The government’s £29bn Help to Buy scheme has pushed up house prices in England and failed to “provide good value for money” for the taxpayer, according to a House of Lords report published on Monday.
Cash spent on the scheme could instead have helped to replenish England’s falling stock of social housing, said the report’s authors, who sit on the Lords’ built environment committee.
The “scheme, which will have cost around £29bn in cash terms by 2023, inflates prices by more than its subsidy value in areas where it is needed the most . . . This funding would be better spent on increasing housing supply,” according to the report.
Help to Buy was designed to boost home-ownership by providing an equity loan to buyers. However, it has been criticised as a developer subsidy that does little to tackle the lack of genuinely affordable housing.
The stock of social housing has shrunk by close to 500,000 homes since 2000, according to an analysis of official statistics by housing charity Shelter.
“Help to Buy has had its virtues, particularly outside of London. But in London and those hotspots of demand, it’s gone straight into price. That’s been the problem,” said Baroness Neville-Rolfe, chair of the committee.
Almost 340,000 homes have been bought using the equity loan since Help to Buy was introduced in 2013, the large majority by first time buyers. In the same period the share price of leading builders including Persimmon, Barratt Homes and Taylor Wimpey has nearly tripled.
Developers defend the scheme, saying it has helped boost the number of houses built and broadened access to them. “Since its introduction in 2013, Help to Buy has been the biggest contributing factor in the doubling of housing supply,” said David O’Leary, policy director at the Home Builders Federation, an industry body.
The scheme was now paying dividends for the Treasury, he added, “with a return of around 10 per cent from the 70,000 equity loans already fully paid back by homeowners”.
The Lords committee has put forward a number of proposals for addressing the national housing shortage, calling on the government to reform the planning system, support small builders and redirect funds towards new social housing and training for construction workers.
The government published a white paper in August 2020 outlining ambitious plans aimed at simplifying the byzantine, often-sclerotic planning system. That would have been a boon for small and medium-sized developers, who struggle to navigate the lengthy, costly planning process.
SME builders account for just 10 per cent of new housing built in England today, down from 39 per cent in the late 1980s, according to the report, which says boosting their number is important to solving the shortage.
But the plans have been put on ice by Michael Gove, who replaced Robert Jenrick as housing secretary last year. He is expected to introduce a watered-down version of the reforms as part of a wider levelling-up package later this year.
“Uncertainty about the future planning system and delays to planning reforms have had a ‘chilling effect’ on housebuilding and created uncertainty for housebuilders and planners,” said the report, which draws on evidence from housing industry groups, charities, think-tanks and academics.