Secretary of State for the Department for Communities and Local Government, The Rt Hon Eric Pickles MP, has unveiled a “Rent to Buy” scheme of loans totalling £400m to assist housing associations and developers in building 10,000 homes.
The new “Rent to Buy” scheme goes further than the Help to Buy Scheme 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.
The properties would be subject to a rental cap at 80% of market value for seven years, after which occupants will then have the opportunity to buy.
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 between 2015 and 2018 – mainly consisting 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. If not, they will still have a home, which they can look to rent at an affordable rate to another tenant who needs help to buy.
The loan pot will be split 50:50 between London and the rest of England.
London Mayor Boris Johnson will administer the capital’s £200m allocation of the fund, where it will be known as the London Housing Bank.
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.”
LCB / SJ 02.10.14