Frequently Asked Questions
The Rentplus Model
1. MANAGING RENTPLUS TENANCIES
Q. What are the benefits of Rentplus for tenants?
A. The Rentplus model is designed for aspirant homeowners who are unable to purchase a home for a variety of reasons, including lack of savings for a deposit. With Rentplus, tenants are offered:
o A five year renewable tenancy providing stability for their families
o A new home at an Affordable Intermediate Rent (80% of market rent or LHA on initial let, whichever is lower), with lower running costs
o A planned purchase timescale to suit their financial circumstances, at 5, 10, 15 or 20 years with support and guidance to do so
o Housing management services from a reputable local Registered Provider (RP)
o No repairing obligations during the rental period – unlike shared ownership, the RP is responsible for all repairs and maintenance until the tenant purchases the property
o Opportunity to demonstrate creditworthiness through a five-year tenancy of rent payments to help mortgage application and to save with Help to Buy Cash ISA
o Access to a range of mortgage products and competitive interest rates
o A gifted deposit of 10% of the open market value of the property at the time of 100% purchase
o Home which is planned and integrated as part of open market housing and designed with the future in mind
Q. Who are Rentplus homes for?
A: Rentplus homes are suitable for anyone who is local to the area, is working or in training, has an aspiration to own their own home at some point in the future, has an income of less than £80,000 p.a. (in line with ‘Help to Buy Shared Ownership’) and is currently unable to save for a deposit. To be considered households will generally need to be registered on their local authority choice based lettings housing register, shared ownership register or Help to Buy register
Q. How are the homes allocated?
A. The local authority in which the homes are situated will decide who is eligible to apply for Rentplus homes in their area. In many cases, local authorities are looking to target those households who are in the middle to lower bandings on their choice based letting schemes and/or households on their ‘Help to Buy’ register. Local authorities may also consider other criteria such as ‘is the tenant freeing up an existing affordable rented home’ which could be used to house priority needs households
Q. Will tenants have to pay anything before they can move in?
A. No deposit is required but tenants will need to pay the first month’s rent in advance.
Q. Are tenants allowed to under occupy?
A. Yes – the key issue is whether the prospective tenant can afford the rent. Before properties are allocated the managing Registered Provider (RP) will undertake an affordability assessment with the prospective tenant, which will determine the size of their future home. Tenants just need to be aware they will incur the higher rent charges if they are renting a larger home.
Q. What about the tenancy agreement?
A. Rentplus has a standard Assured Shorthold Tenancy Agreement (AST) which all our managing RP partners use for all Rentplus tenants. Rentplus tenants are no different to any other housing association tenant and will have all the same rights and responsibilities. Rentplus tenancies are provided on a five year renewable basis, so tenants have security and stability, and are able to establish themselves in their local community.
Q. Who repairs the properties?
A. Unlike shared ownership, where the part-owner is responsible for the repairs to their home, a Rentplus tenant is not responsible for repairs to their home until they buy it. While they rent their home, the managing housing association is responsible for all repair and maintenance work.
Q. Who owns the properties?
A. The properties are owned by Rentplus. They are leased and managed by an RP. This enables the RP to charge an ‘affordable rent’ which is 80% of the local market rents or the Local Housing Allowance (Housing Benefit) level whichever is the lower. The tenant will have all the rights and responsibilities of a RP tenant.
Q. When can the tenant buy their home?
A. Rentplus tenants can buy their home at either 5, 10, 15 or 20 years.
Rentplus knows that not everyone will be able to purchase at year 5, and so the different timescales to buy allow flexibility and choice to suit the different circumstances of prospective home owners when they move in. At the point of initial application to the Rentplus model, the prospective home owner will work with the managing RP to identify when is likely to be the best timescale for them to purchase depending on their financial circumstances now and what they are likely to be in the future – this could be 5 years, 10 years 15 years or 20 years.
Q. How does the purchase process work?
A. At the time the tenant is planning to purchase their home, the property will be valued. Rentplus will gift the tenant 10% of the open market value of their home at the time of purchase as a deposit.
The deposit is a gift of actual money rather than a discount off the price of the property, managed by the purchasers’ solicitor, which tenants can put s towards their deposit to aid their mortgage application. Rentplus encourages tenants to save as much as possible during the rental period as this will mean they will need a smaller mortgage and reduce their costs in the future
Q. Can the tenant continue renting if they are unable to purchase?
A. Rentplus is aware that things do not always go as planned and therefore our managing RP partners work with the tenants throughout the rental period to ensure there are no surprises and the flexibility to instigate mitigating actions if required.
The Rentplus funding model works on the basis of 25% of the properties being sold every five years. A year before a tenant is due to purchase their home, the managing RP will review their circumstances and assess whether or not they will be able to proceed. If it is apparent that the tenant will not be able to purchase at the agreed time there is a cascade process for the RP to follow before the property is sold on the open market:
The first action is to offer other tenants in the same scheme or elsewhere in the Rentplus portfolio the opportunity to bring forward their purchase of their home. Effecting this substitution means the first tenant can remain in their home for a further five years with a new Assured Shorthold Tenancy, giving them more time to save and prepare to buy their home.
