Speculation is growing that the UK government will shortly announce a review of its Help to Buy scheme. This is a policy that, since 2013, has assisted 169,000 Britons in buying their first homes. Help to Buy is very popular with the electorate, many of whom are struggling to access a market where the average house price is more than six times the average salary. However, one is left with the feeling that Oscar Wilde had it right when he sardonically observed that “everything popular is wrong”.  

The Help to Buy scheme simply pours public money - £9 billion of it and counting - into a housing market awash with private capital. In an economy where so much valuable investment fails to attract private capital, it is a vast waste of the state’s resources. It is almost impossible to overstate this point. In a highly productive economy, those deciding where money should be spent – be it in the private or pubic sector - should identify underfunded areas where fresh investment can yield high returns. With the UK housing stock now worth in excess of £7 trillion, it takes quite some myopia to conclude that the stretched public sector balance sheet needs to do more in this area.  

By further inflating prices, Help to Buy also makes the basic problem of affordability even worse. Any reasonable review of the scheme would conclude that it has been like a fire engine attending the scene of a fire and choosing a tank full of kerosene to address the problem. Indeed in the five years since Help to Buy has been available the average UK house price, according to the Nationwide Building Society, has increased by 30%. Wages over the same period are up just 8%. A third of new build purchases are now part-financed by Help to Buy loans.  

The design flaws in the scheme do not mean that attempts to broaden home ownership should also be ditched. Quite the opposite. A dynamic, accessible housing market is essential for labour mobility. Skilled workers without the privileges of state or parental support need to be able to access housing across a variety of tenures, regardless of where their employer is located.  

To achieve broader access to housing the future of Help to Buy must not be considered in isolation. It must be part of a holistic review of how UK property is funded, taxed and, perhaps most importantly, perceived as an asset. It is the perceived use of property as a savings vehicle, and the growth in that perception as interest rates have plummeted, that is the UK housing market’s Achilles heel. It is also a problem that countries like Canada, New Zealand, Sweden and Australia share. It has led shrinking households to hold on to larger homes that they need. This in turn denies capacity to those with growing needs. Help to Buy does nothing to address this key barrier – indeed, it makes things worse.  

The decline in the availability of final salary pension schemes has also pushed a whole generation of savers into concluding that property is a safe, understandable alternative to an often complex private pension. Even though I work in the investment industry, I can appreciate this logic. The details of pension saving often challenges industry professionals, let alone the lay person trying to plan for their retirement.

Recent changes to inheritance tax have, if anything, reinforced the incentive to save through property accumulation. Stamp duty, despite promising recent reforms, still encourages over-occupancy among older families. Replacing stamp duty completely with a capital gains tax, with suitable allowances for repair and upgrades, would begin to discourage the use of property as a savings account. It is a brave government that pares back one of its best-known, and best-loved policies, but Help to Buy was economically illiterate at its birth and will be cited as such at its eventual death. Unchecked, its legacy will be a greater and more protracted downturn when the UK property market eventually falls, hurting the very people Help to Buy was meant to help.

A version of this piece was published in The Times.