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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:
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.”
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.
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Only in Ireland would a successful scheme that actually helped 40k people buy a new house be criticised. Even the author is clueless, the money is based on the previous taxes payed by earnings of the applicant. Why shouldn’t the actual taxpayer get a leg up for a change instead of those not willing to work. I wouldn’t have my house without this scheme
@Rebel Misfit: Depends how you define success. Given the lack of supply, is the help to buy scheme really just a help to outbid your neighbour?
@Rebel Misfit: It just helps push prices even higher. It is not a good scheme.
@Tom Donnell: the HTB is nothing to do with supply at the end of the day. It helps tax payers get a new house, simple as!
@John Moore: No it doesn’t, thats a myth. Because only new houses are in the scheme there can’t be bidding wars between buyers as new houses are sold at releases value only. There’s no way the builder can know your in the help to buy until after the bid is accepted.
@John Moore: v
Another day, another uncontrolled FFG dumpster fire.
@Dave c: would still be better than your lot
@pBDSiMMi: How do we know when they never have been in power
@Shaun Gallagher: they have been in power in the north. And look how that turned out.
@pBDSiMMi: so they have to run the country and pick up the mess from your lot
@pBDSiMMi: Perhaps, one is proven (his one) and one is speculative (your one).
@Dave c: uneducated comment
@Gavin Gray: not at all. And the SF/IRA drones can complain and have as many of my comments deleted as they want. That lot have blood on their hands. And can’t govern
@Thomas Ryan:
still better than SF/IRA
@Dave c: lol drones?
Pot and kettle
@Dave c: Wonder why you didn’t mention the DUP..of course by not mentioning them..it suits your narrative. Unfortunately the six counties is governed by the basket case that is Westminster.
Government know exactly what they are doing, a hidden agenda behind all this. Every property is inflated and not worth its value. It’s a sad truth, and the people that really need the scheme would struggle to raise 40 k average needed for a deposit! Remove it and watch sales struggle, boom to bust very quickly!
@Michael Mc Gee: You think that without the help to buy scheme the housing market would collapse? You realise there’s far more people buying houses outside of the scheme than inside it, right?
@Jason Memail: don’t talk sense. That logic does not fit into the SF drone ideology. They want everyone to believe that the country is in the toilet. But us who lived through the 70s and 80s know it was a lot worse then.
@Dave c: yeah you have to work now to have the same standard of living as on the dole then. Ie pay bills and not much else.
About time working people got a hand up.
This money should be taken from the welfare budget if there are people moaning.
Stop free houses for lazy people!
Follow the money and see the grift
If it helps people get past the rent rip off(which it has), then it’s to be welcomed. Pales in to insignificance financially though when compared to the “lets pay off the landlords mortgages’ scheme, otherwise known as HAP.
@Fr. Fintan Stack: easy for you to say living in a home given to you by the vatican.
@jiminybillybob: No. They could never find a suitable parish for me, so didn’t get a home. The closest I got was a spell in St Clabberts (otherwise known as Jurassic Park),
It is inflating the house price and not good for anyone
@Pat Redmond: banks always benefit
The policy of buying up any newly constructed homes for social housing leaves very little left for private buyers.
This scheme entices working people to buy new houses even though all their neighbours could be social tenants.
You’d be mad to buy a new build house funded by a massive mortgage when your neighbours are paying €50 a week.
Yet this scheme incentives that, so the Left should commend it as a way to trick taxpayers and lock young working people into lifelong servitude to primarily fund the Irish State which takes 52% of their income), rather than emigrating and paying their taxes abroad.
The free gaffs for asylum seekers utopia requires PAYE workers to foot the bill, after all.
@C: What a snobbish attitude.
The whole housing crisis is a scam that has been created by this greedy government
@lWOk0fWf:
there are too many people in Ireland
@lWOk0fWf: not enough builders in fact
I live in an estate with 10% social housing. The social houses are easy to spot as there the houses with BMW’s, Mercedes Benz and Audi’s in the driveways. And they’re not old too. One social house has a 231 Audi.
If you means tested HTB, how would you explain that to the folks paying taxes and getting no HTB?
I think we should means test more things like holidays and car purchases. If you’re on social, then the best car you’re allowed to drive is a 15 year old Dacia Duster…..
