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Help to Buy isn't just one scheme - it's two very different things

By Mark Wallace
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Growth ConHomeThe Treasury's Help To Buy scheme, which will guarantee billions of pounds worth of mortgages, has raised many concerns. Howard Flight, Graeme Leach and Allister Heath are just three of the well-respected economists and market-watchers who fear the policy will inflate a housing bubble.

Their concern is justified - the scheme effectively commits taxpayers' money to underpinning investments of up to £600,000, fuelling demand without necessarily having any impact on supply. First time buyers and existing homeowners will be eligible, and there is no requirement for the houses involved to be now, so there's no guaranteed focus on the construction sector.

All of which must be a bit irritating for Eric Pickles. For, while "Help To Buy" is generally viewed as one monolithic scheme, it is actually two distinct streams of money, with different conditions attached and very different impacts on the property market. 

The Treasury's programme, which I have just described, is "Help To Buy: Mortgage Guarantee" - and it does not come into force until January 2014.

The Help To Buy which is currently underway, and has been running since April, is not the Chancellor's at all - it is the "Help To Buy: Equity Loan" scheme, which belongs not to the Treasury but to DCLG. Confusing, isn't it?

Any deployment of taxpayers' money into the housing sector, particularly so soon after a crash driven by too many people buying homes they could not afford, is enough to make good conservatives nervous. But Pickles' Equity Loan scheme does have some worthwhile differences which make it, at the least, better targeted than the Treasury's approach.

The Equity Loan programme only applies to new build properties (this is why it belongs to DCLG, who have responsibility for Housing). To qualify for its heavily discounted loans as a supplement to your mortgage, you must be buying a house direct from the construction sector. In short, it is aimed specifically at increasing supply, not just stuffing more demand into a fixed market.

In that context, it is particularly interesting to read the DCLG press release giving a progress report today. Pickles tells us that 10,000 people have made reservations for new houses under the scheme in its first four months - a significant increase in the number of properties being built, given the collapse in construction during the recession.

But that isn't all he tells us. The release has grown from a Help to Buy update into a general report on his department's progress on housing - 319,000 new houses since the election, 150,000 of them affordable homes, with repossession and mortgage application rates returning to their pre-crash levels.

It isn't just a convenient hook on which to hang some statistical boasts. By nestling his Help to Buy statistics in with a basketful of numbers which prove more houses are being built, the Chum-in-Chief is communicating that he is well aware of the bubble fears which Help To Buy inspires. He intends to allay them with the other levers available to him - not least through planning reforms. 

Whether it works, or whether come January the Treasury's boost to the demand-side will knock everything dangerously out of kilter, remains to be seen.


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