The scheme, which has run from April 2013 and was extended until March 2020 in the 2014 Budget, will cost the Department for Communities and Local Government £10bn.
The report said Help to Buy poses a ‘medium and long-term risk’, while managing the portfolio of loans will require ‘careful management’.
Margaret Hodge MP, Chair of the Committee of Public Accounts, said: “The government has yet to demonstrate that the Help to Buy scheme provides value for money.
“The Department for Communities and Local Government does not understand the overall impact of its housing strategy and the combined effectiveness of its different initiatives.
“In the case of Help to Buy, it did not carry out any assessment of alternative, potentially more effective options before going ahead with the scheme – a violation of Treasury guidelines.
“This means it has committed to spending up to £10bn on supporting Help to Buy without establishing whether it represents the most effective way of using taxpayers’ money to achieve its objectives.”
Housing minister Kris Hopkins defended the scheme. He said: “The Help to Buy: equity loan scheme is helping build more homes and support the economy - in fact we estimate the wider economic benefits of the scheme could be as much as £1.9bn. So it is offering excellent value for money for taxpayers and to suggest otherwise is simply absurd.
“Since the scheme’s launch, housebuilding is up a third and now at its highest level since 2007.
“Over 27,000 people across the country have used Help to Buy to get on the property ladder with a fraction of the deposit they would normally require, with cities including Leeds, Durham and Manchester seeing some of the biggest numbers of sales.”
Nearly 13,000 homes were purchased through Help to Buy in the first nine months, while 200,000 homes should eventually be built.
The equity loan scheme will not be evaluated until 2015, after which billions of pounds will have already been spent, as Hodge pointed out.
He added: “That evaluation needs to ask three things: whether more people purchased properties than would have done without the scheme; whether builders built more houses than they would have built otherwise; and what effect the Scheme could be having on house prices.
“Any future assessment of the scheme must also assess its impact on different regions.
“The scheme has proved popular in the North and Midlands, and in areas that have already seen regeneration or major housing expansion, such as Milton Keynes.
“So far the scheme had had less traction in London and the South East despite the fact that these are the regions with the greatest need for new housing. Only 6% of equity loans made had been for properties in London at the time of our hearing.”
The report said the Department for Communities and Local Government and the Homes and Communities Agency must set out how they will protect the taxpayer and demonstrate the scheme’s value for money.
They should also maintain downward pressure on the cost of managing the £10bn portfolio, which was described as a ‘heavy administrative burden’.
Hodge said: “Managing such a portfolio is new territory for both the Department and the Homes and Communities Agency, and the ongoing monitoring required will create a heavy administrative burden for both organisations, potentially over decades.
“There are also more immediate risks, particularly the fact that some buyers have accessed the Scheme with deposits of less than 5%, which increases taxpayers’ exposure to risk.
“The Department must be mindful of these risks – and it must demonstrate that the scheme is value for money to the taxpayer.”
