Buying

A Guide to Affordable Housing Schemes

Posted July 9, 2024
A Guide to Affordable Housing Schemes

Buying a home can feel daunting, especially with rising costs. Luckily, several affordable home ownership schemes exist to make it more affordable for first time buyers. Even though the Help to Buy Scheme is no longer available, you still have plenty of options to help you get on the property ladder.

In this guide, we will provide you with the affordable housing schemes available, what they offer, and their pros and cons. Please note that some schemes may not be available in certain areas and may require specific criteria to be met. Availability of the schemes is subject to change.

We strongly recommend seeking professional legal advice. Guinness Homes currently offers Shared Ownership and London Living Rent.

Shared Ownership

Shared Ownership allows you to buy a share of a property, usually between 25% and 75% (new Shared Ownership model allows a minimum share of 10%), and pay rent on the remaining share owned by a housing association. Over time, you can purchase additional shares in the property through a process known as staircasing.

Eligibility
  • Combined household income of £80,000 or less (£90,000 or less in London).
  • First-time buyers, existing shared owners, or former homeowners who can’t afford to buy now.
  • The property must be your main residence.
Features
  • Initially buy a share of the property (25%-75%).
  • Pay rent on the remaining share.
  • Ability to buy more shares over time.
Benefits
  • Lower Initial Deposit: Since you’re only buying a share of the property, the deposit you need is smaller.
  • Gradual Homeownership: Allows gradual acquisition of the property.
  • Access to Affordable Homes: Places homeownership within reach of more people.
Downsides
  • Ongoing Rent Payments: You have to pay rent on the share you don’t own, which can increase over time.
  • Possible Leasehold Limitations: You may be subject to leasehold restrictions.

Shared Ownership Resales

Shared Ownership Resales are pre-owned shared ownership properties being sold by the current owner. These homes have already been lived in and are being resold under the same shared ownership scheme. You can find Shared Ownership resales on the open market websites such as Zoopla or Rightmove.

Eligibility
  • Same eligibility criteria as the Shared Ownership scheme.
Features
  • Purchase an existing shared ownership home.
  • Generally quicker process than buying new.
Benefits
  • Lower Cost Compared to Full Ownership: Resale properties are often cheaper than new builds.
  • Established Property and Neighbourhood: Typically found in established communities.
Downsides
  • Limited Availability: Fewer properties available.
  • Possible Need for Refurbishments: Older homes may require maintenance.

First Homes Scheme

First Homes are new homes sold with a discount of at least 30% to first-time buyers. This scheme aims to provide homes particularly to local first-time buyers and key workers at affordable prices.

Eligibility
  • First-time buyers.
  • Annual household income below £80,000 (£90,000 in London).
  • Local councils may have additional criteria based on local needs.
Features
  • Minimum 30% discount on the market price.
  • The discount is maintained through resale.
Benefits
  • Significant Upfront Savings: Substantial discount from the market price.
  • Maintain Local Community Affordability: Ensures these homes remain affordable.
Downsides
  • Limited Availability: Not enough homes to meet the demand.
  • Price Cap on Eligible Homes: May restrict the types of properties you can buy.

London Living Rent

London Living Rent aims to help Londoners on average incomes save for a deposit by offering below-market rent. This is a flexible scheme for people who will eventually buy their home but need affordable rent in the interim.

Eligibility
  • London residents.
  • Earn under a certain income threshold (varies by borough).
  • Priority is often given to those already living or working in the area.
Features
  • Rent based on one-third of local median household income.
  • Properties are new builds or recently refurbished.
Benefits
  • Affordable Rent in London: Lower than market rate in an expensive city.
  • Option to Buy the Property Later: Provides a stepping stone to ownership.
Downsides
  • Only Available in London: Geographically limited.
  • Competitive and Limited Availability: High demand with limited supply.

Discount Market Sale

Discount Market Sale allows you to buy a home at a price below full market value. The discount ensures that homes remain affordable to local residents or those with local connections.

Eligibility
  • Set by local councils, often based on income and local connections.
  • First-time buyers or key workers are usually prioritised.
Features
  • Homes sold at a significant discount to market value.
  • Discounts typically range from 20% to 40%.
Benefits
  • Lower Costs Than Market Rate: Initial purchase cost is more affordable.
  • Priority for Local Residents: Helps keep local residents within their community.
Downsides
  • Restrictive Eligibility Criteria: Not everyone qualifies.
  • Smaller Market Segment: Limited number of properties available under this scheme.

Intermediate Rent Scheme

The Intermediate Rent Scheme is designed to help individuals and families save for a future property purchase by offering below-market rental rates. This scheme is often regarded as a stepping stone for those who aim to transition from renting to homeownership.

