DISCIPLES OF ANY religion would struggle to compete with the show of faith that graced the Dáil earlier this summer. 

Despite overwhelming evidence of serious issues with the government’s Help to Buy (HTB) scheme, Finance Minister Michael McGrath could not be swayed.

Independent TD Catherine Connolly raised concerns about reports which found that, every year, potentially tens of millions in taxpayer funding is being wasted due to HTB’s problems.

There were two key points:

• The scheme is poorly targeted at people who really need it – many already have a deposit. Just 19% of households getting HTB earn less than the median income.
• Budgeting for the scheme is consistently wrong – normally about 30% more is spent every year on HTB than expected (€190m spent in 2021 vs €143m forecast)

But while neither of those points can really be contested, McGrath had an untouchable trump card.

“Since its inception until April 2023, some 38,557 first-time buyers either singly or as part of a couple, have benefited from the scheme,” he said.

“Without HTB, many of those people would not have been able to buy a home. That is the reality.”

When further pushed, McGrath reverted to the same point.

“Many people will sleep in homes tonight who would not have those homes if this scheme did not exist,” he said.

“That is my view and it is why the government has supported this scheme.”

Minister for Housing Darragh O'Brien Sam Boal / RollingNews.ie Sam Boal / RollingNews.ie / RollingNews.ie

The minister’s blind faith in HTB would be admirable if his argument wasn’t so flawed.

First, a brief rundown for those unfamiliar. Help to Buy is an incentive for first-time property purchasers, who can claim a tax rebate of up to €30,000.

Crucially, HTB only applies to new properties. The logic of creating the scheme was twofold. One, it would help stimulate new house building in the wake of the financial crisis.

Two, it would help prospective house buyers overcome the hurdle of needing a large deposit to buy a property.

But there’s a big problem here.

Review after review has found that many of the people using HTB don’t actually need help pulling a deposit together.

Organisations which have found this include the ESRI (Economic and Social Research Institute); consultancy firm Indecon (commissioned by Department of Finance); the Oireachtas Parliamentary Budget Office (in two reviews – one in 2019, one in 2022); and consultancy firm Mazars (commissioned by Department of Finance). 

This cohort of people is normally referred to as a ‘deadweight loss’, as they likely would have bought homes anyway, even without HTB.

But every scheme will have its issues. And if 5 or 10% of funds aren’t being perfectly directed, what of it?

The issue is it’s not 5 or 10%. At least a third, and possibly as many as half, of HTB users fall into this ‘deadweight loss’ category.

The scale of the problem 

As of the end of 2021, the state had spent €560m on HTB. Some €175m was forecast for HTB in 2022, although the actual spend will almost certainly be closer to €200m.

It’s a major leap from 2017, when it was forecast it would cost €50m for the first year HTB was in operation.

Even going for the 2022 forecast would bring the total spend to €735m by the end of last year.

With at least a third of this going to people who don’t need it, this means at least €242m of the money spent on HTB so far falls into this ‘deadweight loss’ category.

This amount could be as high as €360m if you go with figures from the Mazars report.

And with the HTB budget going one way – up, fast -, this means potentially €60m – €80m in taxpayers’ money, every year, will fall into the ‘deadweight’ HTB category.

The minister’s argument is essentially that, because lots of house buyers have used and benefited from HTB, the scheme is worth it.

But if state officials dreamt up a policy of going to random rental viewings and handing out €30,000 in wads of cash to tens of thousands of lucky prospective tenants, it would probably help many of them buy a home as well.

It just clearly wouldn’t be the best way of doing it.

The question shouldn’t be – ‘Has this helped some people buy a home?’.

The question should be – ‘Is this the most effective way to help as many people as possible buy a home?’.

How to change it 

The minister knows this is the heart of the point Connolly was making. Conjuring up cosy images of contented home owners dreaming peacefully in their part-HTB funded properties was an emotional way to deflect from this.

So why is the government ploughing on with HTB, despite all the problems identified?

Housing experts such as Technological University Dublin lecturer Lorcan Sirr have said it gives ministers numbers to point to.

Concrete evidence that, at a time when housing costs are crippling for many, some people are being helped by the government.

It’s also much easier for voters to see a direct link of the benefit between themselves and HTB.

An extra €30,000 in buying power is much more tangible to individuals than reading about another large amount of state money going into social housing, even if the latter would be more effective over the long term.

There are other problems with HTB. The other main one being that it is essentially impossible to measure how much it has helped to stimulate new house building, a key reason for its introduction.

But the facts around this are fuzzier than with the ‘deadweight’ spending issue, where there is clear evidence which has been verified again and again.

HTB is set to run to the end of 2024. While its future after that has not yet been decided, Housing Minister Darragh O’Brien has said he would like to see it extended for a further two years.

If this is the case, it seems a no-brainer that the criteria should be updated.

Changes should include the removal of self-build properties. Incredibly, Mazars found three-quarters of self-builds using HTB fall into this ‘deadweight’ spend category.

Self-builds make up a quarter of HTB claims, meaning €50m will likely be allocated in 2022.

Based on Mazars’ figures, this would mean almost €40m would go straight in the ‘deadweight’ category.

This figure will almost certainly be bigger again in 2023 if nothing is done.

The minimum mortgage loan to value could also be increased – ie, people qualifying for HTB would not be able to use big deposits.

Again, Mazars’ said this could help reduce some of that ‘deadweight’ spending.

The firm said the scheme should be continued for two more years to avoid market instability.

However, it also said the government should clearly signal it will scrap HTB altogether at the end of this two year extension, as the scheme has so many issues.

But despite all of this, despite all problems which have been pointed out multiple times, all signs point towards the government extending HTB and leaving it unchanged.

The faith is strong – people are getting houses. The point is inarguable.

Proper spending of taxpayers’ money is an afterthought. And while this remains the case, the government will continue to funnel tens of millions a year into the pockets of those who likely don’t need it.