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When the Housing and Planning Bill emerged from parliamentary ping-pong and passed into law in May it was not the end of the story. The Department for Communities and Local Government had issued a technical consultation seeking views on details for the regulations to support the Starter Homes clauses in the Bill.
This provided an important opportunity to shape the definition of ‘Starter Homes’ and influence the thinking behind the future of the affordable housing landscape.
At its heart, our response to the government identifies that, through sharing the same objective in providing aspiring households in need the opportunity to buy their own home, affordable rent-to-buy is a Starter Home. Our belief is that mixed tenure communities, offering a range of housing options to suit different needs, including rent-to-buy, are crucial to building a strong and sustainable UK property market.
Affordable rent-to-buy aims to move a household into full ownership and is complementary to the Low Cost Starter Home concept. The latter is ideal for households at an advanced stage who have a deposit available and are therefore able to take advantage of this opportunity.
However, many people are locked out of home ownership by the prohibitive nature of saving for a deposit. The average prospective first-time buyer will currently spend around £50,000 on rent before buying and the average first-time buyer deposit now exceeds £28,000. The rented period of the affordable rent-to-buy tenure, crucially, allows first-time buyers to save and, under the Rentplus model, the 10% gifted deposit aids their mortgage application. By including affordable rent-to-buy within the suite of Starter Home products, home ownership will be accessed by a far wider range of people, helping the Government deliver on its policy aims.
Another crucial point is that relying heavily on a single Low Cost Home Ownership product within a scheme has a number of drawbacks including availability of mortgages, restricting cash flow within schemes and developers not wanting to take market risks in delivery. The delivery of affordable housing within development schemes nationally averages 25% – if there is a requirement to deliver 20% Low Cost Starter Homes this will leave very little room for other tenures and, in our view, creates a risk to the Government’s aim to increase the supply of new housing across the country. Affordable rent-to-buy gives developers comfort because the guaranteed sale of a proportion of affordable housing at the commencement of development de-risks the scheme; it provides cash flow through the construction period to further assist the delivery of the scheme and provides an option to underpin Low Cost Starter Homes in the event of slow sales.
The need to deliver affordable housing in the UK has led to significant innovation in the sector, with private affordable home ownership models created to increase the number of products available. The delivery of Starter Homes, as currently proposed, risks the delivery of affordable tenures such as affordable rent-to-buy – they are in fact a crucial part of the UK housing landscape.
Rich Pillar, Director of Development