If no other tenant is able or interested in bringing forward their purchase, the managing RP will be offered the opportunity to buy the home at 10% discount on open market value. The RP can either rent the property to the tenant or offer to sell it to them on a shared-ownership basis.
If the managing RP chooses not to purchase the property, it would be offered to other RPs in the area (with the 10% discount), with the same option to continue renting or offer shared ownership to the existing tenant.
If no other RP wishes to purchase the property, it will be sold on the open market; the RP will work with the tenant to find them alternative housing, either within their own portfolio or in private rented accommodation
Q. What if the tenant suffers financial difficulties whilst renting?
A. The managing RP will be supporting the tenant into home ownership and therefore should be made aware of any financial difficulties as soon as possible. The managing RP will offer support and guidance to enable tenants to get back on track.
If a tenant falls into rent arrears, the RP will implement the rent arrears policy and procedures as set out in the AST
Q. What are the tenants’ rights and responsibilities whilst they are renting?
A. Rentplus homes are let on a 5 year renewable Assured Shorthold Tenancies through the managing RP. Tenants have all the same rights and the same responsibilities as the RP’s other tenants. The Managing RP is responsible for providing the repair and maintenance service during the rental period
Q. Can the tenant buy shares in their home (staircase into home ownership)?
A. The Rentplus model enables the tenant to buy 100% of their home at the date they agreed when signing their tenancy agreement – either 5, 10, 15 or 20 years
However, if the tenant is unable to buy their home at the agreed stage and the RP decides to purchase the property under the sales cascade set out above, the RP can choose to either continue renting to the tenant or convert the property into shared ownership
Q. How long would a purchaser have to wait before being able to sell the property on?
A. The purchaser would be able to sell the property on at any time
Q. Do tenants have the Right to Buy a Rentplus home?
A. No, the Right to Buy does not apply to Rentplus homes as the Registered Provider doesn’t own the properties, and has instead the 20 year lease for the rental period
Q. Does Pay to Stay apply to Rentplus homes?
A. No, Rentplus tenants will not be caught by the Pay to Stay restrictions, and will continue to benefit from an affordable rent for their rental period irrespective of their income.
2. WORKING WITH LOCAL AUTHORITIES
Q. What are the benefit of Rentplus for local authorities?
A. Rentplus homes can increase the percentage and range of affordable tenures on new developments.
It is for each Local Authority to decide how Rentplus best meets their local housing needs and aspirations of their communities across their authority. The Local Authority can determine who the homes are allocated to, including applying local restrictions, thereby taking tenants off housing lists.
Rentplus aims to maintain a portfolio of affordable housing through the Memorandum of Understanding – a best endeavours agreement between the local authority and Rentplus - which replaces homes purchased or sold on a one for one basis, effectively providing affordable housing in perpetuity.
Provision of affordable rented housing in the local area for a minimum of 20 years.
No grant is required as Rentplus is a fully funded investment platform, resulting in additional investment into the local authority area.
Secure competitive prices on affordable housing to unlock stalled sites (on land and s106 opportunities), forward fund infrastructure work.
If the home is sold on the open market, the LA receives 7.5% of the sale to invest in future affordable housing.
New homes are managed and maintained by an approved local RP and homes are allocated on 5 year renewable tenancies up to a period of 20 years.
Rents during the rental period are affordable – either 80% market rent or LHA (including service charges), whichever is the lower at initial let
Q. Why is Rentplus complementary to the more traditional forms of affordable tenure?
A. Rentplus provides a hybrid product i.e. affordable rent to buy, by providing tenants with the opportunity to purchase in year 5, 10, 15 or 20 depending upon their circumstances and aspirations at the point of letting.
Unlike Intermediate Sale or Shared Ownership/Equity products, Rentplus delivers ‘additional’ Affordable Rented homes for an agreed period of time, providing the opportunity for tenants to save, benefit from a 10% gifted deposit and to achieve their aspirations for home ownership
Q. Are Rentplus homes compliant with the NPPF definition of affordable housing?
A. Yes – we have legal and planning advice which confirms that Rentplus is NPPF compliant. Reports setting this out can be provided on request.
Current planning consultation includes proposals to incorporate affordable rent to buy within the affordable housing contained within NPPF and Starter Homes definitions.
Q. How are properties allocated?
A. Rentplus works with the local authority to agree how they want our RP to identify and allocate Rentplus homes. Different local authorities require different ways to achieve our shared objectives; this can include a range of options depending on the local authority’s objectives such as:
o Local Choice Based Lettings schemes
o HomeBuy Agencies
o Shared Ownership waiting lists
o Local lettings plans
o Local connection requirements
o Local advertising
All applications for Rentplus homes are assessed by our RP partners in accordance with our eligibility criteria and the allocations process agreed with the local authority. Reports about who has been housed in a Rentplus home can be provided for the local authority.
