The government decided to ignore expert advice on Help to Buy (HTB), fearing changes would be too politically damaging.
Despite expert advice to remove “deadweight” recipients from the program to make it more targeted because it would not offer good value for money, it was extended to the end of 2024 with no changes.
A government-commissioned report recommended that home-builds should no longer be eligible and that mortgage loan-to-value ratios should increase from 70 percent to 80 percent from the end of this year.
While the Mazars report said HTB should be scrapped, it said now is not the time and it should be extended. However, experts warned that two changes are needed as “deadweight” is a “big problem” and “efforts should be made to better target HTB during the two-year transition period”.
Deadweight effects would be reduced by removing the eligibility for self-builds and adjusting the loan-to-value ratio.
“Together, these revisions will help reduce deadweight levels,” the report said.
These recommendations were ignored by ministers, who approved the extension of the program in its current form for a further two years.
A government source said it would be politically too damaging to remove self-built houses from the eligibility criteria as it could be seen as having a bad impact on rural areas.
The Mazars report states that alongside the decision to replace HTB, an extension of the program should be announced. Under the program, first-time buyers can claim up to €30,000 towards the purchase of a house or apartment.
It was first launched in 2016 and at the end of last year the total cost of 30,963 approved applications was €559.7 million.
“The program is poorly targeted in terms of income, location, house prices and other socioeconomic factors,” the report said.
“As a result, it has social downside effects, there’s significant deadweight on spending, and it’s poorly aligned with spatial policies.”
An effective HTB proposal should include a “deterrent factor” for buyers who do not need the system.
The Mazars report also said the Treasury Department should not be responsible for overseeing a system that helps first-time buyers collect their deposits.
The devastating results raise questions about the future of the program, which has cost 43 percent more than originally estimated.
Research by Oireachtas previously found that a third of recipients didn’t even need it to make their deposit, instead “fueling housing inflation”.
The Mazars report states that there is no evidence that house prices have increased. However, it said it had helped people who were doing well.
“Almost half of the funds spent are deadweight, meaning they don’t help achieve any of the program’s objectives.”
Of the recipients who built their own homes and received HTB, 75 percent did not need them.
https://www.independent.ie/news/government-ignored-advice-on-help-to-buy-scheme-to-avoid-political-fallout-42025211.html The government ignored advice on the “Help to Buy” program to avoid political repercussions