter with the scheme? The answer is that property developers have noticed buyer’s increased budget and have raised the cost of property accordingly (prices have risen by 38% since 2003). Developers have benefitted massively with companies such as Persimmon Homes which announced pre-tax profits of over £1 billion last year. They are, as Vince Cable suggests, ‘pinching their profits from the public purse’ and negating the purported benefits of the scheme.
The call for new homes to be built is valid but it doesn’t explain the scarcity of homes available to the public; in-fact, 2018 saw a surplus of 1.1 million homes in the country. A government report released that year concluded that the supposed scarcity of homes is artificial in nature as developers have been drip-feeding property onto the market in order to keep the prices of houses and assets steady.
Help to Buy is set against this backdrop. The scheme serves large developers and fails to provide new and affordable homes. Other more pointed measures are required to remedy deeper problems within the market.