At the heart of the strategy is a new build indemnity scheme that will give a helping hand for up to 100,000 prospective buyers who are currently frozen out of the housing market because of the need for large deposits.
Under the proposals, homebuyers will be able to secure loans on newly built homes – the bedrock of the first time buyer market – with only a five per cent deposit.
The Government and housebuilders will help provide security for the loan, so if the house is then sold for less than the outstanding mortgage total the lender will be able to recover its loss.
Through the scheme lenders will be encouraged to offer mortgages with smaller deposits, increasing demand for new homes and giving a welcome boost to the housing market.
The Government will also consult shortly on proposals to increase discounts under the Right to Buy, giving social tenants the opportunity to buy the homes they live in. The discount will be improved dramatically and will be up to half the value of the home, making home ownership ever more achievable.
For the first time, the receipts from additional Right to Buy sales will be used to support the funding of new affordable homes for rent on a ‘one for one’ basis, which is expected to deliver up to 100,000 new homes and support 200,000 jobs.
Assistance for people buying homes will be matched by support for the people who build them, from the largest housebuilder to people who want to build their own homes.
Affordable housing providers are in line to share almost £1.8bn cash to develop new affordable homes. The first £1bn worth of contracts under the Affordable Homes Programme have just been confirmed, putting the Government on track to deliver up to 170,000 new affordable homes across the country over the next four years.
The Government will give more support for local areas that want to deliver new, larger-scale developments that meet the needs of their growing communities. A new prospectus will be published shortly inviting councils and communities to identify opportunities for locally planned large scale development, which will take advantage of streamlined planning processes, giving communities a stronger say and developers greater certainty.
The new plots could vary in size, from a small expansion of a few hundred homes through to a new market town with up to 10,000 homes. Viable schemes that are sustainable and have strong local support will be given financial assistance to get the work going, and will be prioritised for future infrastructure spending.
Where there are existing building sites that have stalled, a £400m Get Britain Building funding pot will enable housebuilders to restart construction, helping to deliver up to 16,000 new homes on sites that already have planning permission, but have been shut down because of economic conditions.
The new support on offer will also benefit self builders, an industry often assumed to be out of reach for some, but one that is increasingly popular and already worth £3.6 billion for the national economy. £30 million additional funding has been allocated to support provision of short term project finance on a repayable basis.
Councils will receive support to work with local people and bring forward plans for larger custom-built housing projects, similar to the successful project in Almere in the Netherlands.
All these measures will be supported through the New Homes Bonus, which will ensure that those areas which are growing have the resources to meet the needs of their new residents and existing communities.
Efforts to boost the supply of new homes and help homebuyers will be matched by improving fairness for those living in social homes.
Measures in the strategy will support the radical programme of reform to the system for social housing that is already underway. The Government will consult on ‘Pay to Stay’ proposals. This will mean that those social tenants on high salaries, such as household incomes of over £100,000 a year, will pay up to market rents if they want to continue living in taxpayer-subsidised homes.
Councils will be given new powers to reject applications for social housing from people who own a perfectly acceptable home of their own. And there will be stronger measures to help tackle the outrage of 50,000 unlawfully-occupied social homes – with a more detailed consultation to be published later this year.
The overly bureaucratic and complex model of council housing finance will be scrapped too so councils can manage their social housing stock more effectively.
Instead of the revenue generated from social housing being handed over to central Government and redistributed, councils will be able to keep their own receipts, giving them freedom to maintain their housing stock with more efficiency and transparency, in a way that meets local needs.
The Strategy will also support greater investment in the private rented sector, a sector which accounts for around 16 per cent of all households.
Large scale investment will be driven through changes to the tax rules affecting bulk purchases of buy-to-let homes, as well as through measures to encourage the growth of Real Estate Investment Trusts – the globally recognised model for real estate investment that provides low cost access to capital.
An independent review will also consider whether there are barriers to greater large-scale investment in rented housing.
