Affordable housing explained
Most of us dream of owning our own home, yet in recent years, realising that dream has become increasingly tricky for many people – with house prices forcing people out of the market. Finding affordable housing is a problem that’s getting worse, especially for those on a low income and looking to buy. And for first-time buyers, despite the property crash and falling prices, putting together the deposit that’s required to secure a home is almost impossible.
Thankfully, housing associations and government schemes are finding solutions to the problem by making more affordable housing available.
You can buy a home
There are a number of schemes available that are designed to help people on low incomes achieve their dream of owning a property. You are eligible for these schemes if your combined income is $60,000 or less, which means you can’t afford to buy a suitable property on the open market without assistance.
The HomeBuy scheme, introduced in 1999, (the government’s range of shared ownership housing schemes was designed to give low-income households the chance to buy). People who are eligible include first-time buyers, housing association or council tenants, and ‘key workers’ such as teachers or nurses.
There are now several HomeBuy schemes. Social Homebuy is where housing association and local authority tenants are helped to buy their current home. New Build Homebuy involves you sharing part of the ownership with a housing association. And Open Market Homebuy is where you part-buy a property and get a loan from the government for the rest.
If you are a housing association or council tenant, Social HomeBuy allows you to buy a minimum share
of 25% of the market value of your home. You’re also given a discount of between £9,000-£16,000, depending on where you live and the amount of money you’re investing into your home. The remainder of the equity will still belong to the landlord and you will have to pay rent on it, but it will be at a low rate. The beauty of this scheme is that if you’ve rented your home for a long time, it gives you the chance to actually own a part of it – and benefit from the rising equity if house prices start increasing again.
The Social HomeBuy scheme
also allows shared ownership of an existing council or housing association property. Some associations also run
a Mutual Exchange scheme where tenants can exchange properties with other tenants, according to their needs.
New Build HomeBuy
New builds are a tempting option for buyers because everything is sparkling, fully functioning and built with all mod cons in place. The New Build HomeBuy helps low earners buy into a new build property by offering them the chance to share the cost and pay rent on the remaining amount.
You can buy a minimum initial purchase of 25% of a new build home, and the housing provider will hold
the remainder of the equity, for which you will be charged rent. You can buy further shares if you start earning more money – known as staircasing.
Rent to HomeBuy is a good option if you want to try out a new area or location, as it enables you to rent a new build property at a rate lower than the market rate for a specified period. At the end of this period, you will then have the first option to buy the property on New Build HomeBuy terms.
Open Market HomeBuy
Under the Open Market HomeBuy scheme, you are the only owner of the property and you buy your home by getting an equity loan of up to 40% from an equity loan provider. This loan will enable you to buy any property from an estate agent – but you’ll still need to cover the rest of the cost of the property, which is 60%, by taking out a mortgage. On this scheme, you won’t have to pay rent but you’ll still have to pay interest on the loan. You also need to cover the costs of buying a house, such as stamp duty, legal fees and a deposit.
First time around
Getting on the property ladder for the first time is notoriously tough, which is why HomeBuy Direct, a new shared equity scheme, has been introduced to help first time buyers into affordable home ownership.
The scheme is offered on specific new build properties, and buyers are offered an equity loan of up to 30% of the purchase price, co-funded by the developer and the government. This makes more affordable homes available to first-time buyers who are currently priced out of the market, due to the high cost of obtaining a mortgage or the need to provide a larger deposit. It also aims to stimulate more property sales, which in turn will hopefully get the housing market moving again.
You are eligible for HomeBuy Direct in the same way as for other HomeBuy products – that is, households earning £60,000 or less who could not afford to buy a suitable property on the open market without assistance, due to the high cost of borrowing.