It’s been quite a week for news so you might have missed this story - there is yet another boost for housebuilders already making money hand over fist thanks to Help To Buy.
While most of us were pre-occupied with Boris Johnson proroguing Parliament or the endless speculation over stamp duty reform, the government put out its latest Help To Buy tweak at the tail end of a press release about shared ownership.
In the latest boon to housebuilders, the government says a loophole is to be closed so that purchasers with mortgages up to 35 years in duration can take ‘advantage’ of Help To Buy.
To the casual onlooker this might seem good news - after all, buyers can take out larger, longer loans to get a home. In reality, this is only really good news for Persimmon and Barrett Homes and the rest who have been given de facto public subsidies via Help To Buy.
A National Audit Office report issued in June (and, again, one of those lost in the noise of the Brexit debate at the time) revealed precisely how big a failure Help To Buy has been when it comes to alleviating any kind of housing shortage.
Between April 2013 (Help To Buy’s instigation) and September 2018, around four per cent of all transactions were secured with H2B; of those four per cent, well over three quarters were first-time buyers. However…
- the NAO could not conclude whether Help To Buy had been value for money;
- three fifths of the buyers could have bought without H2B anyway;
- one in 25 users of Help To Buy had household incomes of over £100,000 pa.
By contrast, and obviously not contained in the NAO report, just look at how ‘helpful’ H2B has been to housebuilders during roughly the same period from H2B’s start in 2013:
- Persimmon became the first UK house builders to post annual pre-tax profits of over one billion pounds, after its profits tripled in six years;
- Taylor Wimpery and Bovis Homes also saw roughly a tripling of their profits; and
- Barratt Homes’ profits rose from £110m to £835m in the same period.
I’m not a conspiracy theorist. I don’t believe Conservative governments have created Help To Buy just to fatten up Conservative-donating housebuilders.
Indeed, housebuilders and the government are not on good terms because builders are livid Brexit has led to a shortage of EU labour and higher costs for imported materials.
But it does appear that recent governments, in a bid to be seen to ‘do something’ about housing, have taken the line of least resistance - and that’s what Help To Buy is all about.
Nor do I believe that private house builders have any responsibilities other than to their shareholders and investors.
However the government has thrown public money at the housing shortage to win headlines rather than maximise the return in the form of housing stock.
The £10 billion of funds offered so far as Help To Buy loans could have produced better targeted homes for the social sector if the government really wanted to help the housing shortage.
Instead, it’s played to the gallery with Help To Buy and now new Housing Secretary Robert Jenrick continues the trend with his 35 year mortgage announcement - although, to his credit, he was so embarrassed he let it slip only in the final lines of a long press release.
Things won’t be so low profile if there’s a General Election. Expect Help To Buy to feature strongly in the government’s manifesto, and wait to see the housebuilders’ shareholders smile as a result - after all, they may be the only people benefitting from the policy.
*Editor of Estate Agent Today and Letting Agent Today, Graham can be found tweeting all things property @PropertyJourn