Q. Who has been housed in Rentplus homes?
A. Working with Rentplus provides a real opportunity for local authorities to triangulate the use of social/affordable housing in their area to achieve housing policy objectives and the efficient use of existing social/affordable housing.
The evidence from current Rentplus schemes is that:
o 30% of Rentplus tenants have moved from existing social/affordable housing thereby releasing them for people in housing need to be housed from the waiting list
o a further 30+% have been housed from local authority CBL schemes, thus reducing numbers and demand placed on the scheme
o other Rentplus tenants have moved from Armed Forces accommodation
Our RP partners can positively target their existing tenants to offer them the opportunity to move into a Rentplus home. Despite some existing tenants having the Right to Buy, there are a number of reasons why they are not able or do not wish to exercise this option; the lack of a deposit remains one of the main barriers whilst many tenants are not necessarily living in homes that they wish to purchase.
Q. What if the tenant cannot afford to purchase - does the LA have a duty to house them?
A. Tenants are aware when they move into a Rentplus home that they have a five year renewable tenancy, and that if they breach the terms of their AST or are unable to purchase the property at their appropriate purchase point, they will be required to move at the end of the tenancy period. The managing RP will undertake a review with the tenant in year 4, 9, 14 and 19 to confirm their progress towards their planned purchase date
If the tenant is unable to buy, the RP has a number of options to assist the tenant, including:
o Purchasing the property and either offering it as a shared ownership or rented unit allowing the existing tenant to remain in the property
o ‘direct match’ the tenant into one of their other properties
o Working with local private landlords to find an alternative home
The managing RP will endeavour not to make the household homeless and the responsibility of the Local Authority
In the event that a tenant does need to leave the property, they will nevertheless have benefitted from an affordable intermediate rent for between 5 and 20 years
Q. What guarantees do local authorities have that Rentplus will deliver on its promises?
A. There is an agreed the suite of Rentplus documents for local authorities, which includes:
(i) A Memorandum of Understanding (MoU) – providing for a portfolio of stock to be maintained in perpetuity within the local authority area.
(ii) Rentplus Agreement – detailing the model and cascade arrangements and terms for purchases.
(iii) Agreed standard S106 clauses.
There is a similar comprehensive suite of legal documents that describe the respective responsibilities and obligations of Rentplus and its RP partners with regards the management and provision of rent to buy homes and the quality of services for tenants for the 20 year lease period. The key documents are a Collaboration Agreement, Rentplus Lease, Rentplus Assured Shorthold Tenancy Agreement and Rentplus policies.
Q. What are the benefits for tenants living in a Rentplus home?
A. Rentplus provides families the opportunity to rent at Affordable rent levels (80% market rent including service charges or LHA whichever is the lower) on 5 year renewable tenancies. In addition:
o Unlike shared ownership the managing housing association has responsibility for repairs and maintenance not the tenants during the rental period
o They have a new build, fuel efficient home
o A home managed by a reputable landlord
o Security of tenure (subject to compliance with the AST requirements)
o Gifted deposit of 10% of the open market value of the property at the time of purchase.
o Opportunity to demonstrate creditworthiness through the tenancy period to help mortgage application
o There is no obligation to purchase - tenants can give notice at any time. The property is then re-let or sold as part of the 5 yearly planned purchases/sales.
3. WORKING WITH REGISTERED PROVIDERS
Q. What are the benefits of Rentplus for Registered Providers?
A. Because Rentplus is a fully funded investment platform and works in partnership with RPs it increases the supply of affordable housing in the local area, restarts stalled developments, and supports RP growth plans by:
o Delivering organic growth without additional borrowing or subsidy
o Opportunity to cross-subsidise RP services and achieve economies of scale
o Enhance value for money and efficiencies through consolidation of operational costs
o Providing a planned future new development programme to meet known local needs
o Forward planning for replacement of properties lost under RTB
o Opportunity to purchase properties with 10% discount
o HCA compliant product and certainty through partnership agreement and leases
Q. What are the revenue opportunities for a Registered Provider?
A. Rentplus will pay Registered Providers:
o Retained rent income from the properties in management
o Project Management fees where an RP manages the development of a new scheme on site
o Introductory fees where an RP brings a site to Rentplus where Rentplus subsequently enters into a contract to deliver Rentplus homes
Q. How will services for RP customers be enhanced?
A. Rentplus is a complementary product that supports RP’s strategic business objectives, including:
o Increase range of housing offer, including opportunities for existing tenants to move out of social rented housing into a brand new Rentplus home, thus releasing scarce social rented homes for households in priority need
o Certainty of housing supply to meet housing need and aspirations
o Providing a revenue income stream to support for core activities and maintenance of social housing portfolio