The Prime Minister and Deputy Prime Minister said that the fact that for years so little has been done to bring the nation’s empty homes back into use is a "national scandal". Tackling the 700,000 empty homes across the country is a top priority in the strategy, and a key feature in the drive to increase the provision of affordable housing.
Housing Associations and councils will be able to apply for part of £100m of Government funding to bring empty homes that blight neighbourhoods back into use. The money will be used for innovative housing schemes that will ensure empty properties that ruin neighbourhoods are lived in once again, communities are regenerated and at the same time more affordable housing is provided. Government is also announcing £50 million of further funding to tackle some of the worst concentrations of empty homes.
The schemes will be backed by cash rewards through the New Homes Bonus for councils bringing empty homes back into use, and many schemes will also have wider benefits such as providing excellent training opportunities for local people.
The Government is also consulting on plans to allow councils local discretion to introduce a council tax premium on homes in their area that have been empty for more than two years, to provide a stronger incentive for empty homes’ owners to bring them back into use.
The Strategy also focuses on the needs of older people and includes a deal to improve the quality and choice of housing available for older people, which aims to help them to stay independent for longer.
Nearly a third of all homes are occupied by the elderly, and nearly two thirds of the projected increase in the number of households over the next twenty years will be headed by someone aged 65 or over.
So a package of measures will help the elderly adapt their homes, or move into alternative housing, to meet their changing needs. As part of this package the Government will work to develop simple and attractive financial products that help older home owners safely release equity that they can then use to maintain or adapt their homes.
Other reforms set out in the strategy include:
– transferring housing and planning powers from central government to councils and local people, so that they can shape development in their areas
– replacing top down targets with powerful cash incentives through the New Homes Bonus, so instead of simply feeling the strain that new building projects place on existing services, communities have a reason to support new development
– supporting private sector growth by reducing regulation and other burdens on house-builders
– accelerating the release of public sector land with capacity to build up to 100,000 new homes by 2015, and support up to 200,000 construction and related jobs during development.
Nicholas Leeming, business development director at Zoopla.co.uk, said:
“The housing market has been teetering on the edge of a precipice for the last few months and it was vital the government made some decisive moves to pull it back from the abyss. Focussing on helping first-time buyers and tackling the issue of housing supply is exactly the right place to start as it is these two parts of the market which provide the foundations upon which the rest of the sector can grow. Unfortunately, it’s questionable whether these measures go far enough. The schemes outlined in the plan are elective, so lenders and house builders are not obligated to participate if they don’t want to. With the market in danger of stagnating, the government should have been brave enough to make their plans compulsory. It’s very possible that lenders and house builders will cherry-pick the elements that suit them best rather than the people the strategy is aimed at helping.”
Steve Lees, Director at SmartNewHomes said:
“The Government’s new build mortgage indemnity scheme provides a welcome lifeline for perfectly credit-worthy first time buyers who are struggling to raise the large deposits necessary to buy their first property.
"Improvements to affordability will drive demand, so I am pleased that the mortgage scheme is announced alongside a new £400million fund to get stalled developments moving, which will help ensure these funds make a real difference to the wider economy. Over the long term hundreds of thousands more new homes need to be developed every year and it remains to be seen what impact the new Localism Act will have on development levels once it finds its feet among communities.”
Stuart Law, Chief Executive of Assetz, said:
“It is good to see today’s announcement from the Government offering to underwrite some of the risk of higher loan to value mortgages via an indemnity fund supporting up to 95% loan to value loans. This is exactly the structure we suggested to HM treasury earlier this year and will leverage some risk capital provided by housebuilders to a level where 95% mortgages are possible again.
"We are talking about providing mortgages to high quality buyers who can more than afford monthly mortgage repayments but who are simply struggling to save the much larger deposits now required, so I expect the risk to taxpayer’s cash to be very small.
"The enormous benefits to the wider economy will far outweigh the negligible risk of mortgage defaults, and the announcement of the £400 million investment fund to support development could be the kick start we need to start building our way out of this recession."
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