The government’s Help To Buy Scheme has increased home ownership and housing supply, but many of those using the scheme would have been able to buy a home anyway, according to a report by the National Audit Office (NAO).
Introduced by the Ministry of Housing, Communities and Local Government department in 2013 in a bid to increase both home ownership and boost housing supply, NAO has questioned the scheme’s overall value for money.
Under the scheme, delivered by Homes England, around 211,000 loans were made by December of last year, amounting to a total of £11.7bn.
Between the start of the scheme in April 2013 and September 2018, 38% of all new-build property sales had been supported by loans through the scheme, said to amount for around 4% of all housing purchases during this time.
According to MHCLG’s own independent research, 37% of households would not have been able to buy any property without the scheme.
In reports, NAO estimates this has resulted in around 78,000 additional sales of new-build homes as of December 2018, with around 81% of all buyers supported by the scheme being first-time buyers.
However, the Department’s independent research also found around three-fifths of buyers could have bought a property without the support of Help To Buy.
It also highlighted that almost a third of buyers (65,000 households) could have purchased a property they wanted without the scheme.
Overall take-up of the scheme is said to have been low in less affordable areas where the ratio of house prices to average earnings is higher.
To address the initial low London take-up, the government increased the maximum loan in the region to 40% of the property value.
The NAO’s analysis has found that buyers who have used the scheme have paid less than 1% more than they might have paid for a similar new-build property bought without the support of the scheme.
According to reports, new-build properties typically cost around 15-20% more than an equivalent ‘second-hand’ property (termed the new-build premium), and some buyers who want to sell their property soon after they purchase it might find they are in negative equity.
By 2023, the net amount loaned through the scheme is forecast to peak at around £25bn in cash terms.
The Department expects to recover its investment by 2031-32 and make a positive return overall and redemptions are “running ahead of expectations”.
However, the NAO report highlights that the Department’s investment is exposed to “significant market risk” as it is sensitive to house-price changes and the timing of buyers repaying loans.
Gareth Davies, the head of the NAO, said: “Help To Buy has increased home ownership and housing supply, particularly for first-time buyers.
“However, a proportion of participants could have afforded to buy a home without the government’s help.
“The scheme has also exposed the government to significant market risk if property values fall, as well as tying up a significant public financial capacity.”
Davies added: “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 from the mid-2020s.
“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.”