NOW THAT Gordon Brown is soon to take over as Prime Minister, the issue of affordable housing is expected to move up the agenda. A review for the Government by the Town and Country Planning Association has forecast that 220,000 new homes a year are needed. Building more houses, releasing land and simplifying rules on home ownership through shared equity are being examined.

To date, 80,000 households have been helped on to the property ladder by government schemes, and the aim is to double that by 2010. However, there has been criticism of the HomeBuy government scheme, which is aimed at low earners and key workers. A committee of MPs reported earlier this year that inefficiencies in the scheme meant that those in genuine need missed out. David Stubbs, a senior economist at the Royal Institution of Chartered Surveyors, said this week that the Government had not done enough. “Shared equity schemes are too small in size to really tackle the problem of key worker affordability. They merely provide additional housing demand at the bottom of the market, further contributing to the difficulty of first-time buyers not eligible for these schemes.”

People feel that the schemes are too complicated. So Bricks and Mortar has summarised the main HomeBuy schemes based on equity sharing. HomeBuy agents, who can be found on www.housingcorp.gov.uk, can help you to decide. The schemes are:

New Build HomeBuy: This will enable people to buy a minimum share of 25 per cent of a newly built property. The housing association will hold the remainder of the equity and will be able to charge up to 3 per cent on its share (ie, as rent). People will be able to buy further shares in their home when they can afford it, a process known as “staircasing”. If the property is to be sold, the housing association has three months to find a new buyer; if unsuccessful the property can be put on the open market, with the proceeds shared on a percentage basis.

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First-Time Buyers’ Initiative (FTBI): This scheme, run for the Government by English Partnerships, has three forms: provision through current English Partnerships projects; private-sector schemes, where developers will receive FTBI funding from English Partnerships to allow them to sell some of their homes to first-time buyers; and the possible use of surplus public-sector land for FTBI homes. Under the FTBI, first-time buyers will purchase 50 per cent of the home, with English Partnerships retaining the other half. After living in the home for three years, buyers will pay a monthly “rent” – of up to 3 per cent of English Partnerships’ share. The FTBI allows homeowners to “staircase” up to full ownership by making additional payments. It is worth noting that each time a homeowner acquires a further percentage in the property, it is bought at the current market value.

Open Market HomeBuy: This scheme will enable people to buy a 75 per cent share in a property on the open market with the help of an equity loan. The other 25 per cent will be shared between the Government and mortgage lenders. Participating lenders are Advantage, HBOS, Nationwide and the Yorkshire Building Society. There is no charge or interest on the 25 per cent share for the first five years. After that there will be a maximum of 3 per cent on the lender’s equity loan, rising to the lender’s standard variable rate after ten years. Buyers will not be charged interest or need to make monthly payments on the Government’s 12.5 per cent loan. However, the lenders charge a higher mortgage rate to reflect the risk from housing market fluctuations. Also, if you qualify for the scheme because you are a key worker you will have to repay the Government’s share within two years – and possibly the lender’s too – if you leave key-sector employment.

Social HomeBuy:This is a pilot scheme that gives new opportunities for tenants who do not have “the right to buy” or “right to acquire” – or who cannot afford to do so – to buy a share in their rented home. It allows tenants to buy a minimum share of 25 per cent at a discount.

www.housingcorp.gov.uk
www.communities.gov.uk
www.englishpartnerships.co.uk

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