Read the full report here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/662744/State_of_the_Nation_2017_-_Social_Mobility_in_Great_Britain.pdf
The challenge aspirant homeowners face in accessing the housing ladder is perhaps the most significant it has been in decades.
The latest official figures show that the average house price is 7.6 times the average annual salary, more than double the figure for 20 years ago.
This is compounded by the lowest levels of peacetime construction in the past 10 years since the early 1920s. Demand is far outstripping supply.
“The current range of low-cost homeownership tenures are only available to those who have a deposit.”
It’s no wonder, therefore, that more than half of 25 to 34-year-olds find themselves stuck in private rented accommodation, spending up to half their income on rent and struggling to save for a deposit to make the transition to homeownership.
The current range of low-cost homeownership tenures – such as shared ownership and Help to Buy – are only available to those who have a deposit.
The fact remains that there is a significant gap in the market for those without the ‘Bank of Mum and Dad’ or their own deposit.
Politicians from across the political spectrum acknowledge the need to address the housing crisis, with some, such as communities secretary Sajid Javid and Chris Chope MP, proposing solutions to help aspirant homeowners overcome the deposit trap by rolling out innovative tenures like affordable Rent to Buy at scale.
Rent to Buy has been trialled before, but previous models were typically developed in response to the financial crash in 2008 when shared ownership units were converted in order to address low sales. Current affordable Rent to Buy models are a mainstream tenure in their own right.
These new Rent to Buy models are specifically designed to allow people to securely rent the home they plan to purchase at an affordable rent with an assured shorthold tenancy – giving them time and an opportunity to put money aside for a deposit while establishing roots and investing in their local community.
“The fact that it is not readily being deployed shows that there must be a blockage in the system.”
Some models offer people a discount price on their home when they come to buy and others gift residents a portion of their deposit.
Both ultimately provide renters with a realistic and affordable route to homeownership.
Scaling up the delivery of affordable Rent to Buy doesn’t require public funds or subsidy.
One of the government’s Housing White Paper objectives is to encourage private investment into the delivery of affordable housing as a response to the housing crisis. Part of this investment should be destined for affordable Rent to Buy.
Conversations with institutional investors from across the city, including pension funds and banks, indicate that there is up to £40bn of private funding available for new tenure types, such as affordable Rent to Buy.
The fact that it is not readily being deployed shows that there must be a blockage in the system. The chancellor is looking for innovative cost-neutral ways to scale up the delivery of homes and removing this barrier could be one of them.
To unlock this funding the National Planning Policy Framework (NPPF) needs to be revised to broaden the definition of affordable housing as widely as possible and include affordable Rent to Buy. Mr Chope has championed this proposal and in October proposed a new definition of affordable Rent to Buy in the House of Commons as part of his Ten Minute Rule Affordable Homeownership Bill.
“The National Planning Policy Framework needs to be revised to broaden the definition of affordable housing.”
Official recognition in the NPPF would overcome local authorities’ reticence toward delivering innovative new tenures and provide the confidence needed for them to accept these schemes as part of Section 106 affordable housing planning requirements on new developments.
Delivery of privately funded affordable Rent to Buy is complementary to the government’s other affordable housing programmes and it can have a powerful impact in supporting local authorities to meet their housing obligations by reducing waiting lists and enabling people living in existing social housing to move into affordable Rent to Buy homes, thus freeing up homes for those most in need.
The evidence from one such model shows that up to 60% of tenants have been housed from housing waiting lists, and of these a third were previously living in social housing.
Turning on the tap of private investment and facilitating investment into accelerated delivery of affordable Rent to Buy would assist in fixing the broken housing market and see many more hard-working families fulfil their dreams of homeownership.
Steve Collins, chief executive, Rentplus
Sajid Javid’s proposal is an illustration of the more traditional methods of Government intervention that would see the public sector used to borrow, absorb risk and ultimately build more houses. The CEO of Rentplus, Steve Collins feels that the communities Secretary will be missing a great opportunity is they pass up on the opportunity to genuinely innovate while delivering affordable housing to the UK.
Rentplus has carried out conversations with the City, and as a result of these discussions feel that there is up to £40 billion of private funding available for a range of new tenure types. The investments that could be made without adding to the national and local government borrowing costs and without using public money would be beneficial in order to deliver more homes and help to ease the housing crisis. This funding could be unlocked with the amendment to the definition of affordable housing in the National Planning Policy Framework. The results of this would be wide reaching and will give councils the confidence to support these new types of tenure.
