An inconvenient truth - Help To Buy mostly helps the better off

Government schemes like Help To Buy, supposedly assisting more people get on the ladder, have little impact on improving social mobility - and that’s because it’s the better-off buyers who are most likely to benefit.

A new report published by the Social Mobility Commission investigates the impact of low-cost home ownership schemes and finds that individuals benefitting from schemes - such as Help to Buy - earn more than one and a half times the national working age median income.

Around three in five first-time buyers said that they would have bought anyway and that the scheme merely enabled them to buy a better property, or one in a better area, than they were originally looking for.

Since the 1990s, around 1.8m council and housing association properties have moved into private ownership through Right to Buy. 

Some 200,000 were provided through the affordable homes ownership route, and 300,000 households were assisted through reduced costs of attaining ownership.

The report which was carried out by researchers from the London School of Economics builds on previous government commissioned research which found that Help to Buy Equity Loans had generated 43 per cent additional new homes over and above what would have been built in the absence of the policy - contributing 14 per cent to new build output.

However that research found that the average income for these Help to Buy buyers was £41,323 - similar to other first-time buyers who had average incomes of £47,528.

Fewer than half of all working age households have incomes over £30,000, meaning that this scheme is unlikely to be able to help those households without more specific targeting.

The research points out that the high cost of housing means many low cost home ownership scheme are beyond the reach of almost all families on average earnings.

Only 19 per cent of Help to Buy Equity Loan completions to date were for homes worth less than £150,000. If households put down a five per cent deposit, the researchers found that this exceeded the 40 per cent limit of affordability for a median income working age household.

The report recommends new action to help more low income buyers including targeting financial subsidies on households with incomes up to one-and-a-half times median income and setting different levels for different regions.

It calls on the government to provide more advice and guidance to households without a history of ownership to help them into ownership by managing risks and expectations. It also calls for restricting access to subsidies where a first-time buyer has unfettered access to alternative sources of financial and other support to become an owner, such as capital from parents or other relatives.

Earlier this year, the Social Mobility Commission published research which found that the proportion of first-time buyers relying on inherited wealth or loans from the Bank of Mum and Dad had reached a historic high and the trend looked set to continue. Increasingly, young people are relying on their parents to help them get a foot on the housing ladder.

Over a third of first-time buyers in England now turn to family for a financial gift or loan to help them buy their home compared to one in five some seven years ago. A further one in 10 rely on inherited wealth.

For 25 to 29 year olds, home ownership has fallen by more than half in the last 25 years from 63 per cent in 1990 to 31 per cent most recently. Many of those who do manage to buy eventually can only do so at an older age.