A new report from The Social Mobility Commission which finds that Government home ownership schemes do not help people on lower incomes has been welcomed by a housing developer as evidence that there should be more support for alternative home ownership models that widen access to the market.
The report finds that Help to Buy is overwhelmingly used by better-off households who would have been able to afford a similar home without the Government subsidy. Looking at what impact the Government’s housing policies have had on social mobility, the Commission’s conclusion is that Help to Buy, Right to Buy and Shared Ownership have “shown limited effectiveness in opening up home ownership to lower income households”.
Commenting on the report, the leading affordable rent to buy provider, Rentplus, has said that the Commission’s findings support what it has been saying for some time. The average household income of tenants moving into its affordable rent to buy properties is some £20,000 lower than those using Help to Buy. Most of its tenants and applicants are key and essential workers, and nearly 30% come from social housing which is then freed up for those most in need.
According to Steve Collins, Rentplus’ Chief Executive, the key factor in making its homes more affordable is that its tenants are able to overcome the barrier of not having any savings for a deposit.
Under the affordable rent to buy model tenants move into a brand new home which they will eventually own outright. No initial deposit is required and they pay an affordable rent for up to 20 years, leaving them with more money to save for a deposit each month. When they are ready to buy, these savings are supplemented by a gifted deposit worth 10% of the value of the property at the point of sale.
As Steve Collins says: “Our tenants are 100% renters and then 100% owners. Unlike other government-backed schemes, they require no upfront deposit when they move in.
“This report from the Social Mobility Commission should encourage Ministers and local authorities to do more to promote affordable rent to buy as a significant way of levelling up the housing market and make home ownership a real possibility for people on lower incomes.
“Rentplus is calling on local authorities to include affordable rent to buy as part of their affordable housing provision so this can be achieved.”
- The Social Mobility Commission report, published 10th June 2020, is available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/891155/Monitoring_report_2013-2020_-Web_version.pdf . The relevant section on Help to Buy starts on p75.
- It notes: “We are therefore supportive of the intent behind the multiple programmes to support home ownership noted in the response, including Help to Buy, Right to Buy, and Shared Ownership. Unfortunately, in practice these schemes have shown limited effectiveness in opening up home ownership to lower income households to support social mobility.”
- “[Help to Buy]lacks the reach to genuinely assist people on lower incomes, and is predominantly used by households who would have been able to afford a similar home without a subsidy. Crucially, it is consequently thought to have worsened overall housing affordability by increasing housing demand without a matched increase in supply.”
- The average total household income of those using Help to Buy is £53,084 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/883419/Help_To_Buy_Equity_Loan_Statistical_Release_2019_Q4.pdf
- The average income of Rentplus affordable rent to buy tenants is £31,600.