Evaluation of the Help to Buy Equity Loan Scheme 2017

The Ministry of Housing, Communities and Local Government (MHCLG) commissioned Ipsos in partnership with Christine Whitehead, Peter Williams and the London School of Economics to evaluate supply and demand-side impacts of Help to Buy. Drawing on developer, lender and buyer perspectives, the study revisits estimates of additionality (originally assessed in 2015), defined as the number of new homes built as a direct result of the scheme over and above what would have been built in its absence.

Evidence suggests that the scheme has been successful in boosting both demand and supply. Over the evaluation period (2015 to 2017), an estimated 37% of Help to Buy purchases were additional, equivalent to an estimated 14.5% of total new supply. Supply additionality varies by region and is identified to be highest in the Midlands (16.3%) and the South/ South West (15.9%) and lowest in London (6.6%) where the proportion of Help to Buy sales is relatively low.

Other key findings include:

• Help to Buy has accounted for an average of 38% of all new build transactions and 4% of all transactions since its introduction in 2013.
• Since 2013, Help to buy prices have risen in line with new build prices but are consistently below the average new build price region by region, and have at all times remained below average house prices. 
• Developers saw the scheme as having both a direct impact on sales and an important role in building consumer and developer confidence. Large and small builders differed in their approach to the scheme, but all recognised its strength as a market-led scheme.
• Lenders have joined the scheme in increasing numbers (23 at the time of study), recognising it as a vehicle to enable low-risk medium Loan to Value lending. Early concern about consumer understanding had faded and lenders took comfort from the affordability tests applied which should mean borrowers can cope with increased costs as early entrants start to face interest charges on their Equity Loan.
• Ipsos’s survey of buyers found that Help to Buy had helped speed up access to the market. Some 79% of buyers agreed it enabled them to buy a property sooner than without the scheme. 
• A majority of buyers (82%) agreed the scheme had enabled them to access the market at a higher level and 69% agreed it had enabled them to buy larger. Buying bigger, better, sooner, may mean skipping a rung in the ladder, saving transaction costs but probably reducing transaction numbers in the longer term.
• Most buyers said they understood their obligations under help to Buy. The majority were very confident in their ability to make interest payments (69%), but were somewhat less confident about repaying the Equity Loan (54%).

Technical information

The buyer survey was conducted by Ipsos using a telephone interview approach and was based on 1,500 responses completed between 2nd to 20th August 2017. Data from completed interviews have been weighted using: (i) a design weight to account for the non-proportional sample design by Homes England Operating Area and (ii) calibration weights to align the sample to the Help to Buy population profile of those purchasing a property using Help to Buy Equity Loan between June 2015 and March 2017 (replicating the two-year timeframe used in the 2015 evaluation) taking into account location, first-time buyer status and property sized purchased.

In-depth, semi-structured qualitative interviews were conducted with 26 senior representatives of large developers and small builders, 12 lenders and representatives of five stakeholder organisations able to provide a broader, strategic view of the impacts of the scheme.