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Richard-Connolly

Richard Connolly is the Chief Executive of Rentplus.

David Cameron began the New Year by announcing his intention to make his number one priority that of helping “hard working families” who are priced out of home ownership.

Tackling this issue would be a popular choice for a New Year’s resolution but for many low-income households, especially young families that can’t rely on the bank of mum and dad or the hotel of mum and dad, it will remain little more than an aspiration.

The Government has introduced a number of schemes to help first time buyers including 200,000 Starter Homes at a 20 per cent discount to the market price, extending the Help to Buy equity loan scheme, and introducing the Help to Buy ISA and Help to Buy Shared Ownership.

However none of these schemes address the key difficulty of saving for a deposit and as a result, large sections of society will continue to be locked out of home ownership.

The Government included a commitment to deliver 10,000 rent-to-buy homes which is a new model that addresses the difficulty of raising a deposit, as part of the affordable homes programme.

Rent-to-buy complements the Starter Home programme by providing a new form of tenure for aspiring home owners who would otherwise struggle to save for a deposit or be able to afford shared ownership.

There are a number of rent-to-buy models but the key feature is that they create a path for working families to be able to rent today and eventually purchase their home in the future.

One such rent-to-buy model is offered by Rentplus, a company based in Plymouth, with a number of developments across the Southwest and growing nationally. Rentplus offers an affordable housing tenure that is backed by institutional investors, is NPPF compliant, and provides tenants with new homes at an affordable rent with the option to purchase at the end of their tenancy, having also developed good credit history while renting. Tenants opt to purchase in year five, ten, 15 or 20 based upon their realistic aspirations.

Rentplus gives tenants a ten per cent deposit to help them purchase their home and access the full range of mortgage products. Because the model is backed by institutional finance, it is not dependant on grant or public subsidies and as a result is increasing the level of investment in the delivery of much needed housing.

There is strong evidence that the inability to raise a deposit is a significant barrier to home ownership. Figures from housing charity Shelter show that nearly half of renters are unable to save for any deposit at all and a further 25 per cent are only able to save £100 or less each month.

Analysis from the Council of Mortgage Lenders shows that more than half of first-time buyers in 2014 had to rely on funds provided by relatives to afford a deposit and, most recently, a Halifax report showed the first annual decline in first-time buyers in the UK since 2011.

There is growing political backing for rent-to-buy with endorsements from MPs during debates in the House of Commons.

Rent- to-buy will not be right for every household but it is an important part of the mix of housing tenures to suit different circumstances, alongside starter homes, rented homes, shared ownership, and homes for open market sale.  It is a valuable addition to address the housing crisis facing the country.

Expanding home ownership is a realistic and sustainable goal but new models such as rent-to-buy must receive continued government support if they are to be adopted nationally. 10,000 rent-to-buy homes is a good starting point, however an innovative government-backed equity loan initiative would support construction and delivery at a far greater scale and pace.

The alternative will be an increasingly dysfunctional housing market that locks out future generations from any realistic prospect of ownership with disastrous economic and social consequences.

9 comments for: Richard Connolly: To solve the housing crisis we need to start by breaking the ‘deposit barrier’

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