Boris Johnson has announced big changes – or, at least, big headlines – to England’s housing system.
Thatcher’s ‘right to buy’In a shakeup that was first proposed seven years back, 2.5 million tenants of housing associations will receive discounted rates.
The most interesting – and controversial – proposal is what the PM calls it. “benefits to bricks”. 1.5 million housing benefit claimants who are working will be able to put their benefits into a mortgage for the first time.
ISAs used to save for a house deposit will be made exempt from the £6,000 savings limit at which your Universal Credit starts being cut.
The PM also announced that a mortgage review will be conducted, and it will provide a report by autumn on deposits lower than the original.
The point is to make better use of the £30bn housing benefit bill, much of which goes straight to private landlords – helping pay off They mortgages. Also, mortgage payments are often less expensive than renting.
A number of industry professionals disagreed with the decision, with Lewis Shaw of Shaw Financial Services Say it : “This is the ultimate political meringue: sweet, lightweight and with very little substance.
“We don’t need more right to buy schemes, we need to get more homes built and to bring down the cost of buying and owning a home. Talk about fiddling while Rome burns.”
Jonathan Rolande, National Association of Property Buyers, also added: “This policy will do nothing to help anybody affected by the housing crisis.”
When will this all happen?
The next weeks will see a review of the system for mortgages, such as low deposits, and a report by Autumn.
The government will also “work closely”On the design of the right–to-buy scheme together with housing associations
There are not many, if any, commitments as to when these aspects will actually be realized.
Interest rates are rising, making mortgages more costly.
What will 2015 be like?
David Cameron in 2015 proposed that tenants of housing associations have the right to buy, but it was blocked by the buffers.
A pilot scheme took place of 1,892 sales and an average discount of 46% on properties worth £137,271.
Housing associations pledged to comply with the pilot. “at least”One new home for every home that is sold.
These replacements, however, were not. “like for like”In the vast majority cases, it is.
Kate Henderson, Chief Executive at the National Housing Federation said: “Pilots have shown that there is not enough money from sales to build new social homes to replace those sold, meaning a net loss of social housing.”
Now it’s being revived, what will be different?
Are the homes going to be rebuilt quickly and as if they were built from scratch?
Bors Johnson vowed a “one for one replacement”Each home sold under the right to purchase.
But once again there doesn’t seem to be any pledge of a like-for-like replacement.
In the last pilots, most replacements weren’t due to be the same rent level, number of bedrooms or location.
Of the replacements planned (and most weren’t built at the time of the survey), 42% were planned to be at social rent but 58% were planned to be at “affordable rent”It’s more expensive than the home it replaces.
Jonathan Rolande, National Association of Property Buyers said: “Housing Associations are usually private entities who will need to be compensated for the enforced discount, so it appears that there will be a net loss for the taxpayer, rather than the ‘gain’ of the council house sales.
“This is an issue that needs to be addressed.”
Ian Fletcher is Director of Policy at British Property Federation. “The homes bought must be replaced on a like-for-like basis. Without this, the availability of affordable homes will continue to be stretched at a time when we urgently need more stock, not less.”
David Renard, Housing spokesperson for the Local Government Association said: “Any houses sold must be replaced quickly, in the same local authority area and on a like for like basis.”
How do you ensure that 95% of mortgages remain available?
Financial uncertainty means banks have been scaling back lending and it’s harder to get 5% or 10% deposits.
Key to Boris Johnson ’s plan is encouraging more lending of very large mortgages with small deposits.
These are more risky for both banks and borrowers, and could lead to negative equity if you lose your home.
The government is in talks with banks but ultimately there’s nothing to force them to lend on lower deposits.
Do you really intend to build enough houses?
Critics argue that larger mortgages do not solve the problem of a strained supply of housing in the country.
Boris Johnson failed to renew the Tory pledge to build 300,000. Homes per year.
He said instead: “I can’t give you a cast iron guarantee that we’re going to get to a number in a particular year.”
How can people who are on benefits save a deposit
1.5 million working people can now use housing benefits to pay off their mortgages under new welfare rules.
They will also be able to save more for a mortgage. Currently your Universal Credit tapers away if you have £6,000 in savings and ends if you have £16,000. This cap will not apply to ISAs that are used to save for deposits.
Lindsay Judge, Resolution Foundation’s Research Director, disagreed. “The number of people affected is likely to be small given that the deposit is the main barrier to home ownership.
“More than four-in-five families on means-tested benefits have no savings at all.
“In reality, those most likely to benefit will be receiving support from elsewhere – be that via Right to Buy or financial support from family members.”
How do people who are on benefits get approved to mortgage?
Just like banks don’t have to approve 95% mortgages, they don’t have to approve certain people to lend to.
So there’s nothing to stop them running an affordability check on benefits claimants and rejecting their application.
Oli Pearce, director at Guild Mortgage Services, said: “The whole policy package seems like political waffle to me.
“Last time I checked, lenders dictate what income they will allow for a mortgage application.”
How many people will it help?
1.5million people are potentially eligible to pay benefits into a mortgage.
But for the reasons above, experts are sceptical about how many will actually get round to it.
Many people in the benefits system are relying on food banks or just scraping by, let alone saving a deposit.
And ministers have not made any commitment to how many people will be able to buy a home because of this.
Work and Pensions Secretary Therese Coffey said it would be “thousands” but didn’t give a timeline for that.