Posts with tag: general election 2015

How Would the Conservatives’ Right to Buy Work?

The Conservative Party have proposed an extension of the right to buy policy to housing association tenants, but what will this mean?

The plan involves expanding the scheme to housing association tenants and offering discounts of up to £102,700 in London and £77,000 elsewhere in England. Right to buy will not apply in Scotland or Wales, where it is being abolished.

In England, there are about 2.5m housing association tenants. Of these, around 1.3m have lived in their property for three or more years; this would give them the chance to buy.

The Conservatives would also require councils to sell the most valuable homes in their remaining stock. Cash from these sales will create a £1 billion fund for creating 400,000 new homes on brownfield land, says the party.

Around 800,000 housing association tenants can already buy their homes, however, current discounts are quite small. In low house price areas, discounts are £9,000 and rise to £16,000 in London. The new policy would include an extra 500,000 tenants and offer much higher discounts.

Tenants

Once a tenant has lived in their housing association property for three years, they can apply to the scheme. For houses, the discount will be 35% of the market price, and for flats it will be 50%. A larger discount will be made the longer they have lived in the property; for every extra year they rent a house, they will get another 1% discount, and a further 2% if they occupy a flat. The total discount will be capped in cash terms.

These terms reflect changes to right to buy legislation from 2012, which cut the rental period required from five to three years and increased maximum discounts. After this reform, council house sales rose from around 2,500 a year to 11,000 a year.1

It has been noted, however, that in areas with high property prices, tenants on low incomes will still struggle to afford mortgage repayments, even with discounts. For example, a council house in South London could be worth £500,000. At a cap set at £102,700, the tenant would still need a mortgage of £397,300. Tenants will also be required to meet strict mortgage criteria, which the Conservatives introduced due to the financial crisis.

How Would the Conservatives' Right to Buy Work?

How Would the Conservatives’ Right to Buy Work?

The Conservatives say that 15,000 high-value council properties fall empty every year, and the forced sale of these will gain a £4.5 billion profit per year, which would fund the new policy.

The cost

It has been estimated that the policy will cost £5.8 billion, however, critics say it could reach £20 billion or more. Total government spending on housing and the environment in 2013 was £25 billion. The National Housing Federation (NHF), representing housing associations, argues that the £5.8 billion figure could instead fund 300,000 shared ownership homes.

The number of homes

It is fairly clear that the policy will reduce the amount of homes available for social housing. The Conservatives say that for each home purchased, another will be made available. However, the NHF reveals that since 2012, just 46% of homes sold under right to buy have been replaced.1

The Department for Communities and Local Government says that 1.88m council houses in England have been sold since right to buy was launched by Margaret Thatcher in 1980. This accounts for 37% of the total council housing stock, but local authorities have built only 345,000 new homes in the same time.1

The majority of housing associations have informed the NHF that they only expect to replace half the homes currently being sold through right to buy. One in ten say they won’t be able to replace any.1

Phoenix Community Housing in Lewisham, southeast London, keeps just a small amount of the profits from each right to buy sale. One of its homes worth £205,000 was sold through the scheme in 2014 for £105,000. The housing association received just £27,332; too small a figure to build a replacement.1

The waiting list for social housing in England is currently 1.36m households, or 3.4m people.1

Mortgage brokers and estate agents are generally supportive of the scheme, however, they are now questioning whether it would help increase housing supply.

The Intermediary Mortgage Lenders Association says: “It is a quick win to help boost a flagging homeownership sector and stimulate turnover in a market where transaction levels are now three times slower than in the 1980s. However, it carries no guarantee of greater house building as a result.

“The danger is that it will weaken the future capacity of the social renting sector to provide a safety net for those who cannot afford to house themselves via the private market.”1

Landlords

It is estimated that over a third of homes sold under right to buy in London are now owned by private landlords. Labour London assembly member Tom Copley believes that 36% of right to buy properties in the capital are owned by landlords, who therefore benefit from housing benefit payments.

He says: “Substantial numbers of these are being let to tenants who are now supported by housing benefit, while many would-be council tenants have now been forced into the private rented sector because of the dwindling supply of council homes. The consequence of both phenomena has been that taxpayers are again being charged more to subsidise higher private rents.”1

Popularity

The Conservatives hope that they will achieve Labour supporters through this scheme. The original Margaret Thatcher policy apparently swayed people to vote for her. However, this was way before the housing crisis, involving sharply increasing prices and the huge rise in private renting. There are now around 9m private tenants, who will feel excluded from the policy.

A NHF study revealed that 60% of the public think that it is unfair for social housing tenants to receive a discount on their homes when private tenants do not.

A YouGov survey found that Conservative voters are more likely than Labour voters to find the extension of the scheme unfair. UKIP voters find it the most unfair of all.

1 http://www.theguardian.com/society/2015/apr/14/right-to-buy-housing-associations-your-questions-answered

 

Green Party Will Abolish Letting Agent Fees

The Green Party announced in its manifesto that it would abolish letting agent fees and insurance-backed tenancy deposit schemes, if it came into power.

