Last edited 03 Sep 2018

Rent to buy

The ‘rent to buy’ scheme was launched by Communities Secretary Eric Pickles in September 2014. It is part of the affordable homes initiative, which also includes ‘help to buy’ and ‘right to buy’.

Rent to buy allows housing associations and other private housing providers to bid for low-cost loans to build new homes. These will mainly consist of 1 and 2 bedroom apartments. Half of the funding will be made available in London, with London-based housing providers bidding for funding through the Greater London Authority (GLA).

Housing providers must then make the homes available for rent at below-market rates for a minimum of 7 years, that is, at up to 80% of market rent. This 7-year period is intended to give tenants the time to save up for a deposit to buy the home. At the end of the period, the tenant will have first refusal to buy the property.

Housing providers have the flexibility to repay the loan at any time but must repay it no later than 16 years after construction of the funded homes. Only once the loan is repaid can the housing provider sell or rent out the homes at a market rate.

Communities Secretary Eric Pickles said, “As part of our wider housing programme, this new scheme will help increase the provision of low-cost rented accommodation and provide a springboard for young people to upgrade to home ownership down the line.”

The Mayor of London at that time, Boris Johnson, said, “Loans are available to significantly accelerate the pace of development, especially on bigger schemes, and unlock additional supply. Through this exciting new fund we hope to provide thousands of brand new homes many years sooner than would otherwise be possible, and make them available to rent at below market rates for hardworking Londoners.”