An additional 20,000 households will be helped into homeownership by 2010, bringing the total to over 100,000, following a major agreement with three lenders to go ahead with the private financing of equity loans. This will strengthen the new range of HomeBuy schemes.
The new offer, agreed with HBOS, Nationwide Building Society, and Yorkshire Building Society will be available from October 2006 on a pilot basis for two years. Detailed discussions on implementing the equity loans are continuing with the Council of Mortgage Lenders and the lenders themselves.
The new loans will be based on the Government's new Open Market HomeBuy product, helping people to buy a home on the open market with an equity loan. Lenders will provide a top-up equity loan along with the buyer's mortgage, for example: a 75% mortgage, with a 12.5% equity loan, with the remaining 12.5% being provided by the Government.
Buyers will be able to choose the best offer for them, ensuring choice and competition, whilst pricing and affordability levels remain in line with current low cost home ownership products.
Research undertaken by NOP on behalf of the Office of the Deputy Prime Minister was published, as part of the HomeBuy consultation process this year. The report shows the HomeBuy proposals (which include those for Open Market HomeBuy) are attractive to the target eligible groups: social tenants, key public sector workers, and other first-time buyers in England.
Potential buyers considered the schemes as valid routes to meeting their aspirations, and the ability to move to full home ownership, with HomeBuy providing a 'stepping stone,' was particularly welcomed. Charging options and other terms and conditions presented, such as the mechanism for increasing their equity share, were considered affordable and fair.
Aspects of the Social HomeBuy scheme, which met with widespread approval, included the minimum share, the discount (up to £16,000), and the five-year occupation threshold. The range of eligible groups was also positively received.
The results from the HomeBuy research have helped the Government to set-up four Social HomeBuy scheme pilots. The Government is working with the Guinness Trust, Notting Hill Housing Trust, Places for People Group, and Sovereign Housing Trust on initial pilots of the Social HomeBuy scheme. It is anticipated that four to five hundred households across England will be helped through the initial pilots during the coming months. The results of the initial pilots will feed into the implementation of the wider Social HomeBuy programme, launching in April 2006. The Housing Corporation is currently considering bids submitted by RSLs for funding for the scheme. Local authorities can also offer the opportunity to their tenants.
The Government launched its fifth Private Finance Initiative (PFI) bidding round. Final bids are due by 31 March 2006. Housing PFI projects deliver investment in social rented housing through long-term contracts which fall into two groups: Non-Housing Revenue Account (Non-HRA), and Housing Revenue Account (HRA) PFI. For both types of scheme, a local authority will enter into a contract with a private sector firm, or consortium of firms, who will raise funds to undertake the construction or refurbishment work.
Financial support for the capital element of the project is provided by central government to the local authority through PFI credits. The revenue element will usually be supported by the rents and service charges on a non-HRA scheme and by the local authority through its HRA on an HRA scheme.
Non-HRA housing PFI contracts will usually be for the provision of new social rented housing, which will then be managed and maintained by a registered social landlord (RSL), with the tenants having the RSL as their landlord.
With HRA PFI projects the local authority retains ownership of the stock and the tenants retain their secure tenancies. After the initial construction period, which can include wider regeneration work, the consortium will be responsible for repairs, maintenance, and a range of housing management services to the stock. Priority in this round will be given to schemes that have positive output objectives for regeneration and sustainable communities.
Local authorities, through the HRA, will also have the opportunity to submit bids to build new council housing stock where this demonstrates value for money.
The Government announced details of housing subsidy for the next two years. Local authorities in England will receive £4.8 billion to improve the quality and management of their council homes in 2006/07, with as far as possible the same calculations applying for 2007/08.
The Government expects payments to deficit authorities will continue to exceed resources redistributed from surplus councils throughout this period. This means a continuing net subsidy to council housing.
The settlement, made through the Housing Revenue Account (HRA), represents a 2.46% rise and will give councils greater certainty for setting their budgets in determining the calculations for subsidy and capital support two years ahead.
As announced on 7 November, the Government has confirmed it will continue its drive to ensure fairer and more transparent rents for social tenants by implementing the recommendations of the 3-Year Review of Rent Restructuring. This includes larger differentials for bigger properties, and an adjusted formula to bring council and housing association rents fully into line.
Rent increases will be limited to an average of 5% in each of the next two years. Following consultation in the New Year, it is proposed to adjust the HRA subsidy to ensure no council loses out as a result of these limits.
It is expected the actual average national council rent will now be £57.75 a week (up from £55.15 in 2005/06) and in London £72.60 (up from £69.37 in 2005/06). These rents will remain at about a half of private sector rents.
