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In January 2016 the Government implemented a VRTB pilot to scrutinise the critical features of the scheme and ensure a smooth experience for tenants once the scheme is rolled out to a greater degree. So what have we learned so far?
Recently published data from the original pilot scheme at five housing associations, including analysis of application forms, online surveys and qualitative interviews with tenants, provides some surprising and some not so surprising results. Below is a roundup of those findings.
RTB is still seen as a good idea by tenants, and their only way of getting on the property ladder. VRTB is providing the opportunity for home ownership to many tenants who would not otherwise be in a position to buy their own home. Only 16% of those polled thought that they would have looked to buy on the open market if the VRTB programme had not been an option. This highlights the extent to which the majority of tenants perceived VRTB as a once in a lifetime opportunity.
Those tenants who had applied were seemingly very strongly enthused to go through with the purchase. Such enthusiasm was backed by the tenants’ wish to provide housing security for their family amongst various factors.
Not surprisingly, the figures show that many more people were interested than went on to complete.
There was a fairly strong level of interest in VRTB as a proportion of those tenants who were living in eligible properties to apply. 27% of respondents living in properties eligible for VRTB overall expressed interest in VRTB, rising to approximately a third of tenants in two of the pilots (L&Q and Sovereign). However, at the time of the most recent analysis (in November 2016), only 6% of households in eligible properties had made an application. This is likely to be an underestimate of the proportion of the final demand for VRTB for numerous reasons.
For example, one pilot (L&Q) had been compelled to ration demand in order to make the process more manageable. Some tenants advised they were waiting for the national scheme to be rolled out before applying. Also, for those tenants living in excluded properties, the possibility of a portable discount was not available in the original pilot programme.
Unsurprisingly, the average valuations of VRTB properties varied widely, reflecting marked local housing market variances between pilot areas – particularly a north/south split. For example, the average valuation figure for L&Q properties was £374,800, whereas for Riverside properties the average was £93,600.
The majority of tenants expressing interest in VRTB found the process of applying relatively straightforward. Few applicants were deterred from having to pay the initial £250 administration fee at a relatively early stage in the process. This seemed to reflect tenant’s strong motivation to purchase and take advantage of the discounts offered if they could secure the necessary finance to do so.
By encouraging ownership are we putting tenants at risk of losing their homes?
The findings do raise questions about potential financial risk and vulnerability among some VRTB applicants, especially if economic indicators such as interest rates were to change in the future. For example 9 out of 21 L&Q households who had completed the purchase of their homes by November 2016 with a mortgage had received a mortgage at more than four times their income.
A source of dissatisfaction among tenants was reasons for the exclusion of certain properties from the pilot scheme that were not easily explainable to tenants, such as obscure covenants or particular s106 Agreements. Housing associations would be well advised to confront matters of this nature at an early stage in order to make this clear prior to the national scheme being rolled out.
All parties believe that the original pilot programme was a valuable and effective method for testing the VRTB process, especially in terms of the speed at which the five pilot housing associations had to launch and administer their respective programmes. However respondents have expressed a need for greater certainty in terms of time frame once the overall scheme is rolled out.
In the 2016 Autumn Statement the Chancellor announced £200m of funding for a new regional pilot of the VRTB scheme. This pilot is intended to last for one year and will focus on two of the key principals that weren’t tested in the original pilot, namely one for one replacement and portability.
The new pilot is also intended to assess the application of VRTB guidance, this being the policy that details how the scheme will operate, which has been jointly designed by the Housing Associations, the National Housing Federation and the Government. It is likely the new regional pilot will run in 2017/2018, however further details of the particular regions in which the new pilot will run and the eligibility criteria for tenants are yet to be announced.
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