Low cost rental property programme launched in the UK
A new pioneering £400 million programme has been launched in the UK to boost the building of new affordable rental property available at below market rates.
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 and now the government wants to do the same for the rental market.
Communities Secretary Eric Pickles said that the new Rent to Buy provides more flexibility for people who want rental property 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 from 2015 to 2018.
They will mainly consist of one and two bedroom apartments. Landlords must make the homes available for rent at below market rates for a minimum of seven years. Pickles said that 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 or 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 providing low deposit mortgages and Right to Buy which provides home ownership for council tenants.
Pickles pointed out that these schemes are being arranged now, so construction works starts from 2015. ‘This government is standing by people who work hard and do the right thing, and helping them move on and up in life,’ he said.
‘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,’ he added.
Under the deal 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 Mayor of London, Boris Johnson, believes it will help people in London where both buying and renting a property is much higher than in the rest of the UK.
‘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,’ said Johnson.
‘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,’ he added.