Government announces new Rent to Buy scheme

The latest government initiative to boost house building and buying takes a longer-term approach than the existing schemes.

Rent to Buy provides cheap funding to housing associations and the like, to enable them to build new homes on the condition that they are rented at less than market rates for 7 years, at which point the tenants have the option to buy, or move on.

The plan is that charging a discounted rent will enable the tenants to build up a deposit, and thus buy a few years later.

Hence it’s more of a long-term plan to homeownership - as indeed is the building scheme itself, which will fund up to 10,000 new builds from 2015 to 2018. So the later participants will be looking at owning their home a little over a decade from now.

With the shortfall in house building generally said to be in the order of hundreds of thousands per year, 10,000 homes over 3 years clearly isn’t going to make a huge difference to housing supply by itself, and arguably may not do all that much for ownership either if prices keep heading the way they are.

But the concept of Rent to Buy is an intriguing one.

In a way it seeks to condense the previous iteration (post-war social housing build through to ownership under Margaret Thatcher’s right to buy) into years rather than decades. And rather than offering a discount on the price, the state is effectively subsidising the deposit.

In that sense the main weakness of this scheme could simply be its limited scale: the historic massive programme that built low-cost social housing to convert (over time) into private ownership is arguably the process that’s finally unwound, and could do with restarting again.

 

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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