Latest ONS house price index shows property prices jumping by an average of £3,000 month-on-month. That’s more than the monthly salary for a lot of aspirational home buyers. With house prices rising at this pace, deposit sizes are also increasing. Research from the CEBR suggests that the average first-time buyer now needs to save £48,198 for their deposit, a 117% increase on 10 years ago. Saving for a deposit currently remains the biggest barrier to home ownership in the UK.
The hurdles first-time buyers have to jump over to save for this deposit are also getting higher. The ONS states that rents have risen by an average 2.3% over the last year, effectively cancelling out the 1.8% growth in average annual earnings. Fuel bills, another major expense for most tenants, are also increasing by about £80 a year. With this uplift in the cost of living, half of renters can’t afford to save any income each month and a further 16% can’t save more than £50 per month. Even if renters can afford to put a little money away each month, low interest rates mean they’re unlikely to get a decent return, with average easy access savings accounts offering just 0.5% interest.
The government is trying to help, with Theresa May stating that tackling the housing crisis is one of her top priorities. They are still committed to building a million new homes by 2020 to increase the housing supply and control house price growth; the recent softening of language around needing a range of affordable tenures is very welcome. They’ve also offered a series of schemes to help first-time buyers, including starter homes and a range of affordable home ownership schemes. But this won’t be enough to take on the full challenge. The private sector has to do more to help. This is why we designed our model to help people locked out of home ownership, particularly those who are struggling to save for a deposit.
We aim to provide an alternative route to home ownership by offering affordable rents at 80% of the market rate to help our tenants save. We also provide a gifted deposit of 10% of the property’s value when our tenants buy their home to make it easier for them to afford their dream of home ownership.
While our scheme will help increase home ownership, its only part of the solution. If we really want to see an uplift in the number of people able to get on the property ladder, greater co-operation between the government, local authorities and the housebuilders is essential. Widening the definition of ‘starter homes’ to include affordable rent-to-buy models like ours would be an excellent first-step. This would allow us to increase and accelerate the supply of affordable housing we could provide. This could help the private sector institutional investors to fund more alternative routes to homeownership, now that the traditional path for aspirational home owners is too steep for many.
Richard Connolly, CEO of Rentplus
The first noticeable change we saw was the new tone in Housing Minister, Gavin Barwell’s speech to the RESI conference in South Wales. In his first major speech since his appointment, Barwell hinted at a shift in the Starter Homes policy, saying he wanted to focus on all tenures – not just homeownership.
At the National Housing Conference in Birmingham, Mr Barwell went further saying: “Some of you have said to me that you’d welcome the flexibility to bid for a wider mix of affordable housing. We’re happy to look at that – we remain committed to helping people onto the housing ladder, but not at the expense of reducing the number of homes our programme delivers.” Inside Housing also revealed the government is considering broadening its Starter Homes policy to include rent-to-buy homes. Cleary, Mr Barwell has been listening to the concerns of affordable home providers and the representations made by Rentplus; as a result the government is showing much greater understanding of the need for mixed tenure developments.
Further endorsement came at the Conservative Party conference. Theresa May, in her first conference speech as Prime Minister recognised the need for more affordable housing, arguing that, “High housing costs – and the growing gap between those on the property ladder and those who are not – lie at the heart of falling social mobility, falling savings and low productivity.” This chimes with the case we’ve been making. Through the inclusion of Rentplus affordable rent-to-buy homes in new developments, low paid households can afford to live in their local area investing their hard-earned income in the local economy supporting the regeneration of town centres and vibrant communities . Now it seems we are all moving in the same direction.
In order to tackle the country’s housing challenge, the government reiterated its previous commitment to building 1 million new homes by 2020. With research showing that David Cameron built the fewest homes of any Prime Minister since 1923, they’ve sensibly admitted that they haven’t done enough. We welcome Philip Hammond and Sajid Javid’s £5 billion stimulus for housebuilders as a way of stepping up construction, collectively, their new initiatives are expected to deliver 40,000 homes by the end of this parliament. However, more innovation is needed if we are to deliver 1 million homes; we cannot continue doing what we have always done!
