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Rent to own - too good to be true?

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With warnings that in just five years’ time only one in five people under the age of 35 will be able to buy their own home, it’s no wonder that politicians are making their future housing plans key to pulling in voters in the run up to the election. 

The Lib Dems’ announcement that they plan to offer 30,000 rent to own properties has captured the interest of many who dream of owning a home but simply cannot afford it. For a lot of young people, rent levels are now so high that, even though they could comfortably afford monthly mortgage repayments, they are unable to put aside enough savings to fund a deposit.

The average first time buyer in London needs a £64,000 deposit on their first home.  It is no wonder that this is out of reach for most of us.

The idea of the ‘rent to own’ scheme is that you would pay the equivalent of ‘rent’ every month but, like a mortgage, part of this would go towards paying off the equity in your property so that after 30 years, for instance, the property would be yours. If you preferred to move on before the 30 years is up, you could cash in your share to use as a deposit on another property.

It sounds like a win-win plan. So why has it not been introduced already? Well, in fact, it has. A pilot has been running in Sunderland and Mayor Boris Johnson plans to introduce it to London no matter who wins the election. 

So is the Lib Dems’ plan realistic? Well, the first issue is cost. Nick Clegg has admitted that this is not a social housing plan. BBC News has reported that to join the scheme Londoners are expected to have to pay £1100 to £1200 per month – so this is not a plan for helping the poorest in society.

The scheme also relies on subsidisation and it is not clear yet where those subsidies would come from. It is understood that a social enterprise or housing association would build the homes and, instead of expecting a profit from their buyers, they would need to be subsidised.   

Does the plan go far enough? With only 36 per cent of under 35’s able to get on the housing ladder (compared with 59 per cent in the previous decade) it seems the Lib Dems’ plan would only have a very small impact. The bigger impact on housing will be the plans, which all parties are putting forward, to build hundreds of thousands of new homes over the next few years. Sadly, though, however bold these plans appear, I do not think we have seen the end of escalating rents and the rising cost of housing, keeping huge sections of the population off the property ladder.

By residential conveyancing solicitor, Linda Kirk

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