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Fewer first-time buyers will be able to use ‘Help to Buy’ under new Government plans

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Housing Minister Darragh O'Brien. Photo: Niall Carson.

Housing Minister Darragh O'Brien. Photo: Niall Carson.

Housing Minister Darragh O'Brien. Photo: Niall Carson.

Fewer first-time buyers will have access to the controversial €560m Help to Buy scheme under plans to narrow the criteria for those eligible.

It comes as the Government is considering whether to extend the scheme at all beyond its current sunset date of December 31, 2022.

The “poorly targeted” scheme was recently blamed for pushing up house prices and the Government is considering extending it for another year under Budget 2023 negotiations.

It is understood Housing Minister Darragh O’Brien is keen to see the scheme extended but with changes, if needed, to be put in place following an independent review.

Fine Gael ministers are also eager to keep the scheme, with Tánaiste Leo Varadkar recently signalling his support.

A review into the scheme was contracted out to Mazars and is currently on Finance Minister Paschal Donohoe’s desk.

Senior government sources said previous reviews of Help to Buy, which was first introduced in 2016, showed its main issue is that it is not targeted.

Officials are examining whether the scheme could be more targeted if it is to be extended. Damning research from the Oireachtas Parliamentary Budget Office found it has cost the taxpayer 43pc more than originally envisaged.

The scheme was designed to help buyers with a deposit for their first homes. However, 63pc of claims last year were used to buy houses above the average price and a third of recipients used it to buy more expensive houses.

The Oireachtas research said there was a “very small increase in prices attributable to the introduction of the Help to Buy incentive” due to evidence in a 2017 Indecon report and last year’s 2021 Tax Strategy report.

The report said the scheme is “poorly targeted” towards helping first-time buyers make up their deposit, as the vast majority of them already have a deposit and instead use the support to buy a more expensive house.

“Increasing purchasing power for households, while housing supply is constrained, will very likely lead to higher house prices,” it said.

The Indo Daily: Have we hit peak house prices – Is now the right time to buy?

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The scheme championed by the Government found that a third of recipients didn’t even need it to make up their deposit and instead, it “fuelled property inflation”.

Opposition politicians have often criticised the initiative, with Sinn Féin’s alternative budget last year proposing to scrap Help to Buy.

The scheme helps first-time buyers purchase a newly built house or apartments, as well as once-off self-build homes, up to the cost of €500,000.

It gives a refund of the income tax and Deposit Interest Retention Tax (DIRT) paid by buyers over the previous four years.

It was first introduced in 2016 and by the end of last year, the total cost of 30,963 approved claims was €559.7m.

The scheme also aims to encourage the building of homes.

The Mazars review examined whether or not the scheme succeeded in the building of new properties, its cost effectiveness and its impact on house prices and if it is still necessary.

"It has been extended in previous Budgets and is due to expire on December 31, 2022. The future of the Help to Buy scheme beyond its current sunset date of December 31, 2022, is a matter that will fall to be considered by Government in light of the findings of the above review and in the context of the Budget 2023 process,” Mr Donohoe said in response to a parliamentary question.


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