The ‘Old’ Scheme worked…
The Government’s long-awaited evaluation of the Help to Buy Equity Loan Scheme has reignited debate about whether a relaunch of the scheme could give the housing market, particularly the new-build sector a very welcome boost.
The evaluation concludes that Help to Buy delivered what it was intended to do.
Between 2013 and 2023, more than 387,000 homes were purchased through the scheme, including around 328,000 by first-time buyers. The report estimates that approximately 15% of new-build homes delivered during the scheme’s lifetime were attributable to Help to Buy.
Positive effect on Housebuilding Activity
Housebuilders will no doubt not be surprised that the evaluation found that Help to Buy increased confidence across the sector following the financial crisis. The availability of equity loan support encouraged the building of more homes, and accelerated delivery. The scheme also had a positive impact on housebuilder revenues, and profits with the strongest evidence relating to small and medium-sized developers.
Let’s not get carried away…
However, before we all get overly excited the evaluation also identifies risks that any replacement scheme would need to address. It found that Help to Buy probably contributed to higher house prices, particularly in areas that were already relatively expensive. It also found that 46% of customers said they could not have purchased without the scheme, meaning that a substantial proportion may have bought another property without support or used the scheme to obtain a larger or higher-quality home.
The present market is also different from 2013. Interest rates are higher, 95% loan-to-value mortgages are more widely available and affordability is increasingly constrained by monthly repayments rather than the deposit alone. Any new scheme would therefore likely look different. More targeted by design, with clear intended beneficiaries, appropriate geographical, household income or price limits and clearer customer information about equity loan repayment and the realities of future refinancing.
What should housebuilders take from the report?
The overall assessment remains positive. The Government estimates that Help to Buy generated a net present social value of £25.1 billion and represented “very high” value for money. For developers, the central message is that well-designed buyer support can increase sales confidence, improve absorption and unlock additional housing delivery.
The bottom-line is that sadly this stops well-short of giving confirmation that Help to Buy will return. However, this favourable evaluation, combined with renewed pressure from the Home Builders Federation, gives developers a strong basis for engaging with the debate.