Why the Rent to Own scheme in Wales will help people onto the property ladder
Housing associations and the Welsh Government have announced two new schemes today to make home buying easier. Hayley Macnamara explains more
A few weeks ago, Lloyds Bank’s ‘Affordable Cities Review’ revealed homes for sale in the UK have reached their least affordable level in a decade.
The term ‘affordable’ is one which causes much debate when it comes to house buying. It isn’t a one-size-fits-all word, and its definition in this context will vary from one person and one location to the next.
However, we do know that the combination of soaring house prices, rising inflation rates and stagnant wages is putting the majority of first-time buyers at a disadvantage.
Real estate firm Knight Frank predicts a quarter of households will rent privately by 2021 – it’s no wonder the noun ‘Generation Rent’ is now in the Oxford Dictionary.
“The project will help private renters to rent a property they aspire to buy while building up a deposit.”
There are solutions to help people get onto the property ladder. Affordable homeownership options including Help to Buy and shared ownership projects offer financial support to those with not enough budget to buy their first home.
However all of these models rely on homebuyers saving for a deposit. Consumer group Which? revealed this week that one in five first-time buyers moved back in with their parents to save a deposit, while 31% relied on inheritance and 29% received a contribution from family and friends.
But how will people without access to a pot of money or a cheap place to stay save a deposit? The Welsh Government’s inaugural Rent to Own scheme may be the answer.
The project helps private renters to rent a property they aspire to buy while building up a deposit.
After five years, tenants will be gifted 25% of their rent paid during that duration plus 50% of the increase in property value (if applicable) to use towards their mortgage deposit.
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The scheme has been launched today as part of a £70m investment by Welsh Government, which also includes the Shared Ownership initiative.
The latter will help those who have access to a small deposit and are able to get a mortgage on a proportion of the value of the property.
Both schemes will be delivered by housing associations, and will be crucial for generating an income stream that can be reinvested into the social housing sector.
As a starting point, one of Wales’ largest housing associations, Pobl Group, will be offering tenants an opportunity to buy one of its one, two and three -edroom houses and apartments under the programmes.
As the first of its kind in the UK, Rent to Own demonstrates Wales is prepared to lead the way over the other nations when it comes to pioneering innovative schemes designed to simultaneously boost the number of housebuyers and income for the social housing sector.
We have many hurdles ahead of us, including Brexit and the challenges of an ageing population, however it’s important we see barriers as opportunities to transform existing models and create new ones.
For instance, the high number of private renters is an issue but these schemes provide a solution to housing more people and will give us a financial boost to reach our target of delivering 12,500 homes by 2021.
Our sector vision to make good housing a basic right for all is a big ambition, and will require changes to the way we do things – and we are proud to be once again blazing a trail this side of the border.
Hayley Macnamara, policy and programmes manager, Community Housing Cymru
