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Housing formed a key part of George Osbourne’s Autumn Statement. Croftons’ Head of Governance, Jo Savage, picks out some of the key points affecting the sector, and poses one or two questions that still need to be answered.
London will give buyers 40% of the home value from early 2016, as opposed to 20%, as the current scheme offers. This is an equity loan and isn’t really anything new. Equity loans have come and gone, and been in and out of fashion over the last ten years or more, under one name or another.
Buyers still need to come up with the 5% deposit and obtain a 55% mortgage. The remaining 40% will be a equity loan from the government (or whoever is granted the government funding and administering the loans). The loan will be a charge on the property and this will be repayable when the occupier sells, ie 40% of the value at the time of sale will be repaid. Under the current regime, if an occupier has not sold within 5 years, fees are payable on top of the equity loan from then, increasing every year.
The government is also announcing a series of other schemes, including Help to Buy: Shared Ownership to help people get on the housing ladder.
Help to Buy Shared Ownership will lift the limits so that anyone who has a household income of less than £80,000 outside London, and £90,000 inside London, can buy a home through shared ownership. Only military personnel will be given be priority over other groups. The scheme will apply across England. People can buy a share between 25% and 75% of a home. The rent on the rest of the property won’t be more than 3% of the amount left.
From 1 April 2016 people purchasing additional properties such as buy to let properties and second homes will pay an extra 3% in stamp duty. It’s hoped that this will reduce second property purchases which could assist in a halt to rising house prices in areas where it is desirable to have holiday homes or properties to rent out, allowing local people to afford a property in the area in which they grew up.
Money raised from tax on people buying their second home will be used to help those struggling to buy their first home. On the other hand, this could lead to a slow-down in the private rented sector and mean fewer properties are available for rent.
Starter Homes are new build homes available at 20% off the market price. They are only open to first-time buyers under 40 and on homes where the discounted price is less than £250,000 outside London and £450,000 in London. £2.3 billion will be spent on building 200,000 Starter Homes over the next five years. This money will be given to house builders to provide a 20% discount on new homes.
£200m will be provided to deliver 10,000 new homes available at a lower-than-market rent. These would be sold after five years, with the tenant getting the right of first refusal, and the funding will be used to offer an average rental discount of 20% of the market value. The terms of this are yet to be released, but this appears to be much the same as Rent to Home-Buy which was offered a few years ago.
Time will tell whether this is a practical solution for tenants to buy their homes. Will they have the money to save for the deposit which will be required in five years time? Will the landlord be able to force the tenants to move after five years? What will the effect be on property values if the landlord could have sold a new property in year one, but is selling a five year old property five years on?
The long and the short of it is that there is nothing unexpected, or rather nothing new and horrible. But what is now abundantly clear from government is that while there is investment in housing under the budget, it is massively weighted to routes to home-ownership
More than ever RPs are going to have to think differently about how they build and what they build, and how best they can still meet their core aim of providing genuinely affordable housing for those in greatest need.
To discuss any of the issues raised in the Comprehensive Spending Review get in touch with our Head of Governance and Regulation, Jo Savage.
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