The government is to announce a £400m proposal to help "hard-working" tenants save up for a deposit to buy a home. Communities Secretary Eric Pickles tells The Times that the new Rent to Buy scheme aims to give young workers a "springboard" onto the property ladder.
So, how does it work?
Single people earning up to £33,000 or couples earning up to £66,000 will be offered fixed rents at 20 per cent below market rates, allowing them to save for a deposit on their first home. The fixed rent is offered for seven years, with the tenants given first refusal on buying the property. The guaranteed low rents will be available for "hard-working" first-time buyers and will mainly include one or two bed houses or apartments.
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The government is offering £400m in low-cost loans to help housing associations build 10,000 homes between 2015 and 2017. Housing associations will have the opportunity to bid for a share of the funding and set their own eligibility criteria for tenants. They will then have 16 years to pay back the loan, during which rents have to be kept below market rates. Half of the loans will be for London.
Why is the scheme needed?
A recent report from the National Housing Federation found that the average £30,000 deposit required for a house today is almost ten times the deposit required in the early 1980s. The average first-time buyer would take about 22 years to save up that much without financial help, says the Money Charity. Pickles says the new scheme will help "increase the provision of low-cost rented accommodation and provide a spring-board for young people to upgrade to home ownership down the line".
Is it brand new?
Labour announced a similar scheme in 2008 and, according to the HomeOwners Alliance, there is still a scheme in which tenants can rent a newly built property for up to five years while paying a reduced rent. It is sometimes referred to as Rent to Save, Intermediate Rent or Try Before You Buy. However, the HomeOwners Alliance warns that there is "very limited availability" and different housing associations offer different terms and conditions.
Will it address the housing crisis?
The National Housing Federation says it welcomes any measure that can help accelerate the supply of new homes, but it raised concerns that most tenants would still be unlikely to afford to buy after seven years. Labour says the proposal will not be enough to tackle the housing crisis. "With house building under David Cameron at the lowest level of any government in peacetime since the 1920s, yet another piecemeal measure will fail to get Britain building the homes our nation needs," said shadow housing minister Emma Reynolds. However, the government says house building and the number of first-time buyers are now at their highest rate since 2007 and that the Rent to Buy proposal is only the first part of a wider package to address the housing crisis.
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