The government’s Help to Buy scheme has handed billions of pounds of subsidised loans to relatively wealthy homeowners who would have been able to buy a property without help, the public spending watchdog has found.
Help to Buy has also boosted profits for big property developers Redrow, Bellway, Taylor Wimpey, Barratt and Persimmon, the National Audit Office (NAO) said.
It found that a third of the 211,000 buyers who have used Help to Buy already had enough money to buy a property that they wanted on their own. Only 37 per cent of people who have so far benefited from Help to Buy would not have been able to afford a property without it.
Around 4 per cent of buyers handed a government-backed loan under the scheme had a household income of more than £100,000.
The Department for Housing, Communities and Local Government said this was an “acceptable consequence” of designing the scheme to be widely available.
Under Help to Buy, the government provides loans of up to 20 per cent of the property value, or 40 per cent inside London. This allows people who have not been able to save a large deposit to get on the housing ladder.
But the NAO said that Help to Buy has “tied up significant financial capacity” that could have been used for other housing schemes.
Up to December 2018, £11.7bn had been loaned under the scheme with that figure forecast to more than doouble to around £25bn by 2023. Help to Buy has also exposed the public purse to significant financial risk if house prices fall, the NAO said.
Despite these concerns, and widespread criticism that Help to Buy has pumped up already inflated property prices, the department has not made a detailed assessment of the impact of the scheme on the wider housing market.
“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,” said Gareth Davies, head of the NAO.
“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.”
Labour’s shadow housing secretary, John Healey, said the NAO report showed that Help to Buy is failing to provide assistance to those who need it.
“This report confirms the fundamental flaws in Help to Buy which ministers have failed to fix,” he said.
“One in five helped by Help to Buy aren’t even first-time buyers and two-thirds of buyers could have bought without this assistance.
“The current scheme is poorly targeted and poor value for taxpayers’ money. Help to Buy should be tightly targeted on first-time buyers with low and middle incomes, as Labour has long argued.“
George Osborne, the former Conservative chancellor, introduced Help to Buy in 2013, hailing it as the “the biggest government intervention in the housing market since the Right to Buy scheme”.
But it has been widely criticised by economists and housing market analysts, who have said it has had a minimal effect in increasing the supply of homes.
It has also helped boost the profits of large house builders, five of which have scooped half of all sales made using the scheme.
Redrow made up 3.7 per cent of sales, Bellway accounted for 6.7 per cent, Taylor Wimpey made up 11.9 per cent, Barratt made up 13.3 per cent and Persimmon accounted for 14.8 per cent, according to the NAO’s analysis.
The boss of Persimmon, the largest beneficiary of Help to Buy, resigned last year after outrage over his £75m bonus, which had been boosted by sales subsidised with public money. Persimmon said Jeff Fairburn’s bonus had become “a distraction”.
Commenting on the report, Fran Boait, executive director of campaigning body Positive Money, said: “It’s now beyond clear that rather than helping those who can’t afford to buy a home, Help To Buy has mainly been a subsidy for a housing bubble, benefiting property developers and existing home owners.”
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