Leading economic think tank The Adam Smith Institute has warned that Help to Buy will not end the housing crisis.
The institute believes that the government’s plans to increase liquidity in the housing market will do little to solve the UK’s long-run housing supply shortage — and actually lead high housing prices.
They believe that the schemes will simply “raise the height of all the rungs of the housing ladder by boosting house prices”.
Essentially the schemes assist buyers by subsidising additional borrowing meaning that they raise affordability only for members of the scheme whilst reducing it for everyone else.
As well as pointing to many other possible economic effects of the schemes the institute has made a number of recommendations as to how to encourage house building.
These include liberalisation of planning laws and the abolition of mandatory affordable housing in new developments.
They believe that only reforms that allow increases to the supply of British housing will truly solve the affordability problem and therefore solve the housing crisis, with the added benefit that supply-side reform will be entirely revenue-neutral from the perspective of the public purse.
