HELP to Buy has done rather more to boost the profits of major housebuilders than help the average private renting household buy their first home, the charity Shelter has claimed.
What’s more, it says the Government scheme shows a greater affinity for helping higher earning households to get on the property ladder than it does the average earning private renters; supposedly the ones most in need of the leg up.
“Help to Buy is often touted by the Government as a major success, when in truth it’s a major failure,” said Polly Neate, Shelter’s chief executive. “It’s a policy that boosts the bank balances of big developers but has nothing to offer the average renter.”
Help to Buy offers an equity loan to applicants buying newly built homes from authorised developers. Buyers must have a minimum of a 5% deposit for the new home and can borrow up to 20% of the value of the sale (40% for London sales) up to the value of £600,000.
Help to Buy agents cannot agree a sale if the buyer pushes their monthly repayment to more than 45% of their net household income. And Help to Buy mortgages must not exceed more than 4.5 times the household income.
According to Shelter’s analysis, only 4,142 households with incomes of £30,000 or less used Help to Buy in the last year. This represents fewer than 0.2% of England’s private renting households in this income bracket.
The English Housing Survey puts the average private renting household at a gross annual income of £27,000. Whereas the average first-time buyer accessing Help to Buy has gross earnings some 85% higher — at least £50,000.
Shelter said its research “clearly demonstrates that, while helping a minority of high earners onto the housing ladder, the flagship policy has done little for the vast majority of private renters looking for a stable home”.
The charity is also critical of the Government’s recent announcement to extend mortgage terms for Help to Buy, arguing this will simply leave people in debt for longer while doing nothing to address the shortage of genuinely affordable homes.
But Help to Buy has been a boon for housing developers, the charity claims. According to its analysis of companies’ published annual reports, the Government scheme has helped boost pre-tax profits for the country’s three largest developers — Persimmon, Barratt and Taylor Wimpey — since the scheme was introduced in 2013. The trio have more than doubled reported profits in this time, with Barratt’s said to have soared by 325%.
The growth doesn’t appear to be driven by building more homes, Shelter said; rather by an “upsurge” in the profit made on every property sold.
“The problem with the latest changes to Help to Buy is they’ll take already expensive homes and offer to spread out the costs over a longer period, which perversely ends up with the buyer paying more. Given there are millions of people who can barely afford to keep any kind of roof over their head, this piecemeal approach is never going to solve the housing emergency.
“At the crux of this crisis is the desperate shortage of genuinely affordable social homes. In fact, three million more social homes are needed in the coming years. This is where the new Government should be taking decisive action, and where the greatest opportunity to help trapped renters lies.”