Help to Buy worked. But can you build yesterday’s houses in today’s market?

There is a temptation to look at the new Your First Home scheme and expect the results of the old Help to Buy scheme.  But the housing market into which Your First Home is being introduced is very different.

A developer may have planning permission, a willing buyer and government support for that buyer, and still decide it cannot build. If the value of the completed development cannot produce a land value that meets the landowner’s minimum expectation, enables the scheme to be delivered and provides an appropriate return for the developer’s capital and risk, the site does not become viable simply because more buyers have access to a 2.5% deposit.

That is the part of the Help to Buy debate that is largely missing. Demand support can help a viable development. It cannot turn an unviable development into a viable one.

This is not an argument against the new scheme. Far from it. If it helps a buyer who can afford a home but cannot overcome the deposit hurdle, it is doing something valuable. Where a development is viable but sales demand is the constraint, additional buyers could provide exactly the confidence needed to move forward.

But that is a very different proposition from solving the current housing supply problem.

The original Help to Buy was introduced into a housing market that had been badly damaged by the financial crisis. Buyers were cautious, mortgage lending was constrained and housebuilders lacked confidence in demand. Help to Buy helped change that.

The Government’s recent evaluation found that the scheme helped increase home ownership and estimated that around 15% of new-build homes delivered between 2013 and 2023 were attributable to it. Crucially, the research found that the early scheme increased confidence among buyers and developers, helping the housebuilding market recover.Help to Buy was therefore not simply a way of making homes easier to buy. It gave people the confidence and ability to transact. Developers saw those sales, gained confidence in future demand and increased output.

Today’s market presents a different challenge. Buyers face higher mortgage costs, stamp duty land tax and a greater cost-of-living burden, which may constrain demand. But on the supply side, the problem may be even more fundamental: there are consented schemes where the developer could, in theory, build tomorrow, but the development appraisal simply no longer works.

A planning permission does not guarantee a viable development. Many schemes were conceived, appraised and promoted when interest rates, construction costs, sales values, taxes, levies and land prices were very different. Since then, finance and construction costs have risen, regulation has become more demanding and the costs of delivering infrastructure and planning obligations have increased.

That distinction matters particularly on large consented schemes. A developer may need to commit millions to roads, drainage, utilities, schools, parks and other infrastructure before later phases can be delivered. Those costs have to be supported by the economics of the development as a whole.

If the appraisal does not stack up, government-backed demand at the sales end of the equation does not necessarily unlock the scheme.

The Government’s own evaluation recognises this distinction. It found that Help to Buy had a much stronger effect in its early years and that its impact on supply diminished as the market recovered. It also warns that a future scheme should not be expected to produce the same results in a different economic environment.

Housing policy can only work when it addresses the constraint that is actually stopping people from buying and developers from building. That should be the starting point for judging Your First Home. If the problem is a lack of buyers, it may help. If the problem is a lack of viable development, it cannot.

If we confuse the two, we risk expecting a demand-side policy to deliver a supply-side result that the underlying economics cannot support.

Help to Buy was a policy for its time. Your First Home may prove useful in this one. But it should be judged against the problem the market faces today, not the one Help to Buy was designed to solve.