A committee of MPs has questioned the value of the Government’s flagship Help to Buy equity loan scheme, saying it has done nothing to tackle the housing crisis other than throw cash at people who don’t really need it.
In its latest report, published today, the Public Accounts Committee (PAC) said that the equity loan scheme had boosted the housing market and helped many into homeownership as billed– but most of those buyers did not need financial help to buy a home.
What’s more, Help to Buy burdens consumers with financial risks for which they have insufficient protection, while the Ministry for Housing, Communities & Local Government (MHCLG) itself faces uncertainty over whether it will make a return on its investment.
Meanwhile, the scheme does nothing to address other critical housing issues, such as high private sector rents, the delivery of genuinely affordable homes, or the issue generally of high housing costs that are fuelling rising homelessness.
“Help to Buy has certainly increased the supply of new homes and boosted the bottom line of house builders. But it has also tied up a large sum of money, forecast to be nearly £29 billion in cash terms by the time it concludes in 2023, making the value of what has been achieved uncertain,” said the committee’s chair, Meg Hillier MP.
“While many people have been helped to buy properties, who would have not otherwise been able to, an even larger group of buyers did not need its financial support.
“Help to Buy, as the Department acknowledged, only benefits those in a position to buy their own house in the first place. It does not help make homes more affordable nor address other pressing housing problems in the sector such as the planning system or homelessness.
“The scheme exposes both the Government and consumers to significant financial risks were house prices or interest rates to change. Better consumer protection needs to be built into similar schemes in the future.”
Help to Buy was originally meant to be a short-lived scheme, but it has now been extended to last for 10 years, and consume over eight times its original budget, yet the value of this extension remains uncertain.
Rather than offering State largesse to people who don’t need financial support to buy a home, the money tied up in Help to Buy scheme could have been spent tackling a wider set of housing priorities and focus more on those in need, PAC points out.
The committee concedes the Government has separate schemes to address other critical housing issues, but said that Help to Buy remains its largest initiative in terms of value.
Meanwhile, inherent uncertainty in the housing market means there are still risks to the MHCLG achieving a positive return on its investment in homes. The new scheme from 2021 provides an opportunity to target the money more effectively, the report says, but the ministry has “not yet fully thought out” how it will do this.
Unless MHCLG plans alternative housing initiatives, the end of the scheme in 2023 may lead to a fall in supply, PAC warns, adding to the challenge it already faces in achieving its ambition of 300,000 homes a year from the mid-2020s.