The Government’s Housing White Paper calls for more private investment into the UK housing sector, and Rentplus encourage taking these opportunities to deliver a radical fix to the housing market with the support of affordable rent-to-buy properties and giving working families the chance to own their own home.
Rentplus is the leading provider of affordable rent to buy homes across the nation and is funded by international investors. The model delivered by Rentplus offers those that aspire to be homeowners the security of a tenure and the opportunity to rent and then purchase their own home.
“That leave be given to bring in a Bill to make provision for affordable home ownership; to require the inclusion of rent to buy homes in the definition of affordable housing; to make provision for a minimum proportion of new affordable housing to be available on affordable rent to buy terms; to provide relief from stamp duty when an affordable rent to buy home is purchased; and for connected purposes.”
After highlighting the difficulty of saving for a deposit and the population’s continued desire for home ownership, Mr Chope outlined:
“The proposals in the Affordable Home Ownership Bill should therefore be particularly appealing to the Government—not least because they do not add to the nation’s debt, but rely instead on ensuring that some of the land set aside under section 106 planning agreements for affordable housing is earmarked for homes built for affordable rent to buy.”
Mr Chope went on to outline the affordable rent to buy model, quoting directly from the briefing, and highlighted the potential investment available. He then explained that this is subject to one caveat:
“Currently, affordable rent to buy does not come clearly within the definition of affordable housing, and the Bill requires that it should so do. There needs to be an explicit reference to affordable rent to buy in the national planning policy framework definition of affordable housing. Such clarity would enable many more local authorities to take forward these innovative schemes.”
Chris Chope read the full suggested definition by Rentplus and called on the Housing Minister to embrace it. He finished by arguing that the Bill “should enjoy the support of everybody in this House because it works with the grain of public opinion and would enable more people to reach their aspiration of becoming home owners in the United Kingdom.”
It was supported by a number of Conservative MPs:
The full transcript is available at: https://hansard.parliament.uk/commons/2017-10-24/debates/82B08866-A401-47A1-9C84-1CB538EC3A1C/AffordableHomeOwnership
Chris Chope’s supporting article for ConHome is available at: https://www.conservativehome.com/platform/2017/10/chris-chope-changing-the-rules-on-rent-to-buy-would-unlock-billions-in-private-investment.html
He brings extensive leadership experience to the business having held a number of senior positions within both the public and voluntary sectors. He is a housing specialist and most recently served as the Homes and Communities Agency’s Head of Area for the East of England.
John Gildersleeve, Chairman at Rentplus, comments: “We are delighted to have secured Steve’s appointment. He will add value driving the business forward and ensure continued growth and delivery of Rentplus’ affordable rent-to-buy homes. Steve has a demonstrable track record leading the successful delivery of a number of the Government’s key priority projects and affordable housing programmes including investment across five counties in England.”
Richard Connolly, the CEO for the past three years is retiring from Rentplus and will remain with the company until March 18. Richard will ensure a smooth transition to Steve and continue to work with the team on the delivery of affordable rent-to-buy housing across the country – primarily focusing on strategic engagement. Following his retirement from the role of CEO, Richard will continue to provide consultancy services to the business.
Steve Collins, Chief Executive at Rentplus, said: “I am delighted to have secured this very important role and look forward to working with the Rentplus Board and the team to deliver much needed affordable rent-to-buy homes across the country. I want to take this opportunity to thank Richard for all his hard work in building the business so far. Our ambition is to ensure that privately funded affordable rent-to-buy is included as a mainstream tenure on housing developments. This will ensure broader housing options are available for all and many more working people have a pathway to homeownership.”
It is only in recent times that the debate surrounding the delivery and quality of affordable housing in the UK has heightened sufficiently to put it at the top of the agenda, culminating in the housing white paper and the recently announced social housing green paper. Accelerating the delivery of affordable homes is at the heart of finding solutions to fixing our broken housing market. To do so, there is an urgent need to work collaboratively to ensure that the solutions include the injection of additional money into the housing market, as well as providing choice and opportunities for all sections of society to have security and a place to call home.
Rentplus was borne out of a recognition that the housing market does not provide sufficient housing options to meet the needs and aspirations of all sectors of society, particularly those individuals and families who are not considered a high priority for social housing, who cannot immediately afford a deposit, are at risk of no-fault s21 notices and don’t have access to the bank of mum and dad. We also identified this as an opportunity to work in partnership with local authorities to accelerate the delivery of affordable housing, provide them with a financial return and achieve affordable housing policy levels in their areas whilst offering a new housing tenure for local people.
