3Help to Buy and wider housing policy
Meeting the Department’s commitment to deliver 300,000 new homes per year
20.The Department has committed to delivering 300,000 new homes per year from the mid-2020s. Our report on the planning system in June 2019 found that there would need to be a significant increase in housebuilding if the Department was to meet this ambitious target. We concluded that the Department has a highly ambitious target to deliver 300,000 new homes per year by the mid-2020s but does not have detailed projections or plans on how it will achieve this.37 We questioned the Department on the contribution the Help to Buy scheme was making towards this target, but it did not provide us with a figure. The Department recognised the scale of its ambition and that it would be unable to deliver this through a single intervention. It explained that it did not intend to rely only on the traditional developers to come up with the numbers of new homes that were needed, and it needed to build a broader housing market. Its other interventions included encouraging the build-to-rent market and affordable housing.38
21.The Home Builders Federation confirmed that the changes the Department planned to the new scheme from 2021 will reduce demand for, and therefore also the supply of, new housing, at a time when supply needs to increase if the Department is to meet its commitment to deliver 300,000 new homes per year.39 We asked the Department why it was continuing to invest in a scheme that appeared to have no link to the government’s target for new house building, and if it had done any work to quantify the likely reduction in supply and the implication for its ability to deliver 300,000 new homes per year. The Department confirmed that it did not have a precise estimate for the impact of changes to the scheme on the supply of new homes, and that it had also not quantified what the reduction in supply would be once the scheme ends in 2023. It told us that it expected the newer, more targeted, scheme to lead to a 20% reduction in the number of Help to Buy transactions, but asserted that the overall impact on the supply of new homes will depend on how developers and the wider market react. This included where developers subsequently choose to operate and any new products they might offer for borrowers unable to afford larger deposits, which the Department considered to be a factor outside of its control.40
22.We challenged the Department on how it planned to maintain housing supply once the scheme ends in 2023, and specifically what changes it would need to make to its other schemes and initiatives to compensate for any expected loss in supply from Help to Buy. The Department told us that it aimed to withdraw the scheme in a way that did not damage the stability of the new-build market. It explained that it had other interventions that it hoped will make the wider market more sustainable. The Department acknowledged that it expected to spend more in areas of the housing market it described as less commercially viable, such as affordable housing, and infrastructure grants and loans. It committed to monitoring the housing market closely to see whether any new action was needed to support first-time buyers unable to afford property. The Department explained it also expected the private sector to come up with alternative schemes to help first-time buyers and to maintain supply. It told us that it was working with developers on this and would continue to do so. The Home Builders Federation confirmed that it was also working actively with developers to look at what the effect of the new scheme, and its withdrawal, will be and at what the private sector can do to help boost supply. It expected that there will still be some demand for new properties particularly from first-time buyers.41
Other problems in housing
23.The Department expects to have supported around 352,000 property purchases by March 2021, with the total amount loaned forecast to be around £22 billion in cash terms. Homes England confirmed that its investment in the Help to Buy scheme had resulted in its balance sheet increasing in size to the equivalent of a medium-sized building society. The Department agreed that its investment in the Help to Buy scheme tied up capital for a period of time, at a cost, with the money unavailable to be released for other purposes. The Department explained that Help to Buy differed from other housing programmes where it provides direct subsidies and does not receive any money back. Under the Help to Buy scheme, it expects to take a 20% share of any profits the homeowner makes when they come to sell their property.42
24.Professor Whitehead referred to Help to Buy, the Department’s largest housing initiative by value,43 as a “scheme for middle England” as it only benefited those who were already in a position to purchase property. We challenged the Department as to whether Help to Buy was the most effective use of nearly £22 billion, given that it helps a relatively small section of the wider housing market. The Department agreed that Help to Buy was targeted at a specific group, having been specifically designed to help people buy their own home who would not otherwise have been able to, as well as increase housing supply. The Department told us that the scheme should be considered in the broader context of the Government’s housing strategy, and its many other interventions in the housing market. These included significant investment in affordable homes and specific help on homelessness. The Home Builders Federation told us that the private sector was also providing more affordable housing as a result of Help to Buy, with over half of affordable homes now provided through section 106 agreements on developer’s sites. The Department acknowledged that Help to Buy did not address other challenges in the housing market, such as the wider planning system and provision of infrastructure. It told us it had introduced a housing infrastructure fund to help release more sites for housing, and had interventions in place which were specifically designed to support small builders, such as the home building fund which provided loans and other financial support.44
25.We asked the Department if it had assessed whether it still needed to help first-time buyers, who ultimately end up profiting from the scheme, or whether the £17 billion allocated to Help to Buy could be better spent helping those with more pressing housing needs. The Department confirmed that mortgage availability has improved since the scheme was introduced in 2013, with more high loan-to-value mortgages on offer, including for first-time buyers. However, the mortgage market has not yet returned to how it was before the scheme was in place, and lenders are still slightly more cautious in lending for purchases of new-build properties compared to existing homes. For this reason, the Government has decided to keep a scheme in place until 2023, which will focus purely on helping first-time buyers from 2021. The Department asserted that this would also give developers and lenders time to plan their activities for the post-2023 housing market, when support from Help to Buy will no longer be available.45
37 Committee of Public Accounts, Planning and the broken housing market, One Hundred and Third Report of Session 2017–19, HC 1744, 26 June 2019.
38 Q 46
39 Qq 6–7
40 Qq 46, 52–55
41 Qq 6–7, 56, 58, 116–119
42 Qq 42, 59, 63. C&AG’s Report, para 4
43 C&AG’s Report, para 1
44 Qq 8–9, 13–14, 32, 38–39, 86, 126
45 Qq 59, 124, 126–128
Published: 17 September 2019