The UK must get off the help to buy binge

 
Christian May
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House Prices Are Stagnant In London
Help to buy isn't helping enough (Source: Getty)

It's been clear for some time that housebuilders are hooked on the help to buy drug.

Now it seems the government is, too.

In a bid to ensure that the Tory party conference has something to unveil, Theresa May has confirmed that an additional £10bn will be pumped into the scheme, helping (we are assured) another 135,000 people get on the housing ladder with as little as a five per cent mortgage.

Read more: DEBATE: Could rent controls solve the housing crisis?

The market movements this morning will likely tell you all you need to know about the housebuilders’ reaction to this news, but beneath that there’s an almighty political row rumbling on about the extent to which the government should be helping people buy homes with greater enthusiasm than it has for actually building them.

Help to supply, not help to buy – that’s the reaction of the free-market think-tanks, who are also joined by housing charity Shelter – whose chief executive said the scheme had increased house prices while propping up a system in need of reform.

When the PM is being criticised by the Adam Smith Institute and the charitable sector, alarm bells should ring. Clearly, there is a problem with housing policy in this country.

Twenty years ago, over 40 per cent of under 25s owned a property. Today that figure has fallen to just 20 per cent, and many people (regardless of age, and particularly in London and the south east) can see no route out of renting.

The scheme is bundled up with other government initiatives including the Help to buy Isa, the London Help to buy Isa and the equity loan scheme, all of which tinker with a market whose fundamental problem is a lack of supply – not demand. To compound matters, analysts warned recently that many using help to buy do not actually need it – adding weight to the argument that the whole process simply drives up prices of existing stock.

Read more: Millennials now spend three times as much on housing as their grandparents

It’s hard to disagree with the Adam Smith Institute’s assessment over the weekend that the property market is “totally dysfunctional because supply is so tightly constrained by planning rules, and adding more demand without improving the supply of houses is just going to raise house prices and make homes more unaffordable for people who don't qualify for the help to buy subsidy.”

Rather than injecting more taxpayer cash into this monetary doping of the housing sector, the PM should loosen rules to allow the construction of more homes in high demand areas – including in her own green belt constituency.

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