Government-backed Help to Buy schemes, designed to assist first-time buyers onto the property ladder, have primarily served to inflate house prices and boost the profits of property developers, rather than significantly improving housing affordability. This is according to a new report published by the Institute for Fiscal Studies (IFS).
The analysis indicates that the various iterations of Help to Buy, which included equity loans and mortgage guarantees, led to an increase in house prices across England by an estimated 6% to 8%. The substantial public investment of over £30 billion in grants and loans through these schemes appears to have been largely absorbed by the housing market through higher prices, rather than translating into a direct benefit for homebuyers in the form of more accessible properties.
The IFS report highlights that while some individuals were able to purchase homes sooner than they might have otherwise, this came at a significant cost to the public purse and created an artificial boost to property values. The schemes effectively increased demand without a corresponding increase in housing supply in the most sought-after areas, leading to upward pressure on prices. This suggests a fundamental flaw in demand-side interventions without addressing the underlying issues of housing supply.
The implications of these findings are significant for future government housing policy. With the original Help to Buy equity loan scheme closing to new applications in October 2022, and other schemes having concluded, the report provides a critical retrospective. It questions the efficacy of similar initiatives going forward, suggesting that policies focused on increasing the supply of genuinely affordable housing, particularly in areas of high demand, might be more effective in addressing the UK's housing crisis.
A spokesperson for the Labour Party commented that the report exposes the Conservative government's failed housing policies, stating that they have consistently prioritised developers over aspiring homeowners. They called for a renewed focus on building more affordable homes and tackling speculative investment in the housing market.