Help To Buy is about boosting house prices not helping young buyers

Bad news for would-be homebuyers in Scotland: the Holyrood government is scrapping Help To Buy. Bad news for one group, however, doesn’t necessarily mean bad news for society as a whole, and there is an argument that the problem with Help To Buy is not its untimely Scottish end. It’s that the whole thing was misconceived in the first place – and that it would probably be a good thing to scrap it in England, too.

The scheme has offered first-time buyers interest-free loans of up to 15 per cent of their purchase price since 2013, and was expected to run until March 2022. On Monday, however, citing budgets cuts emanating from London, the Scottish government announced it will close on, er, Friday.

Those within a few months of buying are hardly at the sharpest end of the UK’s housing crisis, but nonetheless: it’s likely there are young Scots out there whose plans have just imploded, and that sucks.

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The equity loan was one of a basket of policies introduced in 2013 to stabilise a wobbling housing market. The Help To Buy ISA, in which the government will boost first time buyers’ savings, is still going; the Help To Buy mortgage guarantee, which does what it says on the tin, was killed off back in 2016.

The purpose of all these schemes, ministers said, was to make it easier for first time buyers to pull together the cash required to buy their first home. In fact, they all had a different purpose: keeping both money and buyers flowing to prevent an economically-damaging loss of confidence in the housing market.

To put it another way: the policies intended to help first time buyers realise their increasingly implausible dream of home ownership were actually there to boost house prices.

If “helping first time buyers by keeping prices high” sounds a bit “war is peace”, then, well, yes. But it’s not quite as crazy as it sounds: the UK has managed to create a housing market in which, when prices fall, developers stop building until they rise once again.

Help To Buy, especially the equity loan bit only available for new builds, was meant to provide customers to ensure they kept building. Without it, the thinking went, we’d get fewer new homes and a worse crisis in the longer term.

The UK government maintains this has worked. An evaluation published in October 2018 found that the scheme had resulted in 14.5 per cent more new properties than would otherwise have been built. Others have been more cynical, both about the share of Help to Buy users who’d likely have been able to buy anyway, and about the tendency for new builds to be over-priced. As an analyst for housing charity Shelter wrote back in 2016, “a large chunk of Help to Buy Equity sales could at best be a waste of public money and, at worst, an inflationary boost to house prices”.

There is another way of using public money to provide secure housing, of course: for the government to fund new housing directly, through councils. That, this Conservative government has shown precious little interest in.

As to those worried buyers in Scotland, there is some good news: Help To Buy may be dead, but the First Home Fund, which provides equity loans of up to £25,000 to help buy any property, new build or not, is alive and well. Neither Westminster nor Holyrood governments seem ready to wean themselves off their addiction to high house prices quite yet.