A New ‘Rent to Buy’ scheme to help young people save and move up housing ladder has been announced.
Communities Secretary Eric Pickles launched a new £400 million programme Friday (26 September 2014) to boost building of new rental homes that will also help hard-working people later upgrade into home ownership.
Current schemes like Help to Buy have boosted house building and allowed 53,000 households buy a home with a fraction of the deposit they would normally require.
Today’s new Rent to Buy scheme goes further by providing more flexibility for people who want to rent affordably now, save for a deposit, and then either buy the new home (or a different home) later.
Under the scheme, housing associations and other providers can bid for a share of £400 million in low-cost loans to build up to 10,000 new homes across the country to be built from 2015 to 2018 – they will mainly consist of 1 and 2 bedroom apartments.
Landlords must then make the homes available for rent at below-market rates for a minimum of 7 years.
This fixed period will give tenants the opportunity to save up for a deposit and get ready to buy their own home.
At the end of the period, the tenant will have first refusal to buy the property – alternatively they may choose to move out and buy a different property, or rent another property either privately or with the housing association.
If the home is sold, the housing association will then have the option to use any returns on their investment to build even more affordable homes in the area. Alternatively, they will still have a home, which they can look to rent at an affordable rate to another tenant who needs help to buy.
This programme is part of a broader £23 billion affordable homes programme for 2015 to 2018, as well as other schemes like Help to Buy (low deposit mortgages) and Right to Buy (home ownership for council tenants). These schemes are being arranged now, so construction works starts from 2015.
Communities Secretary Eric Pickles said:
“This government is standing by people who work hard and do the right thing, and helping them move on and up in life.
“Both house building and the number of first time buyers are now at their highest rate since 2007. But there is more to do. As part of our wider housing programme, this new scheme will help increase the provision of low-cost rented accommodation and provide a springboard for young people to upgrade to home ownership down the line.”
The Mayor of London, Boris Johnson, said:
“Through this pioneering scheme I’m challenging the capital’s developers to get building, and deliver the homes Londoners need, as fast as humanly possible. Loans are available to significantly accelerate the pace of development, especially on bigger schemes, and unlock additional supply.
“Through this exciting new fund we hope to provide thousands of brand new homes many years sooner than would otherwise be possible, and make them available to rent at below market rates for hardworking Londoners.”
Housing associations will have up to 16 years to pay back the low-cost loans. Until the loans are repaid, the homes must be made available for affordable rent. Only once the loans are paid can the housing association sell or rent it out at a market rate.
Of the £400 million of government loan funding for this scheme, half of this will be available in London. London-based housing associations will bid for the funding through the Greater London Authority.
The programme is part of the government’s broader £23 billion affordable housing programme for 2015 to 2018.