Will you soon be able to buy a home without a deposit or mortgage?

Posted 21 October 2016

With housing affordability a growing issue, the proposal of a scheme that will not require a large down payment or home loan will interest many...

A new scheme is being proposed that would allow people to pay rent on part of a property while simultaneously buying an increasing equity portion of their home.

The National Housing Federation, which represents housing associations, is in talks with the government about the introduction of a 'buy as you go' scheme which would let people buy a property without a deposit or a mortgage.

'Buy as you go' aims to help tenants stuck in rental property

Currently, Shared Ownership schemes allow homebuyers to buy part of a property while renting the rest. However, to participate in a Shared Ownership arrangement, you need both a deposit and a mortgage on your share of the property.

Recent research by the Resolution Foundation found that it would take an average low-to-middle income family 22 years to save for a deposit to buy their first home, up from three years in the 1990s.

Now, the National Housing Federation (NHF) are in talks with the government to introduce a 'buy as you go' scheme, designed to help those people stuck in rented property and who did not have the job security to commit to a mortgage or to save up a deposit.

David Orr, chief executive of the NHF, pointed to research by the organisation which shows that 1.4million people were on below average salaries but not low enough to qualify for social housing. These people were “not served by current housing options” because they did not earn enough to afford Shared Ownership or a starter home.

"This group has housing as an absolute top priority," he said.

Split of equity and rent payment would change over time

Relations between housing associations and the government had deteriorated under David Cameron's leadership, as his government unexpectedly cut the rents that housing associations could charge tenants.

In order for the scheme to work, the NHF is trying to build bridges with the new government and is looking for changes in how housing associations can use grant funding. Associations hold about £44bn in capital grants from the taxpayer, but these currently come with conditions, including rules on the tenures of homes that can be developed.

The NHF has submitted proposals under which tenants would pay a monthly sum of around 90% of the market rent in the area. The split between rent and equity payments would change over time until the tenant eventually owned the property outright.

A similar scheme, called Genie, ran in north-east England until it was closed to new buyers in early 2016. Genie enabled tenants to buy shares in their homes each month alongside their rental payments and was run by housing association Gentoo.

The NHF believes that it could proceed with a scheme without government support but it would need a system to roll out the scheme nationally - and has called on the government to help.


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