17. Rent to Buy
This chapter sets out the requirements and procedures which must be followed when developing affordable housing as Rent to Buy.
1.1.1 This chapter sets out the requirements and procedures which must be followed when developing affordable housing as Rent to Buy.
1.1.2 This chapter does not reflect all elements of general programme requirements and should be read in conjunction with the other chapters of the Capital Funding Guide (CFG).
1.2.1 Rent to Buy is a scheme which allows working households to rent a home at Intermediate Rent providing them the opportunity to save for a deposit to then go on and purchase their first home.
1.2.2 The scheme will enable providers to build housing that will be let at Intermediate Rent but with the ultimate aim to sell the home to the tenant after they have been able to save for the deposit required.
1.2.3 Unless otherwise stated the policies, requirements and procedures of the Shared Ownership and Affordable Homes Programme (SOAHP) 2016 to 2021 should be applied to the provision of Rent to Buy homes. This section should therefore be read within the context of the other chapters of the CFG and the Agency’s Shared Ownership and Affordable Homes Programme Prospectus.
1.3 Main features of the scheme
1.3.1 Providers delivering Rent to Buy will be expected to let the homes to working households who are looking to buy a home but are unable to save for a deposit.
1.3.2 The homes will be let at an Intermediate Rent (see section 2.3 below) for a minimum of 5 years. During this time it is anticipated that tenants will save for a deposit.
1.3.3 After the initial letting period the provider may continue offering the property as Rent to Buy, they may sell the home (the tenant should be given the right of first refusal) or convert the home to market or another form of affordable rent. Where appropriate, the normal grant recovery obligations will apply (see Grant Recovery chapter).
1.4 Applicant eligibility
1.4.1 Rent to Buy homes are not subject to local authority nominations although landlords may choose to work with the local authority to identify potential tenants.
1.4.2 Rent to Buy tenants must be working households and intending to buy their own home in the future at time of letting.
1.4.2 To be eligible for Rent to Buy, tenants must be first time buyers or those returning to the market following a relationship breakdown.
2. Rental period
2.1.1 Landlords are expected to let the properties on assured short-hold tenancies at an Intermediate Rent for a fixed term of less than 2 years.
2.1.2 If after the initial 5 years of letting the landlord wishes to sell the property the existing tenant should have the right of first refusal.
2.1.3 If at any point after the initial 5 years of letting, the tenants submit a request to buy their home it is expected that the landlord would agree to sell except in the most exceptional circumstances.
2.2.1 Intermediate Rents are offered at a value above social rent but below market levels.
2.2.2 Intermediate Rents must not exceed 80% of the current market rent (inclusive of service charges). In order to provide protection and certainty for tenants, providers and funders, the maximum annual rent increase will be the Consumer Price Index plus 1%. The Consumer Price Index will be taken as at September of the previous year.
2.2.3 Local Rent Officers, Rent Assessment Committees or the Valuation Office Agency may be able to provide details of local market rents for particular types of property, which may assist providers in determining local market rents.
2.2.4 Providers should comply with the Social Housing Regulator’s Regulatory Standards.
3. Home ownership
3.1 Rent to Buy homes will be sold at market value and tenants wishing to purchase their home will need to obtain a conventional mortgage to do so. There is no additional affordability assessment, over that of the mortgage lender, required for Rent to Buy purchases.
3.2 Providers should note that the Voluntary Right to Buy is not applicable on homes built under Rent to Buy.