Privately funded rent-to-buy providers can widen access to homeownership in 2021
Steve Collins is chief executive of Rentplus
2020 has been an extraordinary year for the housing market.
Since July, the UK has been witnessing a mini boom, with transaction volumes rising as buyers have sought to take advantage of the stamp duty cut.
Each month, house prices are reaching record highs, with Halifax reporting that the UK has seen the “strongest five-monthly gain [in home valuations] since 2004” in December.
Yet, beyond the headlines of a housing boom, there lies a divided housing market, where those on lower incomes are increasingly shut out and struggling to get on the property ladder.
Firstly, recent figures have made clear that government-funded schemes, which have been rattled by the pandemic, do little to match the demand of those aspiring to own their first home.
In December, a report from the Public Accounts Committee concluded that MHCLG has failed to deliver the 200,000 starter homes it promised first-time buyers in 2015.
This news came as Homes England reported a 34% decrease in affordable home ownership schemes over the last six months.
Alongside this, our own research from Opinium has shown that three in ten key workers have found home ownership less achievable because of the pandemic, with over a third of them losing money during the crisis.
Many of those on lower incomes are our key workers: nurses, teachers, and retail workers.
Their dedication during the crisis has shown us all just how important they are for the nation, yet despite this, many don’t earn enough to save for a home.
This seems unlikely to abate in the medium term, with Rishi Sunak having imposed a nationwide wage freeze that will hit more than 2 million public sector workers at his latest Spending Review in November.
If Boris Johnson’s government really wants to turn “Generation Rent” into “Generation Buy”, then they need to ensure demand for affordable housing is met and the key barriers to ownership are broken down.
The deposit has long been a challenge for prospective buyers that aren’t able to benefit from the financial support of friends and families.
This problem has been exacerbated by the decision by many mortgage lenders to pull high loan-to-value mortgages or tighten their lending criteria, meaning prospective buyers with a low deposit have even fewer options.
Whilst shared ownership and help-to-buy schemes have provided some with viable routes onto the property ladder they still require un upfront deposit, which locks out the many renters who struggle to save.
An alternative, and often overlooked, model is that of affordable rent-to-buy.
Rentplus is the leading provider of this tenure.
Our approach enables people to rent properties at discounted level, with the option to buy the home after a set period of time.
We offer our tenants a gifted 10% deposit at the point of purchase to ensure that ownership is achievable.
The majority of our tenants are key workers and during the crisis we have worked hard to continue building our pipeline for this group, taking advantage of the slower market conditions to increase our stock by a third in the last six months.
It is clear that privately funded providers can continue to play a significant role in boosting the overall number of homes for first-time buyers, supporting the social housing sector but with no reliance on government funding.
Our model goes some way to helping hard working people get on the ladder, but in 2021, the government and local authorities should do more to support innovative schemes and encourage their development on a much wider scale to meet the home ownership ambitions of many more people.