TRYING TO MAKE SENSE OF THE CRAZY WORLD IN WHICH WE FIND OURSELVES, THIS IS A BLOG ABOUT HOW WE CAN DISRUPT OUR PUBLIC INSTITUTIONS INTO BETTER-SERVING THE PEOPLE OF IRELAND.

Help-to-buy: As daft as it ever was

We're approaching the one year anniversary of the "Help to Buy" (HTB) scheme, one can't help but marvel at the complete lunacy of the scheme. It is a well-intentioned but economically dubious scheme whereby first time property owners can avail of free cash to assist in the purchase price of a new home.

We had similar assistance for first-time buyers in the form of Stamp Duty exemption (reformed in Budget 2015 and no longer with us) and mortgage interest relief (disappears 31st December 2017) for first-time buyers. But whereas these two schemes reduce tax take (by simply not taking it in the first place, and by refunding it in the second), HTB is a flat-out payment from the government coffers to anybody who is buying a home for the first time.

As somebody who availed of first-time buyers schemes, I'm not saying they're without merit or value. I do start to have a problem when we're actively taking money that has been collected from the broad public and giving it as cash to fuel increases in property prices.

Best as I can tell, that's what has gone on here...though it is masked in with general improvement in a market that was ravaged by the recession.

If we really wanted to help first time buyers with general taxation funds, we'd do something to increase the supply of housing. Basic economics such as you'd have learned in secondary school will tell you that prices will fall as supply increases.  

We can do that by encouraging more homes to be built, and we can do that by encouraging more second-hand homes to go onto the market.  Both of these approaches are not without their challenges, but we've screwed around with the demand side whilst utterly neglecting the supply side.

How does that make sense?

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