Help to Buy gives 10% return to taxpayers

The Help to Buy equity loan scheme has produced a return of around 10% to the exchequer, according to an analysis of government data by housebuilders.

The support scheme for buyers of new build homes, which has helped more than 313,000 households to purchase a property since being set up in 2013, has already generated more than £230m for the taxpayer, according to a report by the Home Builders’ Federation (HBF).

The HBF report into the scheme, which is credited with reviving the fortunes of the housebuilding industry after being introduced by then chancellor George Osborne in 2013, also finds no evidence that it has contributed to price inflation.

The government this year introduced a new less generous version of £19bn Help to Buy scheme, targeted only at first time buyers, following criticism the programme was helping to overheat the market and had artificially boosted the profits of major housebuilders. The scheme is due to end completely in 2023.

The report found that £2.48bn of loan repayments had been received by the Treasury, against loans with an original value of just £2.25bn, generating a return of £232m. This represents a 10% uplift on the original loan value.

Help to Buy works by funding an effective 20% “deposit” for new homebuyers which is interest-free but rises and falls in value with the property itself. By March 2020, the report said, 18% of all loans issued under the scheme had been fully redeemed.

The report showed that Help to Buy, which is only available on new build properties, had apparently been effective at driving the recovery of the new build industry back to pre-financial crisis levels of transactions, while transactions in the second-hand market remained, by 2020, 30% below pre-crash levels.

However, the research concluded that house price data for new builds and existing homes showed no evidence that Help to Buy has inflated new house prices, with “prices of new builds consistently tracking the wider housing market trends since the introduction of the scheme.”

The report said Help to Buy sales had accounted for an estimated 30-40% of all new build transactions since its launch, while take up of the scheme has increased year-on-year.

Stewart Baseley, executive chair of the HBF, said: “For many years we have seen evidence of the link between the scheme and the additional investment by home builders which has driven rapid housing supply increases. Now we can also see that the scheme is contributing to public finances as homebuyers pay back Government support.”

The HBF is currently in the process of launching an industry-funded replacement to the scheme, called Deposit Unlock, which is designed to allow first time buyers without large deposits access to mortgage for new build properties, amid continuing concern in the industry over the impact of cancelling the scheme in 2023.

A mortgage guarantee scheme brought in by chancellor Rishi Sunak in April has seen new build housing by and large excluded from accessing the high loan-to-value mortgages offered under the scheme.