The government's Help to Buy scheme, designed to assist first-time buyers onto the property ladder, primarily benefited higher-earning households, according to a new analysis from the Institute for Fiscal Studies (IFS). The report suggests that the initiative may have inadvertently contributed to an increase in house prices, rather than solely improving affordability for those struggling to purchase a home.
Introduced in 2013, the Help to Buy equity loan scheme allowed buyers to purchase a new-build home with a 5% deposit. The government provided an equity loan of up to 20% of the property's value (40% in London), which was interest-free for the first five years. The scheme concluded in March 2023, having facilitated the purchase of over 380,000 homes at an estimated cost of £30 billion to the taxpayer.
The IFS findings indicate that a significant proportion of those who utilised the scheme were already in a strong financial position, falling within the top half of the income distribution. This raises questions about the scheme's effectiveness in targeting those most in need of assistance to enter the housing market. Furthermore, the report posits that many beneficiaries could have afforded to buy a home without the scheme, suggesting it may not have been a critical enabler for a substantial number of its users.
Critics of the scheme have long argued that by stimulating demand for new-build properties without a commensurate increase in supply, Help to Buy inflated house prices. The IFS analysis lends weight to this perspective, suggesting that the scheme's impact on prices might have outweighed its benefits in terms of making homeownership more accessible for lower-income households. The report highlights the complex dynamics between government intervention and market outcomes in the housing sector.
The government's initial rationale for Help to Buy was to stimulate the housing market post-financial crisis and to assist first-time buyers facing significant deposit hurdles. While it undoubtedly achieved the former, the IFS report calls into question its long-term impact on affordability and equitable access to homeownership across different income brackets. The findings will likely inform future policy debates around housing support and intervention in the UK.