The Welsh Lib Dems today launched ambitious plans to help first-time buyers get on the property ladder.
Under the party’s plans, people in Wales will be able to buy their own home without a deposit.
This revolutionary scheme is a fundamental shift in housing policy and will give young people caught in ‘generation rent’ a chance at home ownership.
First-time buyers will steadily build up a share in their home through monthly payments equivalent to rent until they own the property outright after 30 years, just like a normal mortgage.
The party will aim to deliver at least 2,500 rent to own homes over an Assembly term through the existing Social Housing Grant mechanism.
Peter Black AM and Kirsty Williams AM launched the policy at a housing development site in Swansea.
Peter Black, Welsh Liberal Democrat Shadow Housing Minister, said:
“These are ambitious proposals to help people achieve their goal of owning their own home.
“This is all about equal opportunity. Under our proposals, it doesn’t matter what your background or family circumstance is, if you can afford your rent then we will help you own your home – something nearly everyone dreams of.
“The fact is that home ownership has plummeted for the under 35’s. Prices have simply got too far out of reach for too many young families. The Welsh Liberal Democrats are putting forward solutions to help with this problem.”
Kirsty Williams, leader of the Welsh Liberal Democrats, said:
“The Welsh Liberal Democrats will support people’s aspirations to own their own home.
“Our aim to deliver 2,500 rent to own homes will be part of a wider package, including increasing affordable housing, that the Welsh Liberal Democrats will be putting forward in the Assembly elections.”
How this works
Rent to Own effectively allows first time buyers to take ownership of a home for the equivalent of market rent.
- The homebuyer rents the property and accrues a share though their monthly rent until they have full ownership after 30 years.
- This methods negates the need for a huge deposit and will help working young people who can afford monthly payments – but are unable to save enough money for a down payment.
- And as with a traditional mortgage, this is back-loaded so occupants earn a higher share the longer they have been in the home.
- The occupants have the right to sell their property on the open market at any time, cashing out their share of the home – to use as a deposit for a home on the open market or to use as they wish.
- This not a straightforward grant and build policy. It would be part of the mix in the financing of any new development and would be funded accordingly. Any new development by a Housing Association is funded by a mixture of grant and private finance. The income from rents is used to finance the loan. As each property attracts a market rent then costs would be recoverable by the Housing Association and would ensure that the sums on each development add up. This means that we do not need to identify additional capital finding to meet our target but instead just alter the make-up of new developments. However, we will be seeking to identify more capital funding for the Social Housing Grant in our 2016 manifesto so as to ensure that we do not reduce the number of affordable and social homes to rent as a result of this scheme.
This model will be viable for Housing Associations as even though over 30 years they transfer ownership of the property, the monthly revenue is equivalent to market rent: in other words, at least 20% higher than Affordable Rent, and approximately 40% higher than Social Rent.
We will partner with housing associations and other providers, to ensure monthly payments are no higher than market rent.
Homeowners will also be responsible for care and maintenance of their property, like other homeowners, reducing Housing Associations’ costs.
We will aim to deliver at least 2,500 rent to own homes over an Assembly term as part of the existing Social Housing Grant. At present, the SHG funds 50% or so of a new development and the rest is raised privately. Rent to own would be part of the mix in the financing of any new development.
Applicants will have to be in steady employment with the same kind of affordability tests and credit checks as for a conventional mortgage. We will exclude anyone who owns their own home already.
Implementation and application
This would likely be a new initiative delivered in partnership with Housing Associations.
We would seek to introduce the first houses being built within two years of the election.