Government pumps £400 million into new Rent to Buy scheme
New scheme offers below-market rents in bid to help tenants save for a deposit.
The Government has announced a £400 million Rent to Buy scheme to get young workers onto the property ladder by offering homes for rent at below market rents.
It's hoped it will give first-time buyers more time to save up for a deposit.
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How it works
Housing associations and social landlords will bid for a share of the £400 million in low-cost loans to build new homes. The Government is aiming for 10,000 homes to be built under the plan between 2015 and 2018.
These will mostly consist of apartments and one- or two-bedroom homes.
The scheme is available to anyone who earns less than £33,000 individually or £66,000 as a couple.
For seven years, rents will be capped at 80% of the local market value. After this period the tenants will have the option to buy the home at market price, move out and buy another property or rent elsewhere, either privately or with the housing association.
Housing associations will have up to 16 years to repay the loan and, until they are repaid, they must be made available with affordable rent.
If the home is sold, they will then have the option to use any returns on their investment to build even more affordable homes or they can rent it out again at an affordable rate for another tenant who needs help to buy.
Half of the loans will be set aside for the scheme in London.
Will it help?
The scheme is part of a £23 billion affordable homes programme for 2015 to 2018 in addition to the likes of Help to Buy and Right to Buy.
Government figures show that the number of houses being built, although still low by historical standards, and the number of first-time buyers are at their highest since 2007,.
At the start of September this year 48,393 homes had been bought through Help to Buy, with 82% of these going to first-time buyers.
However, whether an individual or couple will be able to save for a deposit in the space of seven years using Rent to Buy is open to debate.
The National Housing Federation has found that the average £30,000 deposit required for a house today is almost ten times what it was in the early 1980s.
It now takes an average first-time buyer 22 years to save up for a deposit without any outside help.
Do you think this new scheme will work? Let us know in the comments below.
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