Now is not the time to reform Help to Buy – it’s the time to scrap it entirely
Housebuilders weighed on the FTSE yesterday following reports that the government is unlikely to extend the Help to Buy programme – in its current format – beyond 2021.
Help to Buy has been doping up the housing market for more than half a decade since former chancellor George Osborne revealed his plan to stimulate demand. Prices have climbed way ahead of wages in the intervening years, while housebuilding shares have also shot up.
The project has been dubbed Help to Bonus in some quarters, given its effect on executive pay at certain large housebuilding companies.
Redrow, which reported full year results yesterday, is not one of the worst offenders, with chairman Steve Morgan slamming astronomical incentive plans at rival Persimmon.
Nonetheless, there was an understandable note of desperation when Morgan's own CEO, John Tutte, accompanied his firm's results by pleading for the continuation of Help to Buy. "I can’t really believe the government are really going to do anything other than allow it to carry on in one form or another," he said. "It has been hugely successful".
This newspaper takes a different view, arguing that supply side reforms are the only way to increase the amount of high quality, affordable housing in areas of burgeoning demand.
There are few signs that sufficiently radical reform to the government's housing policy is on its way. Nonetheless, reining back Help to Buy would be a good start.
The scheme has attracted negative publicity for enabling 32,000 homeowners to upgrade to more expensive properties. It has also been used by thousands of individuals or couples with six-figure incomes. Hardly a picture of squeezed youngsters struggling to get on the property ladder.
The government looks set to reform the scheme to tackle such concerns. This is all very well, but ministers should be bold enough to recognise the distortion caused by policies that encourage more and more capital to flow into housing, exacerbating inequality and even detracting from other areas of investment.
Help to Buy doesn't need a rethink and a rebrand – it needs to be razed to the ground.