Alternative Homeownership Models Provide Silver Lining in a Challenging Housing Environment


February was a tough news month for aspiring homeowners.

the FinancialTimes reports that inflation has reached its highest level in 30 years at 5.5%. The cost of living crisis and rising energy prices are eating away at UCL Institute for Social Research suggesting that families must choose between eating and staying warm as energy prices rise.

James Prestwich, Director of Policy and External Affairs at Accredited Institute of Housing last month, said “affordability pressures for those trying to get on the housing ladder for the first time or to rent a home will not be helped by the rising cost of living.”

In terms of house prices, the ONS said they hit record highs in December 2021, pushing deposit requirements even higher. Rental prices are no better, with The Guardian noting that they are rising at their fastest pace in five years. The JustBuildHomes team reminded us that it will cost you at least seven times your salary to buy your first home – eleven times your salary if you want to buy in London.

For those who can start thinking about mortgages, The Telegraph had more bad news, saying the best mortgage deals were gone as banks hiked interest rates. National figures highlighting deteriorating affordability in most parts of the UK have been backed up by data from the ONS illustrating why home ownership remains out of reach for many would-be homeowners.

These factors have combined to create a difficult environment for first-time buyers. According to Mortgage Strategy magazine, uptake of first homes remains uneven and there is a significant drop in home buying assistance as the issue of collecting a down payment becomes more difficult as the cost of living and housing is increasing rapidly. This “deposit barrier” is the golden thread that connects these stories.

Robert Colvile in The Sunday Times reported that the average deposit rose from 102% of average income to a record 110% and that in London it would take the average worker over 15 years to save for a deposit in rate today. He also said that “being able to own your own home is the essence of the good life” and spoke of this crisis “which poisons the dreams of a generation”.

Despite this, there is very good news for first-time buyers. Over the past few months, Rentplus has continued to turn its tenants into landlords. The first Rentplus tenants who moved into new homes in 2016 without a deposit, with a 5-year contract, have now purchased their homes. They paid affordable rent (usually 80% of local private rents) to our housing association partners, saving them at least the 20% difference. For many, that was around £200 a month.

The following years saw their savings grow and boosted by the 10% sum offered by Rentplus on purchase, which gave them real equity in their home from day one. They have accessed mortgages with good deposits to finance the purchase of 100% of their home and the 2017 cohort is also on track to purchase their home.

With all of these challenges facing the latest generation of future landlords, it’s no surprise that we’re seeing a massive increase in interest in our services and affordable rents to buy in general. In some locations, Rentplus houses can be massively oversubscribed – with over 300 applicants bidding for 6 houses.

To facilitate growth and provide more affordable rents to buy homes, Rentplus seeks partnerships with property developers. Housing organizations that want to offer increased occupancy and see their revenues boosted by low-risk outside investment, and local communities that want to see their waiting lists reduced.

All of this means that with continued cooperation between organizations such as Rentplus, housing associations and local authorities, the needs of a generation of potential first-time buyers can continue to be met. There is a silver lining to the harsh environment that exists.

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