Pension funds help to finance rent-to-buy homes in Yorkshire

A new way of funding affordable housing and rent-to-buy developments is proving to be a big success in Yorkshire.

A new way of funding affordable housing and rent-to-buy developments is proving to be a big success in Yorkshire.

Midlands-based fund management firm QSH is marrying local authorities and housing associations that want to build much-needed new homes with cash-rich pension funds that want to invest in rental property.

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Spokeswoman for QSH, Louise Grocott, says: “Pension funds get a steady income from the capital expenditure and then a capital gain when the property is sold, with most of the profits recycled into more schemes.”

QSH has three developments on site in the Huddersfield area, at Mirfield, Scholes and Upperthong.  It has a further 200 affordable homes in the pipeline with several hundred more in Yorkshire in the near future.

The development at Upperthong is a partnership between QSH, Kirklees Council and Kirklees Neighbourhood Housing. The properties are being constructed by award-winning builders Conroy Brook.

The first phase will comprise 15 affordable rent-to-buy properties, made up of eight two bedroom homes and seven three bedroom cottages. The second phase will provide 12 four bedroom detached homes, available for private sale, and will be released to the market next year.

The first 15 houses will be managed by Kirklees Neighbourhood Housing. Under the innovative QSH-rent-to-buy scheme, tenants can purchase the property between the first and fifth year of living in their new homes. Half their rental payments are put towards the deposit needed to secure a mortgage, up to a maximum of ten per cent of the open market price of the house at the time of purchase.  Those who choose not to buy during this time can continue renting their homes for a further 15 years.   

The rents will be around £500 a month for a three bedroom home and £450 for a two bedroom property.  So if rent at £500 per month is paid for five years, the tenant will be entitled to £15,000 towards their deposit. 

Louise Grocott says; “We’ve found that many people who are currently privately renting want to buy, but they struggle to save up the deposit as they are paying rent.  “Likewise, young people who live at home, paying board still struggle to save up.  “The majority of people signing up for our rent-to-buy schemes are young families or couples currently renting or living at home. However, there have also been some older families and people downsizing.

“Another benefit of this scheme is that it is difficult to get a mortgage without a good credit rating and paying rent and utilities on time for a sustained period helps with that.”

Steve Partridge, finance and investment director at QSH, believes that the innovative funding model will bring new sources of equity investment into the affordable housing sector

he says: “Our rent-to-buy model complements the government’s Starter Homes initiative, helping people to save for their home whilst living in it, but it also provides viable, sustainable options for people who will still require homes for long-term rent. We hope that this new practice of bringing affordable housing developments forward will be carried across many more similar projects and help address the chronic shortage of affordable housing.”

Richard Conroy, CEO at  Holmfirth-based Conroy Brook, adds: “This deal involves multiple parties, all of whom are working together to bring more affordable housing to our local communities and help more buyers onto the property ladder.