Was 'help to buy' really needed?

There has been a flurry of media surrounding the government’s Help to Buy initiative (“the Scheme”) launched five years ago. The Scheme lends individuals up to 20% of the cost of a newly built home with the need for only a 5% deposit and a 75% mortgage.  

After the 2008 market crash, the government sought to address the disparity between house prices and wages and to resolve the housing shortage. The introduction of the Scheme was largely seen as a mechanism to assist those who could not afford a home, due to the need for significant deposits and large mortgages which many would not be able to afford. 

However, the scheme has been controversial as it extends to those with existing properties (approximately a fifth of people using the scheme already own a property) enabling them to use the scheme to buy the “dream home”. 

The Scheme is also not means tested and as a result, the National Audit Office (“NAO”) has confirmed that more than half of people, who took advantage of the scheme, could have purchased a home without the support of the Scheme. 

The scheme has of course, impacted on the rental market; rents are higher and rights and protections for tenants have until recently, been limited. There has however, been a raft of recent tenant friendly legislation (tenant fee ban, habitation act and the gas safety requirements) introduced in an attempt to regularise the balance of power between landlord and tenant. 

The NAO has said that by 2023 the government will have invested up to £29bn in the Scheme. With returns on the government’s investment unlikely to be seen until 2032 and such returns will depend very much on a performing housing market, it seems unconscionable that such significant sums have been lent by the government (and funded by the tax payer) to those who could have afforded a property without the scheme. A significant proportion of the money spent by the government could have arguably been better applied elsewhere to deal with the housing shortage issues, such as investing in social housing and the private rental market.