What's all the noise about Right to Buy?
There has been a lot of negative press about the government's proposed extension to the Right to Buy scheme, with detractors stating that it's already reducing council housing and encouraging housing fraud in certain areas.
The intention of Right to Buy was to allow council tenants to purchase their home at a discount. It applies to most council tenants, as long as it’s their only or main home, is self-contained and they are a secure tenant that’s had a public sector landlord for three years.
However, a proposed change to the legislation, which is part of the Housing and Planning Bill, would also give housing association tenants the opportunity to buy their own home at discounts previously only open to council tenants. This could mean a discount of up to £103,900 in London and £77,900 in the rest of the country.
As compensation to housing associations for having to sell their properties at prices below market value, the Government has promised that a replacement home will be built for every housing association home sold under the scheme. Detractors say that this will put more pressure on councils for housing, and that the properties to be built aren’t necessarily going to be like-for-like.
Ultimately though, the aim of this is to get more people onto the property ladder, and for the wider market, that can only be a good thing. The number of first-time buyers is expected to rise significantly this year, partly thanks to schemes like this, and that’s creating a lot of movement in the market, from the bottom up.
At Together we provide funding for Right to Buy mortgages, based on both capital repayment and interest-only, with many income sources accepted; including employed, self-employed, DWP benefits and pensions. Loan amounts range from £3k to £200k, with loan-to-values of up to 60%, and we’ve seen marked growth in funding for Right to Buy properties in the last quarter.
Following on from my last blog on property hotspots, it’s no surprise to learn that London tops our table for Right to Buy loans in the last 12 months, accounting for 20% of all funding. That’s followed by the thriving Yorkshire and Humber region, and the North West.
The Humber region is enjoying an exciting period of growth, with Hull preparing to be crowned the City of Culture in 2017 and a significant increase in the number of businesses in the region, with the Chancellor proclaiming last year that Yorkshire had created more jobs than France. House prices went up by 3.3% and this growth looks set to continue, so it’s perhaps unsurprising to see the Right to Buy scheme proving successful in this area.
For property professionals and investors, incentives to help drive more people into the market will stimulate wider demand for properties, whilst for previous council or housing association tenants, this is the opportunity of a lifetime to become a home-owner.
So I’ll ignore the naysayers for now, as I believe schemes like Right to Buy can be a positive force for the market and I’ll be eagerly watching to see how this develops under the proposed changes.