Homebuy scheme ‘unworkable’
The government has been forced to concede that its election pledge to allow housing association tenants a share in their properties is not financially viable for landlords, it emerged today.
There are also concerns that fewer homes will be replaced under the plans in areas where they are most needed, even after original estimates have been downgraded.
Under the plans, known as social Homebuy, up to 300,000 tenants will be allowed to buy at least a 50% share in the value of their home.
The Office of the Deputy Prime Minister has admitted that it made an error in the detail of the proposals which inadvertently exaggerated the financial benefits to housing associations. After lobbying from the National Housing Federation (NHF) it released new figures on the proposals, which showed that housing associations would still be out of pocket 30 years after the sale of shares take place.
The admission came in the same week that formal consultation of the proposals closed. In its response to the plans the NHF said the idea was unworkable as it stands.
Launching the response, Danny Friedman, the federation’s director of policy, said: ‘At present these plans are unworkable and a real missed opportunity. The figures don’t stack up for residents, housing associations, lenders and ultimately the public purse.’
Under the present proposals, housing associations would be prevented from charging rent on the share of the home that is not owned by the purchasers. But the federation argues that some rent will have to be levied to make the scheme workable for its members.
The government and lenders are reluctant to agree to this, because they fear it would make the scheme unaffordable for consumers. But at the same time they want to encourage housing associations to adopt the scheme.
Housing associations claim that the proposals have failed to successfully balance affordability for tenants with the financial viability for landlords.
It argued that tenants should be able to purchase 25% shares, which would allow housing associations to charge rents on the rest. Mr Friedman said: ‘Government plans will fail unless the scheme is made more accessible and sustainable for low income households.’
Earlier this month the government admitted that it originally overestimated the number of new homes that could be built from the proceeds of sales from the scheme.
In January it said that for every two homes sold under the plan, another one would be built. It downgraded this replacement rate to one in three earlier this month. But housing associations are now concerned that even this could be difficult to achieve particularly in London and the south-east where affordable homes are most needed.
Source: Guardian Society