Discounts For Right To Buy Homes

No More Scrooge: Discounts For Right To Buy Homes

Discounts offered to council tenants to buy their own homes will be increased to a maximum of £50,000 across England under plans to revitalise the Right to Buy scheme, the Government has said.

The proposals would mean discounts are effectively trebled in some parts of the country and form part of a bid to ease the process for some of the two million social tenants in England to buy the property they are living in.

The scheme was widely associated with the Margaret Thatcher administration of the 1980s, and the Government hopes that the revamp, unveiled in the Chancellor's Autumn Statement, will increase social mobility 30 years on.

Ministers have promised that any home bought under the scheme will be replaced by a new affordable home for rent.

Housing minister Grant Shapps said: "The previous miserly restrictions on discounts meant Right to Buy became, for many tenants, nothing more than an empty promise - a social mobility scheme run by Ebenezer Scrooge.

"That's why I am today publishing proposals that will dramatically increase the discounts under Right to Buy, ensuring it once again becomes a meaningful tool to support social tenants who want to buy the home they live in.

"But we are also determined to maintain the number of affordable homes for rent - so for the first time, every additional home that is sold will be replaced by a new affordable home on a one-for-one basis.

"The new homes for affordable rent will help get the nation building again, and help councils meet housing need."

Mr Shapps said the restrictions on discounts over the past few years had made Right to Buy meaningless in some areas, with fewer than 3,700 sales last year compared with a peak of 84,000 less than 10 years ago.

The plans are part of a package of measures which the Government hopes will inject life back into the flat market, with the low transaction numbers seen during 2011 predicted to remain flat next year.

The Government has also announced a scheme to underwrite mortgages for first-time buyers who want to buy a new-build home, although fears have been raised that the market will be disrupted when the current holiday on stamp duty for first-time buyers ends in spring 2012.

The Government said the Right to Buy plans would "untie the hands of councils so they can manage their social housing more effectively".

The maximum discount currently ranges from £16,000 in most of London to £38,000 in the south east.

Various factors are taken into account when determining the size of a discount, such as how long the person has been a council tenant for and the age and condition of a property.

The Government said the proposals would mean, for example, that someone in the West Midlands who had been a tenant for eight years on an household income of £20,000 could buy their £90,000 flat with a discount of £50,000 compared with £26,000 previously, doubling their discount.

In London, a tenant for five years buying a flat worth £160,000 would also receive a discount of £50,000 - more than three times the previous cap of £16,000, the Government said.

The plans, which are subject to consultation, will be discussed with landlords, lenders and tenant organisations.

Council of Mortgage Lenders director general Paul Smee said: "In principle, we welcome this consultation on changes to Right to Buy, and support the proposal to replace on a one-for-one basis new Right to Buy sales with a newly-built affordable home."

He pointed out that proposals from the Financial Services Authority published this week would mean advice would need to be given on all lending to Right to Buy borrowers, saying this is "a significant protection that we think makes sense".

Mr Smee said: "As with all other mortgages, lenders will need to conform to all relevant regulatory requirements, reflect their own risk appetites and take account of both the borrower's circumstances and whether the property represents adequate security, just as they do on all lending."

Mr Shapps also outlined details of a £420 million fund to unlock stalled sites and "get Britain building" again in 2012.

The Get Britain Building Fund aims to get builders back on housing sites with planning permission that have been shut down because of difficulties in accessing development finance.

Over the next two years, the fund could unlock up to 16,000 homes on sites that have stalled, and help create up to 30,000 jobs in construction and related industries, according to the Government.

Developers can apply for a share of the funding, as a loan at commercial rates or as an equity investment - where the Government invests alongside the developer.

Shadow housing minister Jack Dromey said: "With millions in need of a decent home at a price they can afford, the country is gripped by a growing housing crisis.

"The Government's housing policies are failing and George Osborne's mismanagement of the economy is making things worse, holding back house-building."

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