The Help to Buy scheme, introduced in 2013 to support households onto the housing ladder, has already delivered a positive return on investment for the Exchequer of more than £900m from the first 40% of loans that have been fully paid back by homeowners and interest payments to date, new analysis of the performance of the initiative, including loan redemptions, reveals.
Using government data, the new report by the Home Builders Federation, Road to Redemption, found that across 154,275 fully repaid loans, the government had received an uplift on the original loan value of around 9%, representing a ‘profit’ of £718 million with a further £229m in interest income to date.
The research considers the impact that the scheme’s presence in the market had on housing supply while testing the claims made by some commentators that it led to house price inflation.
Today’s report shows that Help to Buy:
+ Supported almost 400,000 buyers to buy an energy efficient new build home, including just under a third of a million first-time buyer households;
+ Created an unparalleled period of housing supply growth following investment from builders who were given confidence over future demand for new homes;
+ Created no discernible change in the relationship between new build prices and those of existing homes;
+ Has seen 154,275 households fully pay off their government equity loans;
+ Has so far generated a net return on investment of £718m for the Exchequer to date (+9% against original value of loans) in addition to more £220m in interest payments;
+ Is likely to generate a positive return on investment of more than £2bn once the performance of loans and interest income has been accounted for.
The strong performance of the scheme and its positive returns for taxpayers supports calls from first-time buyers, housing experts and industry representatives for government to address a once in six decades void in government home ownership assistance and threatens government’s target for 70% of households to be homeowners
Research published by Savills earlier this month demonstrated that Help to Buy had broken a hitherto universal rule that new build sales only ever represent one in 10 housing market transactions, allowing new homes to be delivered in significant volumes even within a more widely struggling housing market. Reflecting on the absence of support for first-time buyers today, Savills report offered a gloomy forecast for the government’s housing supply ambitions:
“Without Help to Buy or another change of similar impact, it is likely that the ratio will be restored, with consequences for housing delivery.”
HBF’s Road to Redemption report also explores the role of Help to Buy in the context of long-term government support for home ownership from the 1960s up to 2022, ranging from tax relief initiatives for homeowners during the 20th Century, the controversial Right to Buy scheme and successive shared equity, guarantee and equity loan schemes deployed by the 1997-2010 Labour governments and the 2010-2015 coalition government.
With previous interventions like the mortgage interest tax reliefs of the 1980s, coming at a significant cost to the Exchequer and providing no supply-side boost, and with the Right to Buy involving only the transfer of stock between tenures rather than the creation of any new homes, Help to Buy can be seen to have been a success with a long-term return now also being generated for taxpayers.
HBF has called on government to build on its early work in fixing the broken planning system by supporting prospective first-time buyers to access mortgage products that enable them to move into home ownership and into a new, energy efficient home.
Replacing the void left by Help to Buy with a targeted equity loan scheme for a new generation underpinned by developer contributions to assist their buyers to access affordable mortgage finance with only a five per cent deposit, would lead to increased investment in new sites and more new homes delivered.
Neil Jefferson, CEO at HBF, said: “The new government has recognised the importance of addressing the ever-worsening housing crisis. The early work of ministers to reform the planning system provides the foundation for an increase in housing supply, but housing market conditions and mortgage terms continue to work against first-time buyers imposing a limit on what can be achieved.
“If government is to achieve its housing ambitions it needs to consider what targeted support it can provide to help buyers onto the housing ladder
“The Help to Buy scheme supported the fastest increase in housing delivery on record and the positive returns it is now generating for taxpayers shows that intervening to support first-time buyers, as governments have done for decades, can have widespread social and economic benefits.”