Green Party Will Abolish Letting Agent Fees

Green Party Will Abolish Letting Agent Fees

It was also revealed that it would launch five-year fixed tenancy agreements and rent controls. The party would also encourage the introduction of local not-for-profit letting agencies.

The Green’s plans are similar to those in the Labour Party’s manifesto.

If the Green Party won the general election, there would also be obligatory licensing for all private landlords and the abolishment of tax reliefs that landlords can currently claim.

Favouring homeowners, owner-occupiers would be able to receive more tax-free rent from letting a room in their home, as the party would increase the Rent a Room cap to £7,250 a year.

The National Landlords Association (NLA) criticised the proposals describing them as an attack on landlords, giving “a one-sided view of the private rented sector.”

The NLA states: “The Green Party appears to want people to rent. However, it does not take into account the demands on landlords to provide safe and decent housing for those families. Rent controls have been proven not to work and many landlords will just sell up and leave the sector if they are introduced.

“Five-year tenancies will reduce the flexibility within the private rented sector that suits landlords and tenants alike, and this policy does not take into account the fact that tenants can ask for longer tenancies already under the current system.”1

1 http://www.propertyindustryeye.com/second-political-party-pledges-to-abolish-letting-agent-fees-and-bring-in-rent-controls/

Tories Vow Right to Buy for 1.3m People

Published On: April 15, 2015 at 8:46 am

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Categories: Landlord News

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Tories Vow Right to Buy for 1.3m People

Tories Vow Right to Buy for 1.3m People

Yesterday, David Cameron revealed proposals for housing association tenants to be given the chance to buy their homes.

Around 1.3m households will be entitled and the same discount will be available to council tenants, the Conservatives claim.

After releasing the party’s manifesto, Mr. Cameron said that he has “dreamed of building a property democracy for generations, and today I can tell you what this generation of Conservatives is going to do.”

Councils will also be required to sell homes that are in the top third most expensive price bracket under the party.

The Conservatives claim to raise £4.5 billion per year, which would be used to build affordable housing. The party pledge to create 400,000 new homes using a £1 billion scheme that will redevelop brownfield sites.

Councils will have to bid for funds to clean up derelict or contaminated land and provide infrastructure to free inaccessible sites.

Mr. Cameron said: “My message to Britain is this: we have come this far today, now is the time to build on the progress we have made.”1

1 Tahir, T. (2015) ‘Cameron: I’ll give right to buy to 1.3m more people’, Metro, 14 April, p.5

 

 

 

 

 

 

 

 

 

 

 

Reforming the private rental sector

Published On: May 6, 2014 at 9:09 am

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Categories: Property News

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The leader of the opposition Ed Milliband has launched a series of proposals aimed at reforming the private rented sector, should the Labour Party win the 2015 general election.

Mr Milliband’s proposed reforms are sure to be far reaching if enforced. However, critics have argued that the planned changes will cause more negativity than positivity and will cause rents to increase.

Three key planned Labour reforms are:

Fixed three-year tenancies

If elected, Labour plan to give tenants more security more providing longer-term tenancy agreements. A three-year fixed agreement would see the tenant still able to give notice after a six-month period, whereas landlords would only be able to break the agreement if they are selling or moving back into the property.

A similar clause included is one covering ‘breach of tenancy,’ where landlords could break agreements in the case of problem tenants. However, opponents have argued that the current system for tackling anti-social tenants is long-winded, expensive and time-consuming. Landlords are unlikely to be put at ease by this proposed protection.

Capped-Rent

Reforming the private rental sector

Reforming the private rental sector

Despite many economies across the globe abolishing rent caps, Labour is proposing their reintroduction in the UK. This move has caused consternation from experts, who believe that the privately rented sector needs improvement and replenishment in rental stock. Capping, it is argued, would discourage landlords from reinvesting, therefore lowering the quality of properties available to tenants.

Blocking letting agent application fees.

At present, legislation permits letting agents to be clear on fees that will be charged to potential tenants. These fees cover features including agency costs, referencing and securely registering tenants’ deposits. In addition, recent changes have led agents to need to confirm tenants’ immigration status, which again results in a charge.

Under his proposed reforms, Mr Millband plans to block letting agents from charging these additional fees. Critics say that this will lead to falling services, or lead to the landlord having to cover the fees, with rent prices increasing as a result.

Dan Channer, Managing Director of letting agents Finders Keepers, is strongly opposed to Milliband’s proposals. Channer said that, ‘As ever, the true problem is not the fees or tenancy duration but the lack of supply for tenants ‘forced into’ the private rental sector.  Labour’s proposals will do little to encourage people to invest in property and boost the rental supply.  Instead, Labour has failed to address the real problems in the sector while trying to create new ones.’[1]

[1] http://www.landlordexpert.co.uk/2014/05/06/understand-the-pressures-on-the-private-rental-sector-2/