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Saturday, August 06, 2016

The Welsh Lib Dem policy that could help people own their own home

One of the more innovative policy decisions presented to voters at the Welsh Assembly elections was the rent-to-buy scheme proposed by the Welsh Liberal Democrats.

This scheme recognised that many young people can afford to pay rent and/or a mortgage but are unable to get together the 15% or 20% of the purchase price needed for a deposit. The idea is that they rent a property and over a 25 year period their rent counts towards purchasing it.

Thanks to Kirsty Williams' deal with Labour, this is now Welsh Government policy and I look forward to proposals coming forward to implement the scheme.

How exactly it will work is illustrated in a similar but not identical scheme reported on here:

This housing association sources the tenants, either through local authority housing waiting lists or via the local authority’s choice-based letting system. Decisions are made on a case-by-case basis, although Rentplus expects the scheme to be suitable for around 60% of the people on waiting lists.

There is no deposit to pay and tenants will pay either 80% of the market rent or a sum equal to the local housing allowance – whichever is the lower of the two – to enable them to save every month while they are renting.

During the pre-agreed rental period, tenants can leave the property with a month’s notice. But provided they pay their rent on time, display no anti-social behaviour and stick to the terms of their agreement, the housing association landlord cannot ask them to leave.

Their rent will increase by 1% plus inflation (as measured by the consumer prices index) each year. Every five years, it is reset at no more than 80% of market rent.

Unlike shared ownership schemes, tenants do not have to pay for service charges or repairs while they are renting the property.

At the end of the agreed rental period, as long as the original tenant is still living in the property, Rentplus will transfer a 10% cash deposit to the tenant’s solicitor prior to the property purchase.

Home ownership in my view is not a legitimate policy objective for government in its own right, but as part of a suite of measures designed to put in place affordable homes to meet all needs it has its place. The key is to ensure that the subsidies we apply are appropriate to the means of those who receive them. In that way we make the maximum use of public resources whilst ensuring that people are able to have the homes they need.
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