Ruth Kelly, the communities and local government secretary, caused hope to
beat in the hearts of many a would-be homeowner last week by suggesting
that, in future, council tenants might be able to buy a stake as small as
10% in their homes.
At present, under the government’s shared ownership scheme, known as Social
HomeBuy, tenants must buy an initial minimum share of a quarter (and
continue to pay rent on the rest). By lowering this barrier, Kelly said the
government would offer a new “right to own” to match the Tories’ “right to
buy” of the 1980s.
Kelly’s desire to attract more potential homeowners is understandable: take-up
of the scheme, launched last October, has been low. The government admitted
last week that only 47 of the country’s 1,850 “social landlords” — local
authorities and housing associations — had signed up. Just 170 tenants
across the country had applied and only 23 sales had been completed — the
equivalent of fewer than six complete houses taken into private ownership.
In theory, it is not just council house tenants who can benefit from
governmental largesse. Variations of the HomeBuy scheme can also help other
first-time buyers to buy properties on the open market — an increasingly
attractive option for many following the announcement last week by the
Council of Mortgage Lenders that average prospective homeowners must borrow
a record 3.31 times their income to fund their first buy.
So how do you qualify?
Inevitably, as with most such government schemes, there is no simple answer.
It depends not only on what you do for a living and how much you earn, but
also where in the country you live.
To start with, it helps to be a key worker. If you are a teacher or a
policeman then you are probably all right; earn your money in other ways,
and things start to beome a little more complicated, especially as the
definition of key worker is not national but is determined by Regional
Housing Boards. Refuse collectors and council swimming pool attendants, for
example, qualify in some parts of Britain but not in others.
Although government websites describe subsidised housing as also being
available to “other first-time buyers”, this does not mean that any Tom,
Dick or Harry can apply.
If you are already on the waiting list for social housing, you can jump
straight to the front of the queue. But there is a bit of a postcode lottery
going on here. As well as stipulating what is — or is not — a key job, the
various Regional Housing Boards dictate how much (or how little) a household
is allowed to earn before it can qualify for subsidised housing.
In London, you may have a maximum household income of £49,000; elsewhere in
the southeast and in the east and southwest of England you can earn up to
£60,000, while the maximum in the Midlands is £20,000. To add to the
complexity, in Yorkshire and Humberside priority goes to those who live in
areas where the average prices is more than four times annual earnings.
In the southeast, you have to be making a direct contribution to the local
economy. In the northeast, you may be in luck if you have a local
connection, which could include responsibility for a family member.
There are other, more subjective — and overtly political — criteria. In the
West Midlands, for instance, “first-time buyers will be targeted for
assistance in order to extend tenure choice and geographical areas for the
black and minority ethnic population”. If you live in Yorkshire and
Humberside, it helps to be divorced or separated. Authorities are also keen
to “support sustainable tenure diversification in specific geographical
areas where a mix is crucial to sustainable communities” — whatever that
means.
Wade your way through all the official gobbledegook and there can be clear
benefits. Take Carlos Munoz, 24, a sports co-ordinator for four southwest
London primary schools. With a salary of £30,000 he is not exactly poor, but
is well below the £49,000 ceiling and does serve the local community. As an
added bonus — so far as the rules are concerned — he does not own a car.
All this means that, under a scheme devised by developers St George and
Hammersmith and Fulham council, Munoz was able to buy a £215,000, two-bed
flat in the riverside Imperial Wharf development at a 30% discount. Should
he wish to sell in future, he must do so to someone who fulfils the same
criteria; crucially, he must also sell it on to them at the same discount to
the market prevailing at the time. “It’s a lovely flat,” says Munoz. “For
what it is, it’s a really good scheme.” So, even if you qualify, is buying
through such a scheme always the best option?
Not necessarily, says Paul Holmes, director at Firstrung, an organisation that
aims to help those trying to get a foot on the ladder. “We would question
the valuation being placed on these HomeBuy units,” Holmes says of one
development in Middlesex. “Their valuations are insulated by other
interested parties with seemingly endless funds.”
Others have also been critical of the government’s scheme. Adam Sampson, chief
executive of Shelter, the housing charity, says it is “relatively
irrelevant” to Britain’s housing problems and believes it may, at worst,
actually exacerbate them. “The general proposition is that we need a massive
increase in the supply of the socially rented sector,” he says.
For the Home Builders Federation (HBF), the problem with the shared ownership
scheme is more fundamental — there are just not enough homes to go around;
and, by subsidising some people to buy, the government risks penalising
those that don’t qualify by driving up prices. The HBF said last week that
housing associations should be given the resources to deliver 210,000 new
affordable homes in the next three years to meet housing needs.
“The only solution to the long-term affordability problem is to increase
supply,” says John Slaughter, HBF director of external affairs.
“Essentially, the biggest problem overall is that we’re not building enough
homes.”
- Firstrung, 07963 090 558, www.firstrung.co.uk
What’s on offer
The government’s HomeBuy scheme enables social tenants, key workers and
first-time buyers in England to buy a share in their home and take that
important first step onto the property ladder.
There are three HomeBuy options:
Social HomeBuy: aimed at existing tenants of housing associations and
local authorities, it enables tenants to buy a minimum 25% share in their
home at a discount, with the option to move to full ownership in stages of
10% as and when they can afford it. So, depending on the local authority, a
tenant could expect a discount of £9,000 to £15,000 on a £150,000 flat. The
government has allocated £15m to the scheme and is encouraging local
authorities and registered social landlords to offer the scheme. That said,
only 23 tenants have taken it up so far.
Open Market HomeBuy: launched last October, after ministers struck a
deal with four mortgage lenders (Nationwide, Yorkshire Building Society,
Bank of Scotland and Advantage, a Morgan Stanley company) in which the
government and the lenders agreed to share some of the cost of buying a
home. The scheme, part of the National Affordable Housing Programme, is
primarily for key public sector workers in London, the southeast and East
Anglia. Buyers have to take out a mortgage for 75% of the purchase price,
with the lender providing a top-up loan of 12.5% and the government stumping
up the remaining 12.5%. The extra loans incur no costs for five years, but
must be repaid if the property is sold on. This scheme is only open to
20,000 first-time buyers between now and 2010.
New Build HomeBuy: Eligible first-time buyers can invest in a minimum
initial share of 25% of a newly-built home; a housing provider such as a
housing association or a developer holds the remainder of the equity. The
provider then charges rent (up to 3% of the total equity per year).
Purchasers may buy further shares as and when they are able to, a procedure
known as “staircasing”.
For details of eligibility for HomeBuy schemes and local HomeBuy agents, go
to www.communities.gov.uk
I really cannot get over how frustrated I am with the market - it is unbelievable that when I see news of dips in the market, my heart skips a beat - I have been told I can borrow a maximum of $70,000 - in scenic North Wales, that won't even give me a sniff of the action! I carry on paying $400 a month rent with a heavy heart!
Rachel Taylor, Menai Bridge, Anglesey