Towards the end of September, Communities Secretary Eric Pickles, announced the government's new ‘Rent to Buy’ scheme. This is seen as a concerted effort by the government to give young people a helping hand up the housing ladder, by initially renting homes and then being able to save up funds to purchase the properties at a later date.

Pickles unveiled the £400 million scheme to help increase numbers of new rental homes and to give employed people a chance to one day get onto home ownership.

The Help to Buy Scheme, has accounted for large numbers of new homes to be built and 53,000 households have been able to buy their own homes, with the new low deposit scheme.

The new Rent to Buy scheme hopes to provide the means and flexibility to workers to be given access to homes that can be rented affordably, thereby giving them the option to save up a deposit and buy their accommodation or choose an alternative.

Housing associations and other providers will be invited to bid for funds from the £400 million pot. The loans will be low cost and should hopefully encourage 10,000 new homes build across the country. The apartments, which will mostly be one or two bed roomed homes and are envisaged to be built from 2015 to 2018.

The caveat for landlords is that they must make the homes affordable for renters and should be below market rent for at least 7 years. The theory is that this timescale should give tenants the chance to save up deposits to eventually purchase the properties.

When the seven year period concludes, tenants will be given first refusal to purchase the home, if they decide not to then they are given further options.

They may wish to move from the property and buy a different home, or rent another property with the housing association or privately rent a different residence.

This scheme  is just one part of the £23 billion affordable homes programme for 2015 to 2018, and works in hand with the other schemes such as Help to Buy (low deposit mortgages) and Right to Buy (home ownership for council tenants).

 

Communities Secretary Eric Pickles said: “This government is standing by people who work hard and do the right thing, and helping them move on and up in life.

“Both house building and the number of first time buyers are now at their highest rate since 2007. But there is more to do. As part of our wider housing programme, this new scheme will help increase the provision of low-cost rented accommodation and provide a springboard for young people to upgrade to home ownership down the line.”

Half of the £400 million will be made available for London Housing associations which will have to submit bids to the Greater London Authority.

 

The Mayor of London, Boris Johnson, said: “Through this pioneering scheme I’m challenging the capital’s developers to get building, and deliver the homes Londoners need, as fast as humanly possible. Loans are available to significantly accelerate the pace of development, especially on bigger schemes, and unlock additional supply.

“Through this exciting new fund we hope to provide thousands of brand new homes many years sooner than would otherwise be possible, and make them available to rent at below market rates for hardworking Londoners.”

Richard Merrick of PIMS said:" Although we don't normally cover stories that invloves housing associations, this scheme could have a serious impact on the private rented sector.

 

"The government's intention to lower the market rates of renting, will affect the influx of new landlords investing into the private rented sector, as in some areas it simply will not be worthwhile to invest in properties that need considerable refurbishment, knowing that the rental price is already hampered by this scheme."