We welcomed Alok Sharma’s recent confirmation that it is the government’s intention for privately funded affordable rent-to-buy models to be specifically considered as affordable housing within the new NPPF definition. This will ensure that affordable rent-to-buy becomes a mainstream affordable housing tenure. Rentplus is entirely funded by institutional investment, meaning our model delivers additional affordable homes at no public cost and both complements and augments what local authorities and housing associations are able to build.
Facilitating the injection of private institutional investment into the affordable housing market could be one of the keys to unlocking the crisis. From our own discussions with investors, we know there is potentially £40 billion of institutional investment available. The advantage of the Rentplus model is that it provides a win-win for local authorities. Where Rentplus has already developed schemes, up to 60% of tenants came from either the Choice Based Lettings scheme or the waiting list; of these, over 30% moved from existing social housing, freeing these up to house people in need and supporting local authorities to meet their wider housing responsibilities.
The National Housing Federation recently highlighted that £9.1 billion of public money is being spent on housing benefit, a substantial increase since public investment in affordable housing reduced, with much of this ending up in the pockets of private landlords. Rentplus delivers homes without any grant or public subsidy, ensuring central and local government funding can be fully invested in providing other types of affordable housing.
We wholeheartedly agree with the Chartered Institute of Housing report published last month that emphasised the need for local authorities and housing associations to develop close working relationships in order to meet housing need. Working collaboratively with both local authorities and housing associations is central to the way Rentplus works, delivering more affordable homes through partnership.
The Rentplus model helps ordinary hard working people and benefits local authorities, housing associations and developers. In the housing white paper the government stated that at least 250,000 new homes are needed each year and with the continuing issue of affordability, new solutions and options are required. Delivering sufficient homes of a variety of tenures to meet the needs and aspirations of everybody is crucial. Affordable rent-to-buy has a key role to play in creating choice and in tackling the housing crisis.
The government plans to boost funding for affordable homes by providing £9.1 billion – up by £2 billion – of public funding as part of its Affordable Homes Programme, which housing associations and councils can bid for.
It envisages that the extra £2 billion investment would supply around 25,000 more homes at rents affordable for local people.
However, while Steve Collins, chief executive of affordable rent-to-buy homes provider Rentplus, welcomes the new plans, he says they don’t go far enough.
“We must be realistic about the scale of the challenge. Figures from [analyst] TwentyCi show that the number of 18- to 35-year-olds buying a home has fallen by a staggering 21.6% in the last quarter,” he says.
The government reports that since April 2010, around 333,000 affordable homes have been delivered, including 240,000 for rent, but Mr Collins points out that in the past year, the number of affordable homes built has been only slightly over 1,000.
He explains: “The additional £2 billion will only lead to a further 5,000 affordable homes a year being delivered out of a target of 200,000 new homes every year for five years – or 2.5% of the total needed. Given the number of homes we built for social rent fell from 40,000 in 2011-12 to 1,102 in 2016-17, the funding boost is welcome, but ultimately it is a mere drop in the ocean.”
Social Rent Deal
Ministers also confirmed plans to set a long-term rent deal for councils and housing associations in England from 2020, with the focus on areas where working families are struggling with the costs of rent and some are at risk of homelessness.
To give social tenants more security, increases to social housing rents will be limited to the Consumer Price Index (CPI) measure of inflation plus 1% for five years from 2020.
Rentplus- Rent, Save, Own
Rentplus is the leading provider of Affordable rent to buy homes, providing an accessible route to home ownership for those who cannot afford a sufficient deposit. Homes are fully funded by Rentplus with institutional investment and managed by Registered Provider, Council or ALMO partners on a 20 year FRI lease.
Tenants pay up to 80% market rent (inclusive of service charges) for defined periods of 5, 10, 15 or 20 years and receive a 10% gifted deposit from Rentplus to supplement savings when purchasing their home.
Rentplus aims to deliver a minimum of 5,000 affordable homes across England by 2020. The company already has completed Affordable rent to buy homes in Devon, Dorset, Gloucestershire and Oxfordshire complementing sustainable mixed tenure developments. Rentplus ambitious plans support accelerated delivery of new market and affordable housing, to address the housing crisis and provide greater local choice of housing solutions.
The struggling affordable housing market in the region is reaching breaking point. The National Housing Federation Home Truths report showed that house prices in Devon are more than 11 times more than the average salary for the region. Many households in the area would need a pay rise of £34,561 to afford a home. Rents in this region account for 43% of the average net pay. These problems combined are creating an environment in which thousands are ‘barely managing’, and getting a foot on the property ladder is notfeasible.
