The government’s Help to Buy scheme, which offers
government-backed equity loans to house buyers and mortgage guarantees to
banks, will distort the housing market, risk taxpayers’ money with no promise
of a return, and introduce into the UK housing market the same perverse
incentives that led to the US subprime mortgage crisis, argues a new paper by
the Adam Smith Institute. The report,
Burning Down the House, argues that without measures to increase supply by
liberalising planning laws, the Help to Buy scheme will simply drive up house
prices, making housing no more accessible overall. Indeed, users of Help to Buy
benefit at the expense of those who fail to use the subsidy scheme; the policy
is like putting a platform under the buyer while also raising the bottom rung
on the housing ladder. Download a copy
of the report from the Adam Smith website.
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