Housing models which bring institutional investment through new entrants to affordable housing should also be an important part of the new housing market the government is seeking to build. The existing affordable housing sector cannot meet the demand alone. Partnerships between the private and public sectors work well and we believe that bridging the gap between affordable housing and private funding is a very real part of the solution to the UK’s housing crisis.
We now eagerly await the Autumn Statement and the government’s new housing white paper, due to be published later this year containing “further significant measures” to facilitate the delivery of the target 1 million new homes by 2020.
Richard Connolly, CEO of Rentplus
The Commission’s finding on the subject also investigate the importance of considering housing in a wider context, where it is also relevant to consider the creation of prosperous places, how housing can be crucial in boosting employment levels, and also how best to support an ageing population.
To build more homes, the LGA’s Commission recommends giving councils more power to bridge the gap between housing needs and future building levels in their area. This would require the Government to provide national backing for new local government and joint housing delivery models. While it’s predictable that an association which represents councils would call for them to have more power, when it comes to housing, it’s worth considering any suggestion which could improve the delivery of affordable homes. While the Government’s own major housing policy should significantly accelerate the delivery of homes, given the scale of the housing crisis, shouldn’t other ideas to boost the supply of mixed tenure developments also be examined?
The LGA Commission’s recommendations would enable councils to adopt and test new innovative models in their area. With current models for providing housing under strain, innovation will be essential to improving housing supply. Would it be a good idea to let councils experiment and innovate in their own communities? The Government could then incorporate the successful schemes into national policy. This may allow housing policy to be more effective at providing mixed tenure communities to support local needs.
To unlock more innovation in local government, the Commission argues that councils should be given more control over the private developer market. The LGA correctly states the private sector isn’t building enough homes, especially affordable homes, despite being granted planning permission. They provide recommendations to unblock stalled sites to boost construction and slash housing waiting lists. Leaving these sites empty or underdeveloped doesn’t benefit anyone and ensures it is harder for councils to plan future building levels. These proposals raise a few questions. Would councils be in a better position to track the progress of local building? Or should the bigger picture be considered? Perhaps a developer may need to focus their resources on other areas of the country, which different councils may not appreciate?
The LGA believes that if councils are given more control, they will be able to shape the diversity of homes built, with the Commission understanding the value of providing a mix of affordable housing options for local communities. Many areas might benefit more from an increase of affordable homes to rent than starter homes for example. Housing policy needs to be able to adapt to different economic conditions to meet local needs effectively.
However, it’s unlikely that the Government will want to give local authorities complete free reign when it comes to housing policy. There does still need to be central control over housing delivery to ensure that enough homes are built across the country. The Government’s resources, when used at scale, can create much greater incentives to encourage development compared to local authorities. Without any national oversight, local authorities are also more likely to be influenced by Nimbyism.
Thankfully, there is a compromise which would give more autonomy to local authorities, while still allowing the Government to retain overall control of housing policy. If the Government amended the planning policy and provisions within the Housing and Planning Act, this would allow more flexibility for local authorities, while ensuring they operated within a national framework. For example, if the Government broadened the definition of starter homes to include models like Rentplus, this would empower councils to increase the delivery affordable rented homes when they’re needed more than homes for first-time buyers. This would enable local authorities to create more mixed tenure development which are appropriate for their communities.
While there is no single solution to the housing crisis which will work in everywhere, giving councils the ability to create more mixed tenure developments to support local needs – without forcing the Government to lessen its control over housing policy – would significantly help accelerate the development of affordable housing.
Richard Connolly, CEO of Rentplus
The UK’s decades-old housing crisis is one of those emotive issues new governments tend to pronounce on at the start of their period in office. We have just seen this happen again with the announcements from Chancellor Philip Hammond and Communities Secretary Sajid Javid, with Prime Minister Theresa May pledging to repair ‘the dysfunctional housing market’. It is encouraging to see this level of commitment and, with research showing that David Cameron built the fewest homes of any Prime Minister since 1923, we now urgently need to see these policies drive change.
