A £400 million Rent to Buy plan is set to become the newest addition to the government’s efforts to stimulate the housing market, giving young people the chance to rent properties at a 20% discount for up to seven years while they save up for a deposit.
The scheme has been put together by Eric Pickles, Communities Secretary and will see the building of 10,000 new dwellings for renting, with a budget of £400 million which is to be bid for by different housing associations.
The numbers were immediately criticised by people who say that 10,000 new rentable properties isn’t even going to scratch the surface of the deficit of homes that first time buyers and renters are clamouring for.
The scheme has been made to be available to people on salaries of less than £33,000 (or up to £66,000 in the case of couples), and is most commonly thought to be available on one and two bedroom apartments or flats.
The scheme involves housing associations bidding for a share of the budget in a loan form, which will be given cheaply. They then use this money to build the homes, flats, or apartments, with the proviso that they rent these properties to people cheaply, capped at 80% of the market value.
This is to enable people to save up for a deposit to move on in the property world and purchase their own home after seven years.
The housing associations will only be able to charge full price when they have paid off the cheap loan from the government.
It is reported that around half of the budget is to be made available for the areas in and around London, while the other half is spread around the country.
Whether this scheme will have the desired effect and help stimulate the market is yet to be seen, although with a seven year cheap rent period, it will be a long time until any benefits, other than 10,000 people getting cheap rent, are seen. But as with the Help to Buy scheme, there could be a plethora of hidden, negative impacts and controversies that haven’t been foreseen.