Review of Help to Buy will determine future of €600m scheme for first-time buyers

A fundamental Government review that will determine the future of the Help to Buy scheme for first-time buyers ― which has cost almost €600 million to date ― has been completed.

The scheme was originally designed to help new home buyers meet the 10 per cent deposit required by banks to obtain mortgages in the face of increased property prices.

However, evidence suggests as many as a third of those who have availed of the scheme did not need it to meet the deposit requirement and instead used the scheme to create larger deposits.

There were almost 8,000 claims for the scheme last year, up almost 50 per cent on the first year. The overall cost to date for the scheme has been €559 million, which is 43 per cent above cost estimates. The maximum grant available is €30,000 and the average cost per grant has been €24,300.

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The fact that so many of those who avail of the grant had sufficient funds to meet the 10 per cent deposit has raised concerns about “deadweight loss”. That term describes the loss incurred because a grant was given for financial activity that would have taken place in any event, if the grant scheme was not in place.

Minister for Finance Paschal Donohoe has confirmed, in a recent reply to a parliamentary question, that a review of the scheme has been conducted and was due to be submitted to his department by close of business last Friday. He said the review was “fundamental in nature and would help inform decisions for Budget 2023”.

The Minister said it would examine if the scheme, now in its sixth year, was meeting its key policy aims of assisting first-time buyers of new homes to fund their deposit and encouraging the building of additional properties. “The review should explore the cost effectiveness of the scheme to date, including the issue of deadweight. It should also examine the impact of the scheme on house prices since inception.”

The majority (63 per cent) of claims last year were for properties valued above the national average price of €290,000, with 70 per cent of all grants being issued in Dublin and Cork.

The Parliamentary Budget Office report said that evidence provided in a 2017 Indecon report and the 2021 tax strategy report suggested there has been “a very small increase in prices” attributable to the existence of the scheme.