Policy Exchange: Right to Buy should incentivise fixed-rate mortgages

John Hewitt Jones

September 19, 2016

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People using the Right to Buy scheme should be given an incentive to obtain a 5-year fixed-rate mortgage, centre-right think tank Policy Exchange recommends.

The report, entitled A New Settlement, said eligible tenants taking out a 5-year fix should be given a maintenance allowance offering assistance with home repairs.

The think tank also proposed that housing associations should commit to a new property construction rate of between 3% and 4% of their housing stock.

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In order to fund such construction Policy Exchange argued that housing associations should negotiate directly with central government and borrow against their funding surpluses.

Chris Walker, author of the report, said: “The government needs to urgently move away from a one size fits all policy towards housing associations if it is to meet its target of 1 million new homes by 2020.

“While it is true that reducing social rents – which make up 90% of housing association income – will force poor performing organisations to have to make efficiencies or exit the sector, the policy also makes it harder for well-run housing associations to build the homes they want to build.”

The proposal that associations use surplus funds to finance the construction of new houses was one of nine. Others included a requirement for housing associations to offer existing social tenants a new build home instead of simply the Right to Buy or the portable Right to Buy.

The paper outlined a raft of new measures designed to incentivise social tenants to get on the housing ladder, including the Right to Part-Buy, and a homeownership allowance of £15 a week to cover home repair costs.

The report also said 5-year fixed rate mortgage deals for new Right to Buy clients should be part of the eligibility criteria for the proposed homeownership allowance.

Walker added: “A new settlement will give well run housing associations freedom to run their own organisations in the most efficient manner, incentivising them to borrow to build and providing opportunities for people on low incomes to become part of the property owning democracy.”

A number of housing associations have expressed support for the proposals.

Carol Matthews, chief executive of The Riverside Group social housing association, reckoned the proposals offered a more flexible range of options for housing associations.

She said: “We are genuinely excited by the devolution deals unfolding in the places where we work.

“That is why we are particularly drawn to extending the concept to housing associations. Rather than the ‘one size fits all’ inflexible regulatory system that currently frames our work, we believe that time-limited, bespoke ‘deals’ are more suited to a hugely diverse sector operating in a rapidly changing environment.”

Neil Hadden, chief executive at Genesis housing association, suggested increased cooperation in the sector would increase the efficiency of the sector.

He said: “Our job must be to build more homes to tackle the housing crisis, but to enable us to do so as effectively as we can, the government must reduce the burdens we contend with and which often get in the way.

“The report rightly supports consolidation in the sector too – and despite some high-profile attempts which have not succeeded, this is the right approach to sharpen the sector’s focus and efficiency.”

Ann Santry, chief executive at Sovereign housing association, said: “I firmly believe it is through stronger partnerships that we can increase homebuilding, helping those who want to buy as well as supporting those who need a stable, affordable home.”

Policy Exchange is the UK’s principal centre-right thinktank. It has provided the intellectual melting pot for modernisation of the Conservative party and set up the careers of politicians including Nicholas Boles, Michael Gove and Francis Maude.

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