Help to Buy Scheme: A Sticking Plaster on UK's Broken Housing Market?

Rishi Sunak is reportedly considering reinstating the Help to Buy scheme, which closed to new applicants in October 2022. The move is seen as an attempt to attract young voters. However, critics warn that the scheme will not address the underlying issues of the UK's housing crisis.

According to Freddie Poser, director of affordable housing campaign Priced Out, reintroducing Help to Buy would be "a sticking plaster on a completely broken housing market." He added that the scheme would not help the UK build more homes or tackle the shortage of new homes in the country.

Poser also cautioned that the subsidy provided by the Help to Buy scheme could be offset by inflated house prices.

The scheme offered a five-year interest-free loan of up to 40% of the purchase price and required just a 5% deposit. However, if supply fails to expand in response to a rising price, most of the subsidy would be eaten up by the price rise, he said.

David Pett, from MJP Conveyancing, commented: "The Help to Buy Scheme does provide assistance to those looking to jump onto the property ladder. However, it can lead to price increases. It's not uncommon to find a buyer who is using this scheme having to pay more for a new build property than a cash buyer. So, yes, it will provide support. However, the model is in need of reform to combat inflated pricing."

Help to Buy: Pushing up House Prices

Critics of the Help to Buy scheme have long suggested that the scheme would drive up house prices further and fail to address the underlying cause of the UK's housing crisis. They contend that merely injecting cash into the demand side of housing would not fix the crisis.

"Not improving subsidies for first-time buyers when house prices remain so high because of the fear of the inflationary effect is like arguing that benefit claimants should not receive significant increases in the value of their benefits because it will be inflationary," said Ryan Shorthouse, chief executive of the Bright Blue think tank.

However, critics argue that by subsidising first-time buyers, the scheme is likely to inflate house prices further. They point out that the drivers of house price and general inflation are much greater than subsidies for first-time buyers.

The Help to Buy scheme is designed to assist first-time buyers struggling to get onto the property ladder. It has helped more than 400,000 first-time buyers in the UK since spring 2010.

The Backdrop of the UK Housing Crisis

The UK is facing a housing crisis, with house prices rising beyond the reach of many first-time buyers. According to a report by the Royal Institution of Chartered Surveyors, the UK needs around 300,000 new homes built per year to address the existing shortfall.

The UK government has committed to building 300,000 new homes annually and investing £11.5 billion to provide affordable, quality homes in the country. However, critics argue that the government is not doing enough to address the housing crisis, and the Help to Buy scheme is not the answer to the issue.

The crisis has forced young people to stay at home longer or rent for longer before they get onto the property ladder. Access to affordable housing has been a significant issue for millions, with many renters squeezed out of the market due to high rents and low wages.

Opposition from Priced Out

Priced Out, a campaign aimed at making housing more affordable and accessible in the UK, opposes the Help to Buy scheme. The campaign is calling on the government to address the underlying causes of the housing crisis, which is the scarcity of new homes.

"If you just give this demand-side injection of cash, that actually pushes up prices rather than fixing the underlying cause, which is that there aren’t enough places for people to live. You’re just shuffling around the stock."

Priced Out has long campaigned against the scheme, which it views as a means of masking the underlying housing crisis without fully addressing it.

The Labour Party's Perspective on Housing Crisis

If it wins the next election, the Labour Party has pledged to become "the party of home ownership." The party has announced that it will achieve this by reinstating the legally-binding target of building 300,000 new homes.

Labour's proposal also includes plans to give more planning powers to local authorities and to provide council tenants with the right to buy their homes at a discounted price after three years of renting.

According to shadow housing secretary Lucy Powell, "This ambitious plan would help deliver the homes people need and, just as importantly, give renters a fairer deal. With Labour, the scale of ambition will meet the scale of the crisis."