It’s been six years since the Help to Buy scheme was launched, with the honourable intentions of helping more people onto the housing ladder in the UK.
After some negative press in recent months and the scheme’s extension until 2023, I would like to shed some light on the nuances of the initiative. As a developer and someone whose business has benefitted from Help to Buy, I think it is important to delve into how it might be adjusted to be more helpful to its users.
Help to Buy was introduced back in 2013 and has proved very popular, especially with young people who might have thought that home ownership was out of reach without the opportunity to buy with only a 5% deposit. From my background as a property developer, I have really enjoyed seeing young people move into their first homes within some of my projects which have qualified to be sold under Help to Buy. However, I have a number of concerns about elements of the scheme, specifically whether it is really benefitting buyers or merely bolstering major housebuilders’ profits.
One issue that dominates is the restriction of Help to Buy to new-build properties only. This was put in place to stimulate a much-needed uptake in creating new homes in the UK, but the downside of incentivising developers in this manner is that premiums on new-build properties have spiralled further than they should. Developers are aware that Help to Buy is a closed market, and many properties are sold for premiums of 15-20%, a surprising statistic that may come to harm first time buyers perhaps more than it is helping them.
Buyers are paying an artificial price on day one, in comparison to buying an older property. My concern is that they won’t be protected in the event of a market correction if they have to repay their Help to Buy loan and mortgage company and fall into financial trouble. Just like in the case of new car sales where the minute the car is driven off the forecourt it has dropped in value, the same applies to any Help to Buy purchase.
Furthermore, conditions of the loan specify that subletting is prohibited so in the instance where a couple purchase their first home and subsequently decide to separate, they could be faced being unable to sell due to negative equity and unable to rent due the HTB restrictions.
The onus was on getting young people into the market, but if they then can’t afford to move when they want somewhere bigger, are we going to see the same issue with property availability in 10 years’ time?
There is also the matter of meeting the criteria of Help to Buy, which critics have claimed is an issue with the scheme, with the National Audit Office revealing in June that two thirds of purchasers could have afforded to buy without using the loan. In addition, one in 25 of those who used Help to Buy had a household income of over £100,000 per annum, which was widely criticised. From this outlook, it seems that the initiative is not succeeding at helping people who really need it. There is certainly a case for means-testing those who purchase using Help to Buy to ensure the system is fairer.
However, this would require the government to invest greater resources into the scheme, which is another fairly common complaint I hear from those I deal with in the property industry. The HTB completion monies for a property I recently sold arrived seven weeks late, and the estate agents I deal with on a regular basis say that the initiative is under-resourced and slow.
My final concern, and one that has been widely discussed in the media, is the amount of snagging issues found in many new-build homes, where buyers are not provided with adequate support after purchasing. Some major housebuilders have posted an enormous increase in annual profits on the basis of the Help to Buy scheme, and one has to ask whether developers are running away with themselves to fill their own pockets at the expense of compromising the quality of build.
To conclude, I think there are still a great deal of benefits to the Help to Buy scheme, but that it could benefit from some significant reforms. I think means-testing applicants or taking some elements of the Key Workers Scheme could help the system become more effective. I also think it should be applied to all homes within a certain value and not just new-build properties, to level out the market and ensure that developers are not applying enormous premiums to their developments. The scheme itself also needs greater investment to become more efficient in its dealings. With a little adjustment, I think Help to Buy could truly help those it was meant to.