Help to Buy, a real help!


The government’s Help to Buy scheme is set to stay until March 2023. Now in its third incarnation, most would argue that it’s been a success with first time buyers making up 82% of purchasers nationally and a staggering 95% in London. This puts into perspective the accusation of widespread abuse of this government intervention scheme, which are levied at those who are existing home owners. The scheme was primarily set up to help people get on to the property ladder amidst rising prices and stagnant incomes – and it has largely been a success.

Going forward, from April 2021, the scheme will be restricted to first time buyers. Some would argue that this crucial adjustment make sense, ensuring that the scheme remains fit for purpose – supporting people to get on to the property ladder for the first time rather than helping those homeowners savvy enough to benefit from the system to buy bigger and better.

A further pivotal addition is the introduction of new caps on sale prices. Some developers have financial concerns about these caps, which is set at £600,000 for London and will vary regionally, with the South West at £349,000 and the North East set at £186,100. Although counter-intuitive for the development sector, the caps are necessary to ensure that the system isn’t abused, with some developers perhaps being tempted to overprice. Simultaneously, purchasers will be reassured that the government is trying to ensure that the purchase of new build homes remains in the reach of first-time buyers by stabilising prices. A positive for developers is that planning applications for new developments looking to build units, with a lower purchase price tag, may sit well with local planning authorities as they strive to increase their populations and kick start inward investment.

Many forget that Help to Buy is an equity loan scheme and benefits the government coffers. Based on the premise that UK house prices continue to rise, the government will take a percentage of the onwards sale price which trumps the initial investment in the scheme. It would be great to think that this income will be ploughed back into the sector with further schemes for first time buyers, as well as looking at much needed investment in the rental sector in terms of social housing and regulation.

Further recognition that continued government assistance is needed by the market, for both developers and purchasers, is illustrated in the government’s recent announcement to extend the completion deadline by a further two months for the existing Help to Buy equity loan scheme. With a government that seems to be paying attention to the detail, developers have been granted breathing space to ensure promised new homes are built and sales completed, which had been reserved by mid-December 2020 under the current scheme. This is an important detail, as Covid-related delays meant more than 16,000 sales were at risk and, as reported in the media over the past few weeks, construction of newly-built homes which qualify for the scheme have been put back by as much as eight months.

So, is it a good idea to continue a scheme which artificially supports an industry? Over the last seven years, the Help to Buy equity loan scheme has accounted for 224,133 of purchases by first time buyers, (1 April 2013 to 31 March 2020 – Ministry or Housing, Communities and Local Government statistics). Until the residential property eco-system is tackled holistically – including a return to consensus politics on housing policy, a commitment to building social housing and examining the impact of stagnation of salaries long-term on the housing sector – there needs to be a place for a system which supports first time buyers who otherwise would be abandoned in the current residential landscape.