Providers were panicking over the mounting number of unsold homes built for shared ownership as the mortgage market dried up and house prices plunged, so the then Labour government rode to the rescue with its £300 million ‘rent-to-homebuy’ scheme.
This was intended to buy associations time. Landlords could rent homes which wouldn’t sell at 80 per cent of market rents for up to five years, during which tenants could save up for a deposit. It was hoped that was long enough for property values to recover, allowing landlords to sell the homes. Tenants would get first refusal.
Unsurprisingly the scheme was massively popular, covering almost 7,000 properties. But the flaws in the plan were obvious from the start: what to do if prices don’t recover enough, and what if the tenant can’t afford to make the step into shared ownership once the five years are up?
One Housing Group provided an answer this week when it emerged it has issued notices to quit to 43 of its rent-to-homebuy tenants (page 1). It claims it is doing this in the light of demand from others to buy homes that were always intended for sale.
While One is perfectly within its rights to take this step and recoup its and the taxpayers’ investment, it does seem harsh - particularly as it and its tenants entered into a three-year scheme in apparent good faith and many tenants have been saving for a deposit.
Are other landlords likely to follow suit? Despite protestations this week to the contrary from some of the biggest rent-to-homebuy landlords, senior industry sources feel the answer to this will be yes. Money is tight and if prices have recovered and current tenants aren’t yet able to purchase, others will find it difficult to resist the temptation to cash in.
When landlords are considering this though, they should bear in mind the potential impact on those households making way. The funds raised through sales may be used to ease longer-term housing need - but is adding to it in the short-term a price worth paying?