A parliamentary report out today underlines that £29bn-worth of housing subsidies have simply helped to boost several Tory donors’ profits, reports our housing correspondent, BARRATT HOLMES
Builders’ subsidy: a Lords committee has been critical of a costly Tory government scheme
The cost of an average home in Croydon increased by 4 per cent in the first 10 months of 2021, according to official government data, as some house prices in the capital soared at a rate of £10,000 per month in that same period.
According to figures from the Gov.uk House Price Index for January to October 2021 (the latest available data), the cost of an average home in Croydon increased from £380,866 to £397,215 – £16,348.
In Sutton, prices went from £393,920 to £417,545 – £23,544, or 5.9 per cent. In Bromley, the average house price went from £456,738 to £479,845 – £23,106, 5.0 per cent.
Such increases came despite the rate of house price inflation slowing at the start of the year, which analysts suggested was as much because of the impact of Brexit on the London housing market as covid.
Kensington and Chelsea (£101,171), Hammersmith and Fulham (£95,522) and Richmond upon Thames (£85,862) had the biggest average price increases of all London boroughs. In Newham, Brent, Southwark, Hackney and Tower Hamlets, average house prices fell during 2021, as the average house price across London increased by 3.3 per cent.
But a report published today by a House of Lords committee has accused the Tory government’s flagship Help to Buy scheme of fuelling such house price inflation while doing little to address the crying need to provide more social housing across the country.
Help to Buy, which has cost £29billion since it was introduced as a subsidy for property developers in 2013, has failed to “provide good value for money” for the taxpayer, according to the report from the Lords’ built environment committee.
The “scheme, which will have cost around £29billion in cash terms by 2023, inflates prices by more than its subsidy value in areas where it is needed the most… This funding would be better spent on increasing housing supply”, the report states.
While helping to line the pockets of millionaire house-builders, Help to Buy has done little to tackle the lack of genuinely affordable housing. The stock of social housing has shrunk by close to 500,000 homes since 2000, according to an analysis of official statistics by housing charity Shelter.
Unimpressed: Lucy Neville-Rolfe, chair of the Lords committee which published the report
“Help to Buy has had its virtues, particularly outside of London. But in London and those hotspots of demand, it’s gone straight into price. That’s been the problem,” Baroness Neville-Rolfe, the chair of the committee, told the Financial Times.
Almost 340,000 homes have been bought using Help to Buy’s equity loan, the large majority by first-time buyers. In the same period the share price of leading builders including Persimmon, Barratt Homes and Taylor Wimpey has nearly tripled, according to the FT. Property developers are among the biggest donors to the Conservative Party.
The Lords committee has put forward a number of proposals for addressing the national housing shortage, calling on the government to reform the planning system, support small builders and redirect funds towards new social housing and training for construction workers.
“Uncertainty about the future planning system and delays to planning reforms have had a ‘chilling effect’ on housebuilding and created uncertainty for housebuilders and planners,” said the report, which draws on evidence from housing industry groups, charities, think-tanks and academics.
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The irony of this is that in future years the government will make a fortune when the Help to Buy loans have to be repaid.
The scheme works by the government taking a percentage stake in the property. As the value of the property increases, so does the government’s share. If your home doubles in value when you either sell or have to repay the loan, then you will have to pay back twice the amount borrowed through HTB.
The loan is interest-free for the first 5 years, but after that interest is charged at 1.75% but this will increase by RPI plus 1% year on year.
It might help people on to the housing ladder, but it has a big price attached which some people may come to regret.