Dáil Éireann Debate, Tuesday - 9 May 2023
55. Deputy Catherine Connolly asked the Minister for Finance further to Parliamentary Question No. 128 of 7 March 2023, his plans for the phasing out of the help-to-buy scheme; and if he will make a statement on the matter. [21523/23]
View answerI am returning to a theme I have raised lots of times on the help-to-buy scheme. What are the Minister's plans for phasing out of that scheme? What further analysis is there on it? I say this having read all of the reviews, analyses and commentaries that clearly identify serious concerns with this scheme. I will come back to this in my two supplementary questions.
The help-to-buy scheme was introduced in 2017 with the purpose of assisting first-time buyers with the deposit required to purchase or self-build a new house or apartment to live in as their home. The Deputy will be aware that the Finance Act 2022 extended the help-to-buy scheme for a further two years to the end of 2024.
To date, the scheme has been a significant support for first-time buyers of new homes. Since its inception and until April 2023, some 38,557 first-time buyers either singly or as part of a couple, have benefited from the scheme.
I note the Deputy has previously raised concerns regarding the potential for the scheme to exacerbate housing prices. As previously stated, policymakers were aware at the time the scheme was being developed that it was not without risk. Likewise, they were aware there was a danger, against a background of constrained supply, that the initiative could serve to increase prices for new homes, thus potentially undermining to some extent the affordability aspiration of the scheme. However, on all occasions when the matter was formally examined to date, concerns in this regard were not borne out by the review data.
Studies carried out by Indecon economic consultants found that the main driver of house prices was the mismatch between supply and demand rather than the existence of the scheme. Similarly, the review by Mazars last year found no definitive evidence that help to buy pushed up the price of new houses. In fact, Mazars found that the prices paid for new homes by people who received the help-to-buy relief were slightly lower than new house prices in the economy in general, which was likely because of the €500,000 price eligibility cap. Last year's review recommended that a more appropriate, non-tax expenditure policy mechanism to address the market failure should be designed to replace help to buy. Having considered the report, in the Finance Bill last year, my predecessor proposed extending help to buy for a further two years in its current form. This approach was in accordance with a recommendation in the report and took account of both the cost of the scheme to date and the need for certainty in the market, while awaiting the increase in new housing supply envisaged by the Government’s Housing for All strategy.
I appreciate the Minister is setting out that more than 38,000 people have benefited from the scheme. My question relates to the analysis that has been done. The Minister is selectively quoting from Mazars and other reports. As he well knows, this scheme was introduced in January 2017, which is more than six years ago. It was estimated that it would cost €40 million annually. It turned out it cost €175 million in 2022 and it looks like it will cost up to €1 billion. Mazars stated: "The scheme is poorly targeted with respect to incomes, location, house prices and other socioeconomic factors ... [and] has socially regressive impacts". It goes on to state the scheme has "deadweight". According to the Parliamentary Budget Office, one third of the recipients did not need the help-to-buy scheme to meet the 10% deposit. The Economic and Social Research Institute, ESRI, has stated that a review of the help-to-buy scheme "suggests that many households with large deposits have received support under the scheme", which is likely to contribute to higher house prices. The Minister stated there is no definitive evidence regarding an increase in house prices, but there are serious concerns regarding this scheme and who it is benefiting.
When we talk about statistics and 38,500 people benefiting from the scheme, I know many of them personally, as I am sure the Deputy does. Without the help-to-buy scheme, the truth is many of those people would not have been able to buy a home. That is the reality. I support the decision made by my predecessor that the extension of the scheme to 2024 provides certainty. We need as much certainty as possible in the housing market, first, for developers so they are aware of what the environment in which they are developing is. We then need to assist with affordability and assist first-time buyers in purchasing a home.
There have been different forms of support down the years to help first-time buyers to purchase a property. This scheme has proven to be effective. I am well aware it has its critics but I will be very clear that the decision made to extend it to the end of 2024 is one I support and stand by. We will honour that. Of course, we always keep taxation matters under review. The future of the scheme beyond 2024 is something I will consider in future budgets.
I bow to the Minister's greater knowledge and wisdom in these matters. I am not even giving my opinion. I am looking at the various reports. The Mazars report states: "The scheme is poorly targeted with respect to incomes, location, house prices ... [and] has regressive impacts. ... the problems that it sought to address remain and the specific market failure at which it was targeted ... [is not likely] to be addressed." On and on we go, whether it is reports from the ESRI, Social Justice Ireland, Mazars, Revenue and whatever other report I have read. The scheme is "regressive", "poorly targeted" and the help is not needed by more than a third of those who have benefited from the scheme.
I am acutely aware of the people who have benefited. I also know that many of them had the deposit, as is borne out by the Parliamentary Budget Office in its overview of the help-to-buy scheme. According to that overview, one third of recipients did not need this help to meet the deposit requirements. It goes on through. Mazars advised that the scheme be scrapped although not now because it is embedded, there is a market expectation and it fits in with the Government's policy of buying up the market at all costs. That is why we cannot scrap the scheme just now.
Our policy is to support homebuyers because we support home ownership. The truth is this is a key affordability intervention. Many people will sleep in homes tonight, in every county throughout the country, who would not have those homes if this scheme did not exist. That is my view and it is why the Government has supported this scheme. The Deputy talked about targeting and the scheme being regressive. She asked about plans for the phasing out of the help-to-buy scheme. I take it she is against the scheme and believes it should be brought to an end.
I am going by what the reports have asked the Government to do, which is to phase it out and scrap it, but not now. That is what I am going by.
I take the Deputy's point that she is drawing that wording from the reports.
It is spelled out clearly.
I take that to be the Deputy's position on it. As Minister, I do not agree with her. The scheme has an important role to play. It is in place until at least 2024. We will keep it under review and will make clear in future budgets what the position is beyond that date.
