Help to Buy housing scheme mainly benefits high earners
Wealthier households have been the main beneficiaries of the government's Help to Buy subsidy scheme and purchasing homes, a new report has revealed.
The original stated aim of the programme was to help those who could not afford a mortgage purchase a home, giving them a taxpayer-funded boost.
But a report from the Ministry of Housing, Communities and Local Government showed that the average income of a household using Help to Buy in three months to the end of March this year was £50,379, with nearly one in 20 households on the scheme enjoying annual incomes above £100,000.
When Help to Buy was first introduced, the average income was £37,000. For those buying in London, incomes have risen to £62,000 in the last year, up from £47,250.
Over 6,700 high earners bought homes through the government’s scheme since 2013, and a further 10,299 households with an income of £80,000 or more have also bought a property through Help to Buy.
This has led to calls for the programme to be reformed.
The Institute for Public Policy Research told The Times. Darren Baxter, research fellow at the think tank, said: “Help to Buy is not supporting the right people. Far from helping those priced out of home ownership, the majority of those who have bought through the scheme would be able to buy at some point without support.”
Currently there is no maximum income on the Help to Buy scheme, with the government equity loan allowing people to borrow 20% of the purchase price of a new-build property, or 40% in London. Buyers must have at least a 5% deposit, and they can borrow the rest from a mortgage lender. The scheme can be used to buy any new build up to the value of £600,000.
Analysis by Morgan Stanley last year found another unintended consequence has been that the scheme has mainly benefited housebuilding companies, driving up the premium between new build homes and resales so that the price of new-build has outstripped second-hand by 15% since the start of the scheme. Housebuilders have been found to have charged a premium of up to 5% for homes sold using the scheme.
Last month, Berenberg said the support of the government equity loan scheme means the new build sector should "continue to outperform the wider market". Analysts said they expects the government to extend the scheme in some way, and even if this is with caps on prices or income, there is expected to be little impact on overall demand.
With more than 10,000 buyers snapping Help to Buy loans in the first three months of 2018, the total number of properties purchased thanks to the scheme has topped 169,000 since 2013, this rises to 420,000 housing completions if including the Help to Buy ISA. The government has provided over £8.9bn of support, with the scheme extended to last until 2021 and an additional £10bn pledged.