Eligibility
  • Primarily aimed at first-time buyers.
  • Must have a household income that falls within specific limits, which vary depending on the region.
  • Priority is usually given to key workers and local residents.
Features
  • Rents set at approximately 20% lower than the market rate for comparable properties in the area.
  • Tenancies typically last for several years, allowing tenants to build savings.
  • Some schemes offer the option to buy the property later, or a similar property, through shared ownership or other affordable housing schemes.
Benefits
  • Reduced Rent Payments: Pay less rent compared to market prices, making it easier to save for a deposit.
  • Stability and Security: Long-term tenancies provide a stable living arrangement.
  • Pathway to Homeownership: Opportunity to transition from renting to owning a home.
Downsides
  • Limited Availability: High demand and limited supply mean that not everyone will qualify or find a suitable property.
  • Location Restrictions: Often confined to specific areas or developments, limiting choice.
  • Income Restrictions: Strict income criteria may exclude some applicants.

Rent to Buy

Rent to Buy lets you rent a new-build home at reduced rent while you save to buy it. It is designed to make it easier for tenants to save for a deposit while enjoying a lower rental rate.

Eligibility
  • Generally for first-time buyers.
  • Meet certain income criteria, which varies depending on the property and location.
Features
  • Reduced rent for up to five years.
  • Option to buy the property later.
Benefits
  • Affordable Renting While Saving: Easier to save for a deposit.
  • Flexibility to Buy When Ready: No rush to purchase.
Downsides
  • Limited Time Frame: The rental period is capped at five years.
  • Risk of Price Changes: House prices may increase significantly by the time you buy.

Home Ownership for People with Long-Term Disabilities (HOLD)

HOLD is aimed specifically at helping people with long-term disabilities buy a home. It offers shared ownership options tailored to meet the needs of disabled individuals.

Eligibility
  • Long-term disability requiring adapted housing.
  • Income and savings to afford the adapted property.
Features
  • Purchase through shared ownership.
  • Option to buy between 25% and 75% of the property.
Benefits
  • Tailored to Specific Needs: Allows for the acquisition of adapted properties.
  • Government Support: Often includes additional financial assistance.
Downsides
  • Limited Property Availability: Fewer adapted properties on the market.
  • Additional Costs for Adaptations: May require further investment for necessary adaptations.

Older Persons Shared Ownership (OPSO)

OPSO is designed for individuals aged 55 or over, allowing them to buy a share in a new-build or existing home. This scheme is crafted to support older adults in securing their own homes.

Eligibility
  • Aged 55 or older.
  • Meet income and savings requirements as set by the local authority or housing association.
Features
  • Option to buy between 25% to 75% of the property.
  • Pay rent on the share you don’t own.
Benefits
  • Tailored for Older Adults: Specifically designed for those over 55.
  • Affordable Entry into Homeownership: Easier access to property ownership later in life.
Downsides
  • Age Restriction: Only available to those aged 55 and over.
  • Rent Still Payable on Unowned Share: Can be a significant ongoing cost.

Lifetime ISA (LISA)

A LISA helps first-time buyers save for a deposit with a government bonus that boosts savings. It also functions as a retirement savings tool.

Eligibility
  • Aged 18-39.
  • First-time buyer purchasing a home worth up to £450,000.
Features
  • Save up to £4,000 a year.
  • 25% government bonus on contributions (up to £1,000 a year).
Benefits
  • Free Bonus Money Towards Your First Home: Enhances your savings capacity.
  • Tax-Free Savings: Contributions and bonuses are tax-free.
Downsides
  • Penalties for Early Withdrawal: High penalty if used for anything other than buying a home or retirement.
  • Limited Annual Contribution: Maximum of £4,000 a year.

The Mortgage Guarantee Scheme

This Mortgage Guarantee Scheme encourages lenders to offer 95% mortgages by guaranteeing a portion of the loan. It is part of the government’s effort to make homeownership more accessible to more people.

Eligibility
  • First-time buyers and existing homeowners.
  • Purchase a property valued up to £600,000.
Features
  • Access to 95% mortgage loans.
  • Government guarantees a portion of the loan to the lender.
Benefits
  • Lower Deposit Requirement: Only need a 5% deposit.
  • High Loan-to-Value Ratios: Easier access to higher-value homes.
Downsides
  • Higher Interest Rates on 95% Mortgages: Loans often come with higher interest rates.
  • Larger Monthly Payments: Higher loan amounts lead to larger monthly repayments.

Conclusion

Affordable housing schemes can significantly ease the homebuying process. However, it’s essential to consider all the pros and cons and determine which scheme suits your situation best.

Explore these options thoroughly and consult with a housing advisor to make an informed decision.

Check out GOV.UK for the latest information on affordable housing schemes.