As part of yesterday’s Budget, the Chancellor revealed £3.5 billion of funding to help homebuyers secure affordable mortgages and new measures that will enable more social tenants to purchase their home through Right to Buy.
The Chancellor also pledged over £1 billion of extra funding to build thousands of new homes for affordable and private rent.
Welcoming the Budget, Communities Secretary Eric Pickles said: “The multi-billion pound package for housing recognises its vital importance to the economy. But this support is not just an economic calculation – it’s about values.
“These measures mean whoever you are – whether a prospective first time buyer, an existing homeowner or a social tenant – if you work hard and want to take responsibility for your future, we will support your aspiration to move up the property ladder.
“At the same time our funding for thousands of new affordable and private rented homes will get spades in the ground, workers on site, and deliver a vital boost to the British economy.”
Housing Minister Mark Prisk said: “The Budget places housing front and centre in the Government’s plans for economic growth, with measures aimed at getting Britain building, helping aspiring homeowners, and supporting our growing market for privately rented homes.
“The clear message from the multi-billion pound package of measures is clear: that wherever you are in the housing market, whether renting council housing or privately, whether a first-time buyer or looking to move up the property ladder, there is help available for you.”
At the heart of the package is the new £3.5 billion Help to Buy: Equity Loan scheme, which by 2016 will help up to 74,000 homebuyers take their next step on the housing ladder with just a 5% deposit.
It will expand and replace the highly successful FirstBuy model, which is currently aimed at first time buyers purchasing new build properties.
Under the new scheme existing homeowners will also be eligible to receive a 20% equity loan that will help them buy a new build property, with prospective buyers receiving support to purchase properties from a participating housebuilder with a value of up to a £600,000.
By extending support to existing homeowners, the scheme will remove a bottleneck in the market where people want to move, but may be struggling to raise a large enough deposit to purchase their next property.
At the same time a separate option, called Help to Buy: Mortgage Guarantee, will enable lenders to use Government-backed guarantees to offer £130 billion worth of mortgages with smaller deposits, as little as 5%, on new and existing properties.
Where properties are bought under this option, the Government will provide security for the loan, so if the house is then sold for less than the outstanding mortgage total the lender will be able to recover its loss.
Help to Buy will build on the popularity and success of the FirstBuy and NewBuy schemes, which housebuilders have praised for driving sales and boosting the supply of new homes.
Aspiring homeowners have already been voting with their feet: by September 2012 nearly 11,000 reservations and 7,000 sales had been completed through FirstBuy, and the latest figures show 3,700 reservations have been made through NewBuy, the successful industry-led scheme that will continue to work alongside Help to Buy.
Right to Buy
Ministers are determined to ensure that aspiring social tenants also have the opportunity to purchase their home through Right to Buy, and will take further steps to remove barriers so that more tenants can get a foothold on the property ladder.
After years of restricted discounts and dwindling sales, the Government reinvigorated the Right to Buy last April, by radically increasing the potential discounts to £75,000 – almost quadruple the previous discount in some areas.
The Government intends to further boost the scheme by:
- raising the discount cap to £100,000 in London, from Monday 25 March, to recognise higher prices;
- lowering the eligibility criteria, so that tenants can apply to buy their homes after 3 instead of 5 years; and
- looking at ways to simplify the application process for tenants.
Since the higher discounts were introduced in April, 3,500 council-owned properties have been sold to tenants – a third more than in the whole of the previous year, and the highest number of sales since 2007.
The new measures will build on the surge in the numbers of homeowners taking up the Right to Buy, and open the door to home ownership for thousands more social tenants.
Private rented homes
Efforts to help homebuyers will be matched by extra funding to build thousands of new homes for private rent, increasing choice across the housing market.
Funding for the Government’s flagship Build to Rent Fund will be dramatically increased to £1 billion to support the construction of new homes specifically for private rent.
Build to Rent provides recoverable finance that supports the delivery of private rented homes until they are built, let out and managed. This funding model gives housebuilders – more traditionally used to building homes for sale – the confidence to branch out into building homes for private rent, and provides the platform for large-scale institutional investment in this sector.
Since the launch of the fund in December 2012, the £200 million scheme has been heavily oversubscribed, demonstrating the huge untapped potential of investment in the private rented sector. The extra funding will help meet this surge of interest and deliver thousands of extra homes.
Ministers will also double funding for the Affordable Homes Guarantees Programme to £450 million. Up to 30,000 affordable homes will now be delivered through the expanded programme, with all new homes started on site by the end of March 2015.
Private registered providers in England will be able to bid for a share of the larger funding pot using guidance published last month. The extra funding will complement the Affordable Homes Programme, which is set to deliver 170,000 new homes by 2015 – with almost 63,000 of these already completed.
Ministers revealed that a social rent policy for the next ten years will be announced in the Spending Review this June, which will give certainty to the affordable housing sector until 2025.
They also confirmed that social landlords will be able to charge high-income tenants – those earning above £60,000 – a fair level of rent for the privilege of living in taxpayer-subsidised housing.
The move could see tens of thousands of high-earning social tenants paying market rents to continue living in their social homes, and the additional income generated could then be used by landlords to increase spending on affordable housing.
Ministers believe the changes are necessary to address the problem of precious social housing resources being occupied by tenants who could comfortably afford to live elsewhere.
Making better use of existing buildings
The Budget also included planning proposals to secure the long-term future of high streets, by making better use of empty buildings and bringing people back to live in town centres, increasing footfall and supporting shops.
Other measures will enable rural communities to grow by ensuring better use is made of their existing buildings. By reducing planning burdens, redundant and empty barns and other farm buildings that are no longer viable for other farming or commercial uses could be converted to homes. This will help increase rural housing for local people and promote regeneration of redundant and empty buildings.