And the furthest we’ll let you go on holiday is Wexford..!
@Ray Winters: There’s no such thing as a 15 year old Dacia Duster. They didnt exist in 2008
Starting Sep 25th people on the dole will receive an extra €33 per week
They call it the fuel allowance
People who don’t work getting extra money because winter is coming
@Foe Cough: Stop voting for FFG then!
@Foe Cough: And what of it? What sort of miser would begrudge elderly people some heating in the winter? They’re not as mobile and they deserve to stay warm. Mind you, they’re probably less active because they worked hard on construction sites all their lives.
What sort of ridiculous narrative is this ? HTB is a tax back scheme based on tax the applicant has already paid . I know plenty of people on or over the “median” income who could not have bought their houses without getting this tax back .
Building some apartment blocks would help. We need laws to block the NIMBYs
@S K:
NIMBYs aren’t they problem, every country has them.
The problem is the fact that in this country they can hold it up for years.
Houses are not worth what people are paying for them. Simple really.
@Telemachine:
I paid €300k for a house in 2006 that was worth €170k a few years later but I’m still better off that those who didn’t.
Because I have a house.
Hardly a drop in the ocean compared to the tax the government refuses to collect from Irish banks for the next 20 year’s and from offshore vulture funds buying and renting out entire blocks of apartments at extortionate rates in Ireland.
Yet another look over there not over here story.
How about making banks pay there taxes and offshore landlord vulture funds pay there taxes properly and use that money to help fund affordable housing. I know crazy idea right.
When we talk of a waste of taxpayers money this 240m is way down the horrific rankings list by government.
“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.”
It would be appropriate to finish this sentence with something like: “in my opinion” it would add some credibility.
Family owning a house is way better and cheaper for the state long term than a family in social housing. How much it cost to manange social housing? Fix them up, pay salaries of vsrious agencies and all sort of things?
Help to buy is just another wheeze to keep prices high rather than address the real problem of unaffordable prices.
I have to say I admire those who are going in for a self-build. Good for them. I don’t mind at all if some got help to get started. Fair play to them for taking such a project on.
Can’t we just be positive about a scheme that has helped so many young couples including my family and many of their friends in their 30s who would have struggled to buy their first home.The Journal article is very negative and gives a platform to the usual kno kers of everything the government does.I pity them
They are useless
A deposit is only half the battle for a lot of people trying to get a mortgage. You also have to show affordability – that is show that you can afford the mortgage repayments.
With house prices going up and up, self builds are more expensive than buying in many parts of the country and interest rates going through the roof. All effect affordability.
So you can have a deposit but not afford the mortgage. The HTB brings down your mortgage by 30k which really helps this.
There are lots of people out there who would fail affordability without the HTB.
Government policy is not focused on ensuring that all citizens have access to a safe secure place to live, rather, their focus is in ensuring that housing provision remains firmly in the hands of a few to be used to make profit. In another time there would have been a revolution by now. One can’t help but think there is much truth in the old saying that the electorate get exactly what they deserve—and we are sure gutting it in spades..
Would it make sense to expand it to all home types (new build and second hand homes)?
Few new homes in cities available on the open market for less than €400K, and here in Cork City, most new builds are on behalf of the City Council.
Any home that is anyway affordable is a second hand home, so why not give the tax paying buyers their PAYE money from the previous few years back to them?
I know the argument will be that second hand home values could increase, but at least give it a try, no?
I agree it’s worth trying, and certainly would help people. I was wondering what use the scheme is to people who may have split up with their partner or spouse and also need to find a place to live, with room for children to stay overnight.
People used to buy a house pretty much for life, but it’s hardly right to leave one person struggling on their own because they previously bought a family home and are now out of it. Also people whose business failed, lost their first house and are making a fresh start. I’d say they need a hand to start again.
Civil service blind devotion to a concept, no matter how it proves to be faulty.
“Consistency is more important than truth” is the mantra. Woe betide the Civil Servant who forgets that or who wants the truth to emerge.
If they lowered income taxes by removing the scheme I would be all for it. But they won’t. They would spend it on other rubbish, so it better be cash for ftbs.
have your say