Category Archives: help to buy

Government action demanded to support private rented sector

Two separate calls have come from those in the property industry, calling on the government to involve itself actively in the promotion of the private rented sector. Only with this level of support, they argue, can the sector gain traction, and help solve the UK’s housing crisis.

Agent GVA suggests three initiatives, to help the housing market. In its Development Outlook for summer 2014, the firm suggests there needs to be:

* a substantial expansion of the new town/garden city initiative

* further stimulation of the private rented sector “on sites less suitable for owner occupier housing”

* more public sector affordable homes

However, the researchers at GVA are under no illusions: “All these initiatives would require increases in government expenditure, which seems unlikely to occur in an era of public sector cut backs.”

That said, the government has previously committed itself to substantial support for the housing market including Help to Buy, Funding for Lending, Build to Rent and Get Britain Building. It’s just that, together, these initiatives may have helped in some way, but do not appear to have solved the key issue.

Meanwhile, PRS developer Fizzy Living believes it is only a change in planning law that will help move things up a gear. The company’s managing director Harry Downes says rental housing needs its own planning classification. “We need to get tot he point where the government, local authorities and planners understand the PRS,” he told Property Week, “where it has its own planning classification and where it forms part of a section 106 agreement.”

Downes has suggested his firm would bind itself to work with local authorities, introducing such restrictions as a cap on incomes for those eligible to rent. “If the government is serious about solving the housing crisis, then it just has to give local authorities the policy to make it happen.”

Housing associations shy away from rental, as sales boom

A booming housing market – helped by government incentives – is forcing housing associations to cut back on their plans to enter the private rented sector.

In London and the south east, the impact of the Help to Buy scheme means house prices are rising, and there is greater demand from buyers who can now get on the housing ladder with a minimal deposit.

As a result, several housing associations are cutting back on their private rented aspirations. Affinity Sutton has abandoned plans to build hundreds of homes a year for private rent, reports Inside Housing. Notting Hill Housing Trust and the Guinness Partnership are also reportedly scaling back plans in a marketplace where building to sell can give them a better short term return, than building to rent.

The news is a setback, as last year nine housing associations bid successfully for funds under another government initiative to boost the housing market, Build to Rent. But house prices are rising, and busy builders are hiking construction costs, while land values are strengthening – all making the quick buck of a sale look more attractive.

Keith Exford, the chief executive of Affinity Sutton told Inside Housing: “We took the decision at the beginning of the year that returns on PRS are just not big enough given the risks involved.”

However, not everyone is focused on the short term, it seems. In the last week, Fizzy Living, the private rented company of the Thames Valley Housing Association, agreed a £200 million cash injection from the Abu Dhabi Investment Authority, specifically to invest long term in growing a portfolio of private rented homes in the UK.

Buyers failing to prepare for Help to Buy

More than a third of 20-40 year olds are hoping to tap the government’s Help to Buy scheme this year, but many of them are ill-prepared to meet the initial requirements of the scheme.

Basic errors such as not being listed on the electoral roll are common, according to research by Experian CreditExpert. A lack of savings or poor payment history on something as inconsequential as a mobile phone account can also contribute to a weak credit record, affecting applications for a mortgage negatively.

The Experian CreditExpert research found just 40% of Help to Buy hopefuls were registered on the electoral roll at their current address. A quarter have never reviewed their credit record, while 7% have saved nothing towards a deposit. Less than three quarters have actually saved the minimum £5,000 required to get into Help to Buy.

“Help to Buy has brought home ownership within touching distance for thousands of younger buyers earlier than they may have dreamt possible,” said Peter Turner, managing director of Experian Consumer Services. “But it’s important to remember that the deposit is only part of the equation and consideration must be given to how much you can afford to borrow – and crucially, repay, in the years to come.”

The research discovered that 25% of the hopefuls have never checked their credit report; however, 31% are switched on to the issue, and have checked their file in the last three months. One in seven admit they have been managing their current credit accounts poorly.

Interestingly, men are likely to have saved more – 47% have more than £10k in savings, compared with just 33% of women. Unsurprisingly, Londoners have the biggest deposits saved, more than half having more than £10k and 19% having double that ready to put down. Currently, the hopefuls have an average £4,600 in other borrowing already against their name.

Turner also warned: “Anyone looking to make the most of Help to Buy would be well advised to check their credit report to better understand their credit history, and ask for help if needed, to ensure your credit report pains the best possible picture – before you make your application. Hopefuls should also note that in the short term, future applications for credit could be negatively affected as lenders may want to see how well you are repaying your current credit commitments, before offering you any more credit.”

Take a closer look at the Experian report here.