Mixed reception for Rent To Buy initiative
There’s been a mixed reception for the government’s Rent To Buy scheme, launched by Communities Secretary Eric Pickles on the eve of the Conservative party conference.
Under the scheme, housing associations and other social housing providers can bid for a share of £400m in low-cost loans to build up to 10,000 new homes across the country. These must be constructed between 2015 to 2018 and will mostly consist of one and two bedroom apartments.
The landlords must then make the homes available for rent at below-market rates- typically capped at 80 per cent of market value – for a minimum of seven years, giving tenants the opportunity to save up for a deposit and get ready to buy their own home if they wish.
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 Rent To Buy home is sold, the housing association will then have the option to use any returns on their investment to build further affordable homes in the area. Or if they do not sell it, they will still have the property to rent at an affordable rate to another tenant who needs assistance in buying
Pickles is predictably bullish about the scheme. “This scheme will help increase the provision of low-cost rented accommodation and provide a springboard for young people to upgrade to home ownership” he claims.
Others are less keen. Matt Hutchinson, director of SpareRoom.co.uk, criticised the scheme because “even 10,000 homes won’t scratch the surface of a chronic supply problem that is severely impacting renters.”
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 let their properties constructed under the scheme at a market rate.
Of the £400 million of government loan funding for this scheme, half of this will be available in London.
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