Government-backed Help to Buy schemes introduced in the 2010s had only a limited impact on overall housing affordability and largely benefited higher-income households, according to new research from the Institute for Fiscal Studies (IFS).
The analysis found that while the schemes supported a significant share of first-time buyers – accounting for around one in five purchases at their peak in 2014-15 – they had limited impact on affordability for lower-income households.
The IFS examined the two main schemes launched in 2013: the mortgage guarantee scheme, which increased the availability of high loan-to-value mortgages, and the equity loan scheme, which offered buyers of new-build homes a government-backed loan worth up to 20% of the purchase price.
It found that in the early 2010s, most prospective buyers were constrained by income limits on borrowing rather than their ability to raise a deposit. As a result, the mortgage guarantee scheme, which targeted deposit constraints, had limited effect on affordability, while the equity loan scheme had a more noticeable, but still restricted, impact.
Overall, the IFS found that Help to Buy made only a modest difference to the range of homes buyers could afford. The equity loan scheme applied only to new-build properties, which make up a relatively small share of the housing stock, further limiting its reach.
Affordability gains were concentrated among higher earners, with the schemes more likely to bring forward purchases by a few years rather than enable access to the housing market for those otherwise unable to buy.
Regional differences were also evident. Buyers in London and the South East saw larger increases in the price they could afford to pay, but smaller improvements in the proportion of homes within reach compared with those in lower-cost areas.
The study found no clear evidence that the schemes either improved social mobility or entrenched existing inequalities in homeownership linked to parental background, with similar gains observed across different groups once income and location were taken into account.
Bee Boileau, research economist at the IFS and co-author of the briefing, said: “Help to Buy policies can help first-time buyers get on the housing ladder, in theory, but can also push up house prices and require the government to assume the risk on loans that the private sector is not otherwise willing to make.
“Our research indicates that the Help to Buy schemes introduced in 2013 had the largest impact – in terms of making more homes affordable – on higher-income households. If policymakers wanted to boost affordability for those with lower incomes, they could offer more generous subsidies to this group.
“This would involve a difficult trade-off, however. It could increase social mobility and reduce inequalities when getting on the housing ladder, but would also increase the exposure of both the government and potential borrowers to housing market downturns.”