In order to create a resilient and inclusive housing market which creates strong, functioning communities it is vital that the process of accelerating housebuilding benefits from an injection of innovation – and this requires a fundamental change in thinking.
In my view Housing Minister Gavin Barwell is right on track when he says we must move away from monoculture when thinking about the housing market. Local planning authorities are currently having to work to outmoded or inappropriate tenure models that are often no longer relevant. We need to move forward and embrace flexibility. The aspiration of homeownership is embedded in the British psyche, but it is not the only solution and, at a time when deposits remain the biggest barrier to people buying a home and house price growth is rampant, it would be very damaging if it were the only real choice.
Mr Barwell has recently hinted that the Shared Ownership and Affordable Homes Programme (SOAHP) will be more flexible in future and the rhetoric around Starter Homes has softened. A housing market which welcomes mixed tenure developments is desperately needed. For example, affordable rent-to-buy provides a much-needed all-embracing model for people who cannot afford to buy today, but will be able to in future, if given half a chance to save to buy their home. Rent-to-buy should be widely available across the country as a mainstream tenure. Communities comprising people with a range of skillsets and from a range of backgrounds are the most successful – and particularly when those people have a secure housing option that suits their needs. The apparent shift toward a flexible tenure approach is very welcome and to create the housing market we so desperately need it is vital that this crystalizes into clear action.
Housing models which bring institutional investment through new entrants to affordable housing should also be an important part of the new housing market the government is seeking to build. The existing affordable housing sector cannot meet the demand alone. We need to build on the excellent work local authorities and housing associations have already done. Partnerships between the private and public sectors work well and we believe that bridging the gap between affordable housing and private funding is a very real part of the solution to the UK’s housing crisis.
We hope the housing crisis will start to ease following the government’s commitment to accelerate housebuilding, but it should not miss the opportunity to widen its thinking about how we solve this most divisive of issues.
The multi-million-pound development headed by city-based Rentplus, has financial backing from private and institutional investors. Rentplus is creating a “step-change in the delivery of affordable housing” nationally with its new model.
Under the Rentplus model, at the end of a rental agreements, tenants have the opportunity to purchase their property and receive a ten per cent gifted deposit from Rentplus to help their mortgage application.
“The Rentplus homes will be managed by Tamar Housing Society and let to tenants at affordable rents capped to the local housing allowance for a minimum of five-years with the opportunity to purchase in the future with the assistance of a 10 per cent gifted deposit.”
Despite the recent government policy changes, intergenerational inequality still means people in their thirties will be looking at the generation above believing they have been hoodwinked out of numerous benefits their parents enjoyed, including higher levels of home ownership, lower living costs and access to the most generous pension schemes
The housing supply crisis in the UK is particularly severe and is feeding a lack of housing affordability. With the UK population growing and demand for homes on the up, we urgently need to address this issue with innovative housing solutions, such as rent-to-buy models backed by institutional investment, which unite the public and private sectors and address the housing crisis at no additional cost to the public purse.
If we are to start to close the intergenerational wealth gap and address issues of housing supply and affordability we need the government to stay on course and deliver a housing strategy with a range of solutions to suit the needs of as many people as possible. Immediate home ownership is not an affordable or feasible option for everyone and only by working together can we find acceptable solutions to the housing crisis.
This week is an extremely important one for the team at Rentplus. We have received a significant new injection of funding which will help us expand our delivery of affordable rent-to-buy homes across the UK.
The investment has come via a delivery finance facility from Crestline Investors, a credit-focused institutional alternative asset management firm. We have agreed to initial funding of £20 million, available to be drawn down over the next two years, with an option for a further £20 million.
This adds to the £70 million of investment already secured from BAE Systems Pension Funds Investment Management earlier this year.
