One of the biggest barriers to home ownership is saving for a deposit. Most lenders require between five and 10 per cent of the property’s value before they will grant a mortgage.
A buyer would need between £5,000 and £10,000 before they could contemplate buying a £100,000 house or flat on the lower rungs of the property ladder in Yorkshire.
This huge financial hurdle means that those who desperately want to own their own home and who could afford a monthly mortgage payment from their wage have no option but to stay in private or social rented property.
Now, a radically different rent-to-buy option has arrived in Yorkshire and it includes the gift of a 10 per cent deposit. Rentplus won Most Innovative Home Ownership Solution in the National Housing Awards last year. A private enterprise co-founded four years ago, it is backed by institutional investors. Most of its profit comes when the properties are eventually sold and have, so it is hoped, risen in value.
Rentplus chief executive Steve Collins says: “Rentplus has already been successful across the south of the country. Our families have moved into a home without having to have even one penny of deposit. They pay affordable rent until they are in a position to buy the home they are living in.”
The company now has properties in Devon, Dorset, Somerset, Oxfordshire, Northamptonshire, Cambridgeshire and Wiltshire and recently appointed Barnsley-based Alasdair Manson with establishing Rentplus in the North.
The business model works by buying newly-built homes from housing developers, some of who have a Section 106 obligation to provide affordable housing on their sites. Rentplus then leases the properties on 20 year contracts to housing associations, which allocate them to those deemed eligible for the scheme.
These include those already on housing association or social housing waiting lists or already renting via the housing association or other social housing providers. Those on waiting lists are judged by local authority criteria as in need of affordable homes. Councils often state that applicants must live in or have a connection to the area, are unable to afford to buy a home on their salary or combined salaries and are working and able to pay rent. Key workers are usually favoured.
In some areas, 35 per cent of those taking a Rentplus property move out of a social rented house into a Rentplus home. This frees up their old property for allocation to those in greater need.
The would-be buyers then move in and pay an affordable rent, which is usually 80 per cent of the local market rate, for five to 20 years on five-year renewable tenancies. This gives them time to save, clear any debt, build a good credit history and become part of the community.
There are no service charges for repairs and maintenance and, after fixed periods, they are offered the chance to buy the home they are living in. When they have agreed a mortgage, tenants are gifted 10 per cent of the market value of the property to put towards or pay for the deposit.
Rentplus say many of those who rent then buy its homes are key workers such as teachers, NHS and emergency services staff and armed forces personnel. All shared an inability to save for a deposit because their rent and essential outgoings are too high.
The company has just over 850 homes but its ambition is to deliver 5,000 homes across England by the end of this year. Rentplus North manager Alasdair Manson, who has previously worked for local authorities, housing associations and tenant management organisations, is actively looking to buy new-build homes in Yorkshire for the business.
He is already in negotiations with housebuilders in Leeds and Bradford and hopes that the first Rentplus homes in the region will be up-and-running within a year. This should prove attractive to developers who are often bound to provide a proportion of affordable homes through Section 106 agreements. They usually sell these to housing associations but the process is often bureaucratic and lengthy.
“We also have strict criteria but we can make decisions very quickly,” says Mr Manson. “We can also help developers who are planning land purchases and want certainty in finding partners to buy their quota of affordable homes.”
Nurse Nicole Richards, 27, from Northampton,saw no prospect of buying her own home until she was allocated a Rentplus property. The rent on her previous house was £725 a month. She is now paying £460 and puts £200 a month in an ISA to build up savings.
She plans to combine her ISA cash with the Rentplus gift of 10 per cent of the market value of the property when she is ready to buy her home.