Government should introduce Help to Own scheme for landlords selling to tenants

Michael Lloyd

October 15, 2018

The government should introduce a Help to Own scheme, where for a single year Capital Gains Tax payable by a landlord on sale of a rented home should be turned into a rebate shared between landlord and tenant, a think tank has recommended.

The Centre for Policy Studies ‘From Rent to Own’ report proposed this an incentive for the landlord to sell, while the rebate could contribute toward the tenant’s 10% deposit to purchase the home.

This scheme, entitled Help to Own, would mean that for every £1 a tenant invested to buy the property they rent they would receive a total of £3 for their deposit. For an average property worth £228,000, they would be putting in just over £7,000 and getting £22,800 back.

David Hollingworth, associate director of communications, L&C Mortgages, said: “It sounds like an interesting approach and if landlords want to sell a property it’s a genuine incentive for them to sell to a tenant.

“You can see that’s an incentive for both parties, for those renting who are most likely first-time buyers to overcome the practical difficulties of achieving a deposit without leaving the landlord questioning what’s in it for them.”

Alex Morton, author of the report, head of policy at the Centre for Policy Studies and former No 10 adviser to David Cameron on housing, said: “The great transformation in the property market recently has been the rise of private renting and the collapse of homeownership among younger people.

“This report shows how landlords can be incentivised to sell to tenants at a discount, promoting mass home ownership in a way that is fair to everyone – and at no cost to the Treasury.

“It is highly encouraging that the government is reported to be taking this proposal seriously.”

The rebate would be split 33% to the landlord and 66% to the tenant, capped at 6.66% of the property. The landlord would receive 33% of their capital gains back. All tenants would receive 6.66% of the value of their property toward a deposit.

There would be a mechanism to pool capital gains receipts, and further shared ownership schemes to help those whose landlords were reluctant to sell, or who could not afford the entirety of their property.

In order to ensure fairness, the tenant would have to contribute 3.33% of the value of the property to the deposit, although they would be given time to save or find this money. This would be a hand up on to the housing ladder, not a handout for nothing.

If just one in 10 landlords took advantage of this policy this would allow over one million people to move into homeownership – a massive shift in a single year.

If one in four landlords took advantage of this rebate and offered it to tenants it would allow 2.5 million people to move into homeownership, more than the entire first decade of Right to Buy.

Robert Colvile, director of the Centre for Policy Studies, said: “The housing crisis is one of the great public policy challenges of our age – the Prime Minister has called it her ‘personal mission’ to reverse falling home ownership.

“A fully costed policy to increase homeownership which requires no increase in spending by government is therefore something of a policy holy grail in the current political climate.

“By implementing this policy, the government would be giving private renters up and down the country the help to own that they so desperately need.

“Like the original Right to Buy, this would promote mass ownership and be welcomed by those who need, want and deserve homes of their own.”

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