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SOCIAL HOUSING TENANTS TO BENEFIT FROM HOMEBUY SCHEMES

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Council and housing association tenants with joint incomes below...
Council and housing association tenants with joint incomes below

£15,000 in the north of England and£20,000 in the south east could

be eligible to buy a share of their homes under new government shared

equity housing schemes - Social HomeBuy.

Further analysis added today to the current consultation Homebuy -

expanding the opportunity to own - shows that for every three

families buying a share of their home through Social HomeBuy, one

more family will also be able to move off the waiting list or out of

temporary accommodation.

Deputy prime minister John Prescott said the figures showed a

government committed towards low income earners benefiting from its

new housing plans.

'Social HomeBuy will help tenants into partial home ownership and

with the money they pay being used to reinvest in new social housing.

This will make available sooner for families in temporary

accommodation and on council waiting lists new homes.

'We want families on lower incomes to get a foothold on housing

ladder but not at the risk of taking on financial responsibilities

they can't sustain. There will be strict checks to ensure this, with

the consultation proposing several measures to ensure anyone entering

into home ownership through one of the schemes is able to sustain the

long term costs.'

Mr Prescott added that many people would benefit, including key

workers, such as nurses and teachers, but that above all the research

showed Social HomeBuy can be affordable for tenants on relatively low

incomes.

Notes

HomeBuy: Expanding the Opportunity to Own consultation was issued on

April 1 with a closing date of June 24.

1. Under the government's proposals, the following opportunities

would be available to those seeking assistance to buy a home:

* an ownership discount, through the modernised Right to Buy and

Right to Acquire schemes for eligible social tenants

* shared equity, through a new extended HomeBuy scheme to help key

workers, social tenants and other first time buyers, with three

variants depending on the type of home bought.

2. Subsuming existing low cost home ownership schemes under a single

HomeBuy banner will simplify the arrangements for people seeking

assistance to buy a home. It will also make those arrangements

fairer, by ensuring that all applicants benefit from a similar offer.

3. Under HomeBuy, buyers will purchase a share of a home - paying for

as much as they can afford through savings and/or a mortgage. The

remaining share of the home will be held by the local authority or

housing association. The local authority or housing association will

therefore share in any increase - or decrease - in the value of the

home. This is known as 'equity sharing' and enables people to buy a

home where they can't raise a mortgage to cover the full price.

4. Extra help will be offered to social tenants under Social HomeBuy,

to ensure it is affordable, by means of a discount on the buyer's

share of the home. This means that, if a social tenant buys 50 per

cent of their home, they would receive 50 per cent of the discount on

offer. The government proposes to test different levels of discount

to see which provides best value for money whilst ensuring

affordability for social tenants.

5. Social HomeBuy will initially be voluntary, but the Government

will encourage councils and housing associations to apply it as

widely as possible. The government proposes to enable landlords to

retain the sales proceeds to enable investment in replacement social

homes, which would be available to let earlier than homes sold under

the scheme would have become available.

6. Further key features of each of the three HomeBuy variants are set

out in the table below.

7. The government aims to announce decisions in the summer, after

considering consultation responses, and to introduce the new HomeBuy

arrangements by April 2006.

8. Gross Household Income (£k pa) Needed for Home Ownership based

on a regional government breakdown.

A.

Region House Price (£k) Social HomeBuy

Option 1 Option 2

East 113 19 22

East Midlands 78 13 15

London 108 17 20

North East 64 10 12

North West 62 10 12

South East 125 20 24

South West 78 13 15

West Midlands 72 12 14

Yorkshire and Humber 59 9 11

9. These house prices are based on 2003/4 Right To Buy sales, uprated

to 2005 Q1 values. Average prices in London are lower than those in

the South East and the East, because London sales have a higher share

of flats, which tend to have lower prices than houses.

10. Gross Household Income (£pa) Needed for Home Ownership - Open

Market and New Build HomeBuy

B.

Region New Build HomeBuy Open Market HomeBuy

Option 1 Option 2 Option 1 Option 2

East 24 28 27 31

East Midlands 18 21 20 23

London 32 38 37 42

North East 12 14 14 16

North West 13 15 15 17

South East 27 31 30 35

South West 24 28 28 31

West Midlands 18 21 21 23

Yorkshire and Humber 14 17 16 18

11. Open Market house prices are lower quartile values for the first

quarter of 2005, and range from£65,000 in the North East to£172,000

in London. The Table shows that households would need higher incomes

to afford the Open Market and New Build variants of HomeBuy than they

would need to afford Social HomeBuy. This is because there would be

no discount on the purchase price, and because newly-built properties

are assumed to cost 10 per cent more than comparable existing

properties. Incomes required for New Build HomeBuy would, however, be

lower than those required for Open Market HomeBuy because for New

Build HomeBuy households would need to fund a minimum of only 50 per

cent of the house price, rather than a minimum of 75 per cent as is

the case of New Build HomeBuy.

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