Help-to-Buy Schemes Had 'Limited Impact on Social Mobility,' IFS Analysis Shows
The Institute for Fiscal Studies (IFS) has delivered a stark assessment of previous help-to-buy initiatives, revealing they did little to improve social mobility and primarily benefited higher-income households. This critical evaluation comes as the government reportedly considers reviving the controversial program amid pressure from leading housebuilders seeking to stimulate demand in the housing market.
Equity Loan Scheme Mostly Assisted High Earners
The equity loan scheme, which operated from 2013 to 2023, provided loans covering up to 20 percent of new-build property values. According to the IFS report, this program distributed 390,000 loans totaling £25 billion during its decade of operation. A separate mortgage guarantee scheme, initially running from 2013 to 2016 before being permanently revived, offered 105,000 guarantees worth £15.8 billion in its initial phase.
The analysis reveals both schemes disproportionately benefited residents of London and the South East, along with those in higher income percentiles. The report's authors noted that since these individuals would typically have been able to save for minimum deposits regardless, the programs likely accelerated their first home purchases by a few years rather than fundamentally altering their long-term homeownership prospects.
Affordability Impacts Remain 'Muted'
The mortgage guarantee scheme demonstrated "limited" effects on housing affordability, as most Britons face homeownership barriers primarily due to income constraints rather than deposit requirements alone. While the equity loan scheme showed more substantial impact on affordability, its influence remained "muted" because it was restricted exclusively to new-build properties.
Bee Boileau, a research economist at the IFS, highlighted the complex tradeoffs involved in designing more effective support systems. "A new scheme offering more generous subsidies to low-income households would require a difficult tradeoff," she explained. "Such an approach could potentially increase social mobility and reduce inequalities in accessing the housing ladder, but would simultaneously increase exposure to housing market downturns for both the government and potential borrowers."
Housebuilders Advocate for Renewed Support
Leading housebuilders continue to champion equity loan schemes, arguing that Britons face a severe first-time buyer affordability crisis. They contend that additional government support would stimulate demand while assisting aspiring homeowners onto the property ladder. The construction industry particularly favors these programs as they directly boost new-build purchases.
Last month, a commission backed by cross-party politicians and prominent housebuilders urged the government to enhance support for first-time homeowners. Their proposals included reviving help-to-buy initiatives alongside a novel plan to forgive graduates' student debt in exchange for equity stakes in their first properties.
Chris Curtis, the Labour MP who chaired the commission, emphasized the need for strategic intervention: "Given the tough economic headwinds, we also need to think seriously about how to better support first-time buyers and manage the demand side more effectively."
Social Mobility Objectives Unmet
The IFS report concludes that the schemes "seem neither to have entrenched inequalities in housing affordability based on parental background nor to have boosted social mobility." This finding presents significant challenges for policymakers considering program revisions, as they must balance industry demands for stimulation against evidence of limited social benefit.
As the government contemplates resurrecting help-to-buy mechanisms, the IFS analysis provides crucial evidence that previous iterations failed to achieve their stated social mobility objectives while disproportionately assisting those already positioned for homeownership.
