Damning report says Help To Buy helped many who didn’t need it at all

The National Audit Office says many users of Help To Buy would have been able to purchase a home anyway, without the scheme - and one in 25 of them have a household income over £100,000.

Its latest report also says it’s impossible to conclude whether the scheme has actually been value for money for the government and taxpayers who have funded it.

The NAO has been probing the Help to Buy Scheme, which was introduced by the government in April 2013 to increase home ownership and boost housing supply.

Its report, just released, shows that between April 2013 and September 2018, 38 per cent of all new-build property sales were through the scheme, which is around four per cent of all housing purchases during this time.

Some 37 per cent of households would not have been able to buy any property without the scheme, while around 81 per cent of those using the scheme have been first-time buyers. 

The NAO says independent research commissioned by the Ministry of Housing, Communities and Local Government shows that around three-fifths of buyers could have bought a property without the support of Help to Buy - but not necessarily the size or type or location of property they wanted. 

Almost a third of all H2B buyers - that’s 65,000 - could have purchased the precise property they wanted without the scheme.

Startlingly, some four per cent of the 211,000 buyers who had used the scheme by December 2018 had household incomes over £100,000. The NAO says that in the opinion of MHCLG “these transactions are an acceptable consequence of designing the scheme to be widely available.”

The report shows that take-up has 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 per cent of the property value. This improved London take-up from 12 per cent of new build sales between the start of the scheme and December 2015, to 26 per cent between January 2016 and September 2018 - but it is still lower than the rest of England, where the figure is 46 per cent.

The analysis has found that buyers who have used the scheme have paid less than one per cent more than they might have paid for a similar new-build property bought without the scheme. 

A statement says: “The NAO’s estimate of the premium is significantly less than other estimates, which range between five per cent and 20 per cent, as these do not compare similar properties and so do not accurately assess any premium paid by those using the scheme.”

It continues: “However, new-build properties typically cost around 15 to 20 per cent more than an equivalent 'second-hand' property … and some buyers who want to sell their property soon after they purchase it might find they are in negative equity.”

The report goes on to say that H2B has supported five of the largest developers in England to increase the overall number of properties they sell year on year “thereby contributing to increases in their annual profits, which have all increased since the scheme’s start.” 

These five developers sold between 36 and 48 per cent of their properties with the support of the scheme in 2018. 

The NAO believes that “there is concern across the housing sector that the end of the scheme [in 2023] will result in a drop in new developments and sales.” 

Gareth Davies - the head of the NAO - says in a statement accompanying the report that: “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. 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 by 2021. 

“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.”