In her catastrophe-laden speech at the culmination of the Conservative Party Conference, Theresa May announced further support for Help to Buy, together with a commitment to support affordable social housing.
She stated that a further £10 billion would be set aside to boost the Help to Buy scheme, while £2 billion was earmarked for councils and housing associations to create new social housing.
In addition, in areas of high rent, the latter amount could be used to make social rents that are up to 80% of market rent.
May’s cheque book was, she claimed, supporting the Conservative commitment to the belief that everyone should be able to buy their own home.
“I will take personal charge of the Government’s response, and make the British dream a reality by reigniting home ownership in Britain once again,” she said.
But critics have been quick to point out that she failed to say where the funding for these schemes would come from.
In fact, Sam Bowman, Executive Director of the Adam Smith Institute stated that “reviving Help to Buy is like throwing petrol onto a bonfire,” as it will further inflate house prices by increasing demand, but not supply.
As of March 2016, Help to Buy had contributed to 150,000 completions, which Government says has transformed the housing market.
But it has done nothing to bring the cost of housing down – it simply offsets the loan as buyers still need to pay it back. And of course, it props up unaffordable property prices. And meanwhile the volume builders post record returns.
Quite simply, the problem with Help to Buy is that once you’ve started subsidising a housing market, how do you withdraw support? For May, the answer is: you don’t.
With Help to Buy bolstering the mainstream market, the argument has long been that it unfairly prejudices custom build, as it’s not available on the plot-purchase model that most custom and enabled self-build is reliant on.
This is because Help to Buy is only applicable on completion. And for custom and serviced-plots, the purchase is at the plot point – precisely to enable the consumer to take advantage of CIL exemption. Purchase later on, and CIL, where applicable will become due.
For a long time, the affordable aspect of custom build, where relevant, was partly down to this exemption offering a saving to the consumer.
But with CIL slated to disappear, custom build is losing one of the competitive edges it has over mainstream housing.
So important is Help to Build to the market, that two custom-build enablers have reviewed their process to get some element of their homes eligible for the scheme.
Meanwhile, another major custom build enabler is exploring Help to Buy by looking into offsetting the money transfer from plot purchase to the end of the process.
This is because the plot represents roughly 20% of the total cost of the house, which is the same amount Help to Buy is able to advance to purchasers.
But deferring this payment from the customer to the end of the build process means the developer will have to wait for their money during the build process.
The land transfer is the crucial aspect in all of this, and without a plot purchase, custom build becomes a hybrid version of off-plan sales, albeit without the developer funding all of the build.
However, the problem with these custom build approaches is that smaller SMEs – which need cash to fund their developments – may not be able to swallow a model that means they need to wait for plot costs to be turned into income. And in all likelihood, this income is most probably needed to help bring on the site.
And ironically, according to the more rigid definition of custom build, not purchasing at plot point means that the house is no longer a custom build project in the strictest sense. This would also undermine CIL where applicable.
What’s more, the fluid nature of such an approach raises questions about whether the changed definition would allow councils to allocate such homes as counting towards their supply of serviced plots for self- or custom build. So the definitions become vital.
For Help to Buy to really make a difference to custom build, it needs to be applied to the sector when the design is agreed, and not when the house is built. This makes it more of a Help to Build than a Help to Buy, which is already being campaigned for by NaCSBA.
Meanwhile, we wait for the Autumn budget, to see what other surprises it holds for house building, which is almost certain to be mentioned.