Higher-income households were the primary beneficiaries of the Help to Buy mortgage schemes introduced by George Osborne in the 2010s, according to a comprehensive analysis by the Institute for Fiscal Studies (IFS) thinktank. Launched in 2013 under the Conservative-Lib Dem coalition government, these initiatives aimed to make home ownership more accessible during a period of rapid house price growth, but their effectiveness has been called into question.
Details of the Help to Buy Schemes
The Help to Buy program consisted of two distinct schemes designed to assist first-time buyers. The first involved taxpayer-backed loans to reduce the required deposit, while the second was a mortgage guarantee scheme that covered part of lenders' potential losses on high loan-to-value mortgages. Both schemes applied to homes valued up to £600,000, and by 2014-15, they supported approximately one-fifth of all first-time buyer purchases.
Impact on Higher-Income Households
Using innovative methods based on survey data and local property prices, the IFS found that much of the benefit from Help to Buy went to higher earners, particularly those residing outside London and south-east England, where property prices were relatively lower. These individuals likely would have been able to save for a deposit and purchase a home even without the schemes, suggesting that Help to Buy merely accelerated their home-buying process by a few years rather than enabling long-term home ownership.
Bee Boileau, a research economist at the IFS and co-author of the briefing, explained, "Help to Buy policies can theoretically help first-time buyers get on the housing ladder, but they also risk pushing up house prices and requiring the government to assume loan risks that the private sector avoids. Our research indicates that the 2013 schemes had the most significant impact on making homes affordable for higher-income households."
Limited Effects on Affordability and Social Mobility
The analysis further revealed that the mortgage guarantee scheme had limited effects on affordability, as buyers remained constrained by income-based borrowing limits. The loan scheme, which only applied to new-build properties, was more crucial for improving affordability but had a narrow scope, resulting in a muted overall effect. Consequently, the IFS concluded that both schemes had little influence on social mobility, failing to address broader inequalities in the housing market.
Boileau added that if future governments aim to tackle inequality, they could target assistance at lower-income households, though this approach might increase taxpayer risk. Help to Buy has faced criticism from experts for inflating prices without boosting housing supply, with a 2022 House of Lords report suggesting that funds would be better spent on increasing housing availability.
Political Responses and Current Context
In response, James Cleverly, the Tories' housing secretary, defended Help to Buy, stating, "The previous Conservative government's Help to Buy schemes enabled thousands to achieve homeownership. Under Labour, first-time buyers face increasing challenges, with declining housebuilding and rising stamp duty fees." Notably, a version of the mortgage guarantee scheme was reintroduced in 2021 and made permanent by Labour last year to ensure the availability of 95% mortgages.
This IFS report underscores the complex dynamics of housing policy, highlighting how well-intentioned schemes can disproportionately benefit those already advantaged, while offering limited support to those most in need.
