Given that we are (seemingly) very close to a General Election – perhaps even at some point in the course of the next couple of months – it’s perhaps unsurprising that many in our industry are looking at what future administrations might have as their housing priorities.
Certainly, if a Conservative government of any size is returned, then one might expect ‘more of the same’ particularly when it comes a housing policy which has focused (almost relentlessly) on the Help to Buy scheme and how it can help generate the greater level of supply needed in the country.
There’s no doubting that some of the strongest advocates of a continuation of Help to Buy will be the housebuilders, because as their most recent profits would attest, they have tended to do very well out of the scheme. But, what about purchasers? What about the taxpayer who has funded it? And what about its ability to deliver on the government’s own house-building targets? Has Help to Buy truly been a success or has it merely papered over the cracks?
A recent report by the Public Accounts Committee (PAC) on the Help to Buy Equity Scheme – Help to Buy 1 in old money – suggests that (up until now) any value can best be described as ‘uncertain’.
It suggests the money spent on Help to Buy loans for purchasers could have been spent better elsewhere on ‘a wider set of housing priorities’ while it is also critical of the fact the loans are unregulated and those who may sell soon after purchase, could end up in negative equity as a result of the ‘new-build premium’, which it suggests is 20% more than for second-hand properties.
The report also argued that many of those who used the scheme did not actually need to, plus argued that 20% of purchasers were not first-time buyers – a point which has already been addressed because the next iteration of the scheme will be for first-timers only.
There is no denial that Help to Buy has helped boost the number of new homes which have been built – it says supply is up 14% since the start of the scheme – and agrees it helped stabilise the market, but questions whether it has delivered enough value, especially since 2017, when it argues that supply of homes and, crucially, mortgage availability, were much improved.
From my perspective, this report is a little mealy-mouthed in its assessment of Help to Buy, because there will probably be few who deny that it was absolutely necessary at the time it was introduced; it has certainly helped increase supply, and it has probably helped more people into new homes than would ever have been achievable without it.
Of course, some of the criticisms are justified – should this purely have been a first-time buyer scheme straight from the start? Perhaps. Although if we can’t move second-steppers out of their starter homes then this also impacts on the ability of first-timers to purchase. Might the minimum income required of scheme users have been somewhat off kilter? Again, perhaps, given that it did allow those who could probably have secured the necessary finance and had the necessary deposit anyway, to use the scheme.
But, could the money have been spent better elsewhere? I’m not so sure – you can look at the state of the UK housing market and the lack of supply over a 20/30-year period and suggest that the government should be building more new homes, but does it have the infrastructure to do so? I don’t think so, and therefore – for better or worse – the private house builders are really the only game in town, although this might change again with a new government.
My argument is that, undoubtedly the housebuilders have benefited greatly from the scheme and no doubt want to keep it for ever more, but what else could have been done at the time? And would those who have used the scheme to purchase a new-build home feel they shouldn’t have been provided with that opportunity. I doubt it. Plus, in our market, I’m afraid to say that most of the government schemes and incentives offered do tend to end up helping those that were going to buy anyway, at least in the short-term.
Over the longer-term however they do help bring the financial requirements of purchasing much more in reach for would-be buyers and I don’t think anyone would argue that this isn’t vital and necessary. Indeed, were this coupled with a wider array of high LTV mortgages – non HTB-related – then I think we would be able to do even more to get the housing market moving again, and in particular to help potential first-time purchasers.
So, while the scheme can in no way be said to be perfect, I think on the whole it has had a positive impact on many lives. You might well argue that those who have benefited most are the housebuilders and I perhaps wouldn’t disagree, but for those who have been able to get on the ladder through the scheme, I might argue that for them Help to Buy was necessary and did what it set out to do. For that reason, if the Conservatives are able to form any sort of government after the next General Election, I suspect Help to Buy will be here for a while longer.
Pad Bamford is business development director at AmTrust Mortgage & Credit