The Crestline Investors funding will be used to accelerate the delivery of affordable housing across the UK. We are already in contract to deliver homes in Cambridgeshire, Gloucestershire, Oxfordshire, Essex, Suffolk, Northants, Devon, Somerset, South Hams, Sedgemoor, Plymouth and Bicester by March next year. Our homes will generate significant inward investment for communities and provide much needed affordable homes to residents in these areas. The arrival of Rentplus homes reduces local authority waiting lists and allows tenants to set down roots and make real contributions to their communities because they are able to rent and then buy their home. Rentplus facilitates this migration to home ownership whilst providing security of tenure during the rental period.
As house prices continue to rise and deposits remain a barrier to home ownership, we are seeing significant interest from potential tenants, housing associations and local authorities who want Rentplus homes in their area.
This fresh funding is evidence of the belief in both our business model and our ability to deliver new, affordable homes, providing an alternative route to home ownership. With this additional funding, we remain confident that we will meet or exceed our goal of 5,000 new homes by 2020, providing part of the solution to the UK’s housing crisis.
Richard Connolly, CEO of Rentplus
https://www.theguardian.com/money/2016/aug/06/rent-to-buy-scheme-home-ownership-rentplus
http://www.telegraph.co.uk/business/2016/08/16/rent-to-buy-homes-provider-rentplus-lands-more-funding/
The mix of (2x) two bedroom, (3x) three bedroom, and (1x) four bedroom semi-detached properties will be managed by GreenSquare who will be responsible for the allocation/selection of tenants and management of the new Rentplus homes.
All applicants will be assessed via the Gloucestershire Homeseeker application process to ensure they are suitable for the Rentplus product. For details of how to apply or to make an application, please visit Gloucester Homeseeker.
The properties will be managed by GreenSquare – please click here to view their website.
The Department of Communities and Local Government (DCLG) has released its latest English Housing Survey – data which throws into stark relief the nature and extent of the housing crisis in the UK. This research found that there are now 300,000 fewer first-time buyers today than in 1994/1995. The average age of those who can afford to buy also increased in this time frame, from 30 to 33 years of age. These shocking results, combined with the shortage of homes being built – David Cameron built the fewest homes of any Prime Minister since 1923, with an average of just 123,560 homes per year, – means that housing should still be a serious concern for the Government.
Affordability remains a serious issue and without additional support or policy changes we are left in a situation where only high earners, or those with a generous supply of credit from the ‘Bank of Mum and Dad’, are able to afford to buy their own home. For those less fortunate, saving up for a deposit is an incredible challenge. Research from Resolution Foundation has found that those under 35 will pay £44,000 more in rent during their lifetimes than previous generations. Millennials (those currently aged 15-35) may also be the first generation to earn less than their parents. With rents and house prices rising far faster than wages, many will be struggling to stay where they are, with only the dream of owning their own home. All this means that we have seen a decline in the number of private renters who expect to buy their home, after a relative period of stability.
Theresa May’s new government considers helping young people onto the housing ladder to be a top priority. However, the Government must realise that their Stater Home policy will not help enough people. The struggle to save for a deposit and pay full rent simultaneously is too difficult for many aspiring home owners. Saving for a deposit remains the biggest barrier to home ownership and two thirds of tenants questioned for the English Housing Survey who said home ownership is out of reach, cited saving for a deposit as the main barrier. Affordable models, like Rentplus, are therefore a vital piece of the housing puzzle, as they help people who would otherwise by excluded from home ownership, and are complementary to other affordable options already offered by housing associations.
Tenants in Rentplus homes benefit from affordable intermediate rents (80% of market rent); a 10% gifted deposit when they are able to buy and have the additional benefit of no maintenance responsibilities whilst they are renting their home, as during this time our housing association partners who manage the homes takes care of that on our behalf. Of course, Rentplus is not a panacea; it is a complementary housing tenure which provides an alternative route to home ownership, but it is our belief that there is no one size fits all solution, and instead many are required to suit the needs and circumstances of the UK population at large. It is time to be innovative and brave.
Richard Connolly, Rentplus CEO