Under Rentplus’ rent-to-buy model, tenants pay an affordable intermediate rent which is substantially lower than market rent in the local area, they then have the opportunity to purchase their home after 5, 10, 15 or 20 years. This includes no service charges, and no maintenance responsibilities, which means occupants have time to save for a deposit and build a credit history that will support their mortgage application. The tenants also receive a 10 per cent gifted deposit from Rentplus when they do so.
Richard Connolly, Rentplus CEO, said: “With house prices spiralling out of control and wages not keeping pace, the aspiration to own a home is unachievable for many in West Devon through traditional means. By combining affordable rent and affordable home ownership, our tenants are able to become home owners over a period of time, without having the disruption of actually moving.
“The recognition from the Government’s Housing White Paper of rent-to-buy and more innovative housing tenures bolsters our long-held belief that new models are best fit to help fix the UK’s housing crisis. Hopefully this should see local councils across the country echo the support that we have had from West Devon, and see our model rolled out more widely.”
Rentplus’ 11 new homes will be constructed by local housebuilder, Wainhomes South West, and will form part of the larger Batheway Fields development in West Devon. The development will include a real mix of tenure types, with 34 homes for private sale, 5 discounted homes for private sale and 8 for affordable rent – as well as the 11 rent-to-buy homes. Tamar Housing, will manage the homes once built and provide further support to new occupants to buy them in the future.
Julie Barnett, Chief Executive, Tamar Housing, said: “The housing situation in the South West is becoming unsustainable, and is preventing many from getting onto the ladder. There is a real demand for innovative rent-to-buy houses which will lead families on a pathway to homeownership and security. We look forward to working with both Rentplus and Wainhomes again in the future to expand the model’s use to fit the region’s needs.”
Rentplus, an innovative provider of affordable rent-to-buy homes, and Tamar Housing, a leading housing association in the South West, announce the first affordable rent-to-buy homes in the village of Sparkwell on the edge of Dartmoor National Park. This latest partnership between the two organisations means they are now working together to deliver affordable housing on six sites across Devon and this is the second scheme of theirs to benefit residents in South Hams.
Wellbeck Manor on the edge of Sparkwell golf course is a 22 home development by Blue CedarHomes, specialist developers of housing for the over 55s. Seven of the homes on site will be Rentplus affordable rent-to-buy, four will be for affordable rent from Tamar Housing and the remaining 11 will be sold on the open market to buyers over the age of 55.
According to the National Housing Federation’s Home Truths report published earlier this year average wages for residents in South Hams are £23,613 while private rent is £767 per month. This means that for renters in the region nearly 40% of their annual pay is spent on housing which in turn makes it difficult for them to save for a deposit and get on the housing ladder.
The Rentplus rent-to-buy model was created to help overcome the deposit barrier by enabling tenants to pay an affordable intermediate rent which is at least 20% lower than market rents in anarea. Tenants are then able to save and work towards purchasing their homes in 5, 10, 15 or 20 years’ time. The tenants receive a 10 per cent gifted deposit from Rentplus to put towards their deposit when they buy their home.
Richard Connolly, Rentplus CEO, said: “This second development shows we are committed to delivering more affordable rent-to-buy homes in South Hams and Devon. The housing crisis here is significant and South Hams is becoming increasingly unaffordable for ordinary hard working people to get onto the housing ladder. These seven properties will be seven opportunities for local families to realise their dream of homeownership.
“In the current climate it is essential that there are a range of housing options and that these are more innovative and flexible to reflect the different needs of the people they are intended for. Affordable rent-to-buy means that tenants have the security of a long-term tenure, an affordable rent, saving pathway and ultimately the ability to own their own home.”
Julie Barnett, Chief Executive, Tamar Housing, said: “We are delighted to be working in partnership with Rentplus to deliver our second affordable rent-to-buy scheme in South Hams where the escalating costs of private rent are make it impossible for people to save for a deposit and fulfil their dreams of homeownership. Providing these affordable rent to buy homes alongside the affordable rented homes that Tamar is providing means we are able to provide a range of housing options for local people who otherwise are finding it difficult to find housing that enables them to continue to live in their community.
“The housing situation in the South West of England is problematic and it’s important that innovative solutions like Rentplus are available to provide additional pathways to affordable homeownership and security, enabling local families to thrive in their local communities. We are looking forward to continuing to work with Rentplus on this and other schemes in the region.”
Rentplus has completed affordable rent-to-buy homes at a number of sites across the country including Plymouth, West Dorset, Oxfordshire, South Hams and the Cotswolds with plans to develop many more over the year. Construction has already commenced on site in Sparkwell and the first rent-to-buy homes are expected to be available in Spring 2018.