London Mayor Boris Johnson, recently outlined a new initiative aimed at helping Londoners get on the housing ladder. The scheme adds to the multitude of affordable housing schemes already available, and aims to provide around 3000 new homes at a cost of £135 million.
The properties would initially be available on subsidised rents, but offered to tenants to purchase with a 5% discount after 6 months.
However, a spokesman for the Department of Communities and Local Government said: "While we welcome any steps to improve housing affordability in the capital, we are disappointed that the mayor has prematurely announced these proposals without first securing the necessary funding approval from government."
The Council of Mortgage Lenders also discussed affordable housing in their recent “News & Views”, which made interesting reading.
The main thrust of the report was that while lenders support the affordable housing initiatives, there are too many schemes, helping too few borrowers, without providing enough security for more lenders to back them.
The Homebuy Direct scheme launched in September 2008 was highlighted as one where the intention was good but the reality may be somewhat different. The scheme was designed partly to help developers deal with a backlog of unsold properties, but with a target of funding only 18,000 purchases a year (2.5% of the CML’s market forecast for 2009), it will have limited impact on the market.
They also reported that lenders preferred shared equity schemes, as the equity loan helps protect both borrower and lender from negative equity. The alternative of a shared ownership scheme is less attractive to the lender as it is more complex, and there is no clear process for dealing with a borrower who is unable to keep up his repayments, so bringing more uncertainty to both borrower and lender.