Help to Buy 2.0 – Much more than just a refresh
It may still be early in a new year, but the ongoing coronavirus pandemic and subsequent return to national lockdown has certainly engendered a sense of déjà vu. However, there is one significant change on the near horizon that will clearly distinguish 2021 from its predecessor: the start of the new Help to Buy scheme.
Housing supply has increased rapidly in recent years and the role of Help to Buy in achieving this cannot be overstated. Since the scheme’s introduction in 2013, the number of new homes built per year has doubled, with more than a million new homes added to the housing stock between 2015-20. The scheme has also been responsible for helping significant numbers of people on to the housing ladder. Since its launch in 2013, Help to Buy has supported a third of a million households to purchase a new build home with a 5% deposit, with 82% of purchasers qualifying as First Time Buyers (FTBs).
Crucially, the scheme is also delivering for the taxpayer. By March 2020, close to 50,000 Help to Buy equity loans had been repaid in full to the Government, generating a 10% return on investment for the Exchequer. In 2019/20 alone, more than 18,000 loans were repaid, delivering a 7.5% return on the initial investment.
While the scheme inevitably has its detractors, the above evidence shows that it has been successful in achieving the three objectives set for the scheme at its launch: boosting housing supply, helping FTBs on to the property ladder and generating economic growth. Pivotal to the success of the scheme has been the ease and simplicity with which Help to Buy can be accessed by customers, developers and lenders alike. Therefore, the continuation of Help to Buy in to 2023 is good news for all, particularly at a time of such significant economic uncertainty.
However, the launch of the new programme in April 2021 is much more than just a refresh or a rebrand of the existing scheme. It is very much a new Help to Buy, with new rules, new features and invariably, new challenges. Two of the most significant changes to note is the restriction of the scheme to FTBs and the introduction of regional price caps.
Ever since the regional price caps were announced back in 2018, HBF has expressed concerns to Government and officials about the impact they will have on demand for the new scheme. Our research in early 2020 showed that in 49 local authority areas, the estimated average Help to Buy FTB purchase price already exceeded the relevant regional price cap. In a further 26 local authority areas, recent average FTB Help to Buy purchase prices were within 5% of the planned cap levels, leaving little headroom and meaning that many will fall outside of scope of the new scheme.
It is important the real-world impacts of the changes are kept under review by Government to ensure that Help to Buy continues to deliver for FTBs. We welcomed the extension in the practical completion deadline announced in mid-January which will give builders an additional month to complete Help to Buy plots. This is something we had been pushing hard for since late 2020 having earlier in the year secured an extension from the original December deadline. The move means that the legal completion deadline of 31 March is now the key date for builders and buyers to be eligible for Help to Buy 2013-21. An exception to this continues to be for homes reserved before 30 June 2020 where Homes England has already agreed to allow a further extension to legal completion. This dispensation reflects the impact that the first national lockdown had on construction. For relevant properties, the legal completion deadline – and practical completion deadline – is 31 May 2021.
Ongoing materials and product supply problems and growing labour availability issues caused by coronavirus-related absences on site presented huge challenges for builders and meant that sites were unavoidably delayed. The flexibility shown by Homes England will reduce the number of buyers who will miss out on their dream home.
Of course, the original practical completion deadline had been December and after much discussion, we convinced ministers of the wisdom of allowing more transactions to be eligible, particularly given the shutdown of the market last spring and the subsequent delays many developers encountered to their build programmes. Without it, HBF research estimated that around 18,500 transactions were at risk of being unable to complete under the current scheme, of which some 8,000 would also have been ineligible for the new Help to Buy programme.
As with any substantial policy change, the transitional period can be challenging and the new Help to Buy programme has been no exception. Over the past year, HBF has been working solidly on behalf of its members with Government and Homes England to try and ensure the process is as smooth as possible.
A substantial portion of our energy has also been focused on securing changes to the conditionality and criteria for the new Help to Buy scheme. Following the publication of the documentation in the autumn, HBF and its members expressed concerns about the workability of the 2021-23 programme. Some of these concerns included the lack of specificity around building regulations requirements in the contractual wording, the apparent inability for homes on developments built by builders under building licenses to qualify for the new scheme and the requirement for developers to provide evidence of planning condition discharge for all pre-commencement and pre-occupation conditions to all buyers’ conveyancing solicitors.
It was the last requirement in particular that generated the most concern due to the potential it had for causing major delays to housing transactions. However, following negotiations with Homes England, we were delighted to achieve resolutions to all of these issues. The new scheme is evidently more workable and accessible than it had seemed when the terms were first published during the summer. There may be bumps in the road, but we do seem to be moving in the right direction. As always, we will work collaboratively with industry and stakeholders to mitigate any challenges that arise.