Pertinent questions about the government’s help to buy scheme are raised by the National Audit Office (NAO) this morning following a thorough review of the programme.
Firstly, the report says that “three-fifths of buyers could have bought a property without the support of help to buy”, while nearly a third could have bought the standard of property they ideally wanted even without the scheme.
Secondly, the NAO notes that many users of the scheme are at risk of negative equity due to a 15 to 20 per cent premium they would have paid to secure a newly-built home.
Then there’s the risk to the government itself, which is forecast to have committed £25bn to the programme by 2023. While the scheme could result in a profit for the public purse, there remains “significant market risk”.
Moreover, the audit office stresses the opportunity cost of tying up such a large amount of cash in one scheme, rather than investing in other areas.
The government could, for example, take a more direct approach to boosting the supply of homes in high-demand areas, instead of spending billions to dope-up demand even further.
The report also alludes to criticisms that the scheme, dubbed help to bonus, has simply ramped up profits at some of the UK’s biggest housebuilders.
“The scheme has supported five of the largest developers in England to increase the overall number of properties they sell year on year, thereby contributing to increases in their annual profits,” it says.
The extent of help to buy’s intervention in the sector is so great that NAO boss Gareth Davies says the “government’s greatest challenge now is to wean the property market off the scheme”.
Its existence has become the norm, warping the UK’s already-dysfunctional housing market and storing up problems for future administrations.
Some positive sounds have emerged from the current batch of Tory leadership contenders with regards to exorbitant housing costs in key parts of the country.
The reality of government is much tougher than the rhetoric of a campaign trail, however, and we must hope that the next Cabinet is more prepared than its predecessors to reform restrictive planning rules and plot the end of misguided demand-side policies such as help to buy.