As the election nears, the government has set out its guidelines which house builders must follow if they are to create homes aimed at first time buyers and eligible for a total of £200m in loans from the Department of Communities and Local Government.
The Rent to Buy Fund claims to give those who do not currently own a springboard on to the property ladder without having to pay an expensive cash deposit when they move in.
Under the scheme, the government offers low cost loans to firms building homes which must be let at a below-market rent for a minimum of seven years to households which have never owned a home before. The tenants can then use this fixed period to save to either buy the home they are renting, or to purchase on the open market.
The £200m is for the period 215-17 - there is an additional £200m available for builders committing to this scheme within London. Under the UK-wide scheme, loans to builders start with an interest rate of only 1.0 per cent for the first eight years, rising thereafter to eventually reach 3.0 per cent per annum from the 16th year of the loan.
The government - perhaps smarting from the latest house building figures which show a fall in the most recent quarter - makes it clear from the prospectus that it wants quick results from the Rent To Buy programme.
The Homes and Communities Agency [administering the scheme] wants to encourage bidders to bring forward schemes which can be built out quickly. We want to minimise the risks presented by a heavily back loaded programme and we will aim to do so by advantaging bids in our assessment that can demonstrate both starts and completion of schemes in the early part of the programme says the prospectus.
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