Boris Johnson has announced big changes – or at least big headlines – for England’s housing system.
Thatcher’s ‘right to buy’ at discounted prices will be extended to 2.5 million housing association tenants in a restructuring first proposed seven years ago.
And the most conspicuous – and most controversial – proposal is what the Prime Minister called “benefits for bricks”. For the first time, 1.5 million employed housing benefit recipients can pay their benefits into a mortgage.
ISAs used to save for a home deposit will be exempt from the £6,000 savings limit, which cuts your Universal Credit.
And the Prime Minister also announced a mortgage review that will report lower deposits in the autumn.
It’s about making better use of the £30billion housing benefit bill, much of which goes straight to private landlords – helping it pay off her mortgages. Mortgage payments are also often cheaper than rent.
But a number of industry experts reacted scathingly, including Lewis Shaw Shaw Financial Services saying : “This is the ultimate political meringue: sweet, light and with very little substance.
“We don’t need more purchase rights, we need to have more homes built and lower the cost of buying and owning a home. Talk about fumbling while Rome burns.”
Jonathan Rolande of the National Association of Property Buyers added: “This policy will not help anyone affected by the housing crisis.”
When will all this happen?
A review of the mortgage system will begin in the coming weeks and report back in the fall.
The government will also “work closely with housing associations” in shaping the right-to-buy scheme.
But there are few promises as to when any aspects of this plan will actually be implemented.
At the same time, interest rates are rising, making mortgages more and more expensive.
How will it be different from 2015?
The right to buy for housing association tenants was proposed by David Cameron in 2015 but stalled.
A pilot program took place with 1,892 sales and an average discount of 46% on properties worth £137,271.
As part of the pilot, housing associations committed to “at least” one new home for every house sold.
But these replacements weren’t “like for like” in the vast majority of cases—more on that below.
And Kate Henderson, chief executive of the National Housing Federation, said: “Pilot projects have shown that there is not enough money from sales to build new public housing to replace those that have been sold, resulting in a net loss of public housing.”
Now it’s being revived, what will be different?
Will the houses be replaced quickly and with equal value?
Bors Johnson promised a “one-for-one replacement” for any home sold under the purchase right.
But once again, there doesn’t seem to be any promise of a comparable replacement.
In the last pilot projects, most of the replacement apartments should not have the same rent level, the same number of bedrooms or the same location.
Of the planned replacements (most of which had not yet been built at the time of the survey), 42% would be offered at social rents, but 58% would be offered at “affordable rents” – more expensive than the house being replaced.
Jonathan Rolande, of the National Association of Property Buyers, said: “Homebuilders are typically private entities that need to be compensated for the forced rebate, so it appears there is ‘net loss rather than gain’ for the taxpayer from the community’s home sales.” .
“It’s a problem that needs to be addressed.”
Ian Fletcher, director of policy at the British Property Federation, said: “The houses bought need to be replaced on a like-for-like basis. Without this, the availability of affordable housing will remain strained at a time when we desperately need more stock, not less.”
David Renard, housing spokesman for the Local Government Association, said: “All homes sold must be replaced quickly, in the same area of the community and on an equal basis.”
How do you ensure 95% mortgages are available?
Financial uncertainty means banks have cut back lending and it’s harder to get 5% or 10% deposits.
The key to Boris Johnson’s plan is to encourage more lending for very large mortgages with small deposits.
However, these are riskier for both banks and borrowers, and can plunge you into negative equity as property prices fall.
The government is in talks with the banks, but ultimately there’s nothing to force them to lend to lower deposits.
Will you really build enough houses?
Critics say offering larger mortgages does nothing to solve the country’s stifled housing supply.
Meanwhile, Boris Johnson today failed to reiterate the Tory Manifesto pledge to build 300,000 new homes a year.
Instead, he said, “I can’t give you a cast-iron guarantee that we’re going to hit a number in any given year.”
How do beneficiaries save a deposit?
1.5 million workers who receive housing benefit can use it to pay off a mortgage as part of changes in social regulations.
You can also save for a mortgage more easily. Currently, your Universal Credit tapers off when you have £6,000 in savings and ends when you have £16,000. Saving for deposit ISAs are exempt from this limit.
But Lindsay Judge, director of research at the Resolution Foundation, said: “The number of people affected is likely to be small as bail is the main barrier to homeownership.
“More than four in five families on means-tested benefits have no savings at all.
“In reality, those who are most likely to benefit will receive support from others – whether it’s through purchasing rights or financial support from family members.”
How are beneficiaries approved for a mortgage?
Just as banks don’t have to approve 95% mortgages, they don’t have to approve loans to specific individuals.
So there is nothing to be said against checking beneficiaries for affordability and rejecting their application.
Oli Pearce, Director at Guild Mortgage Servicessaid: “The whole policy package strikes me as political babble.
“Last time I checked, lenders are dictating what income they allow for a mortgage application.”
How many people will it help?
1.5 million people are potentially eligible to pay benefits on a mortgage.
But for the reasons above, experts are skeptical about how many will actually bring themselves to it.
Many people in the benefit system rely on food banks or just scrape by, let alone save up a bail.
And ministers have not committed to how many people can buy a home for that reason.
Work and Pensions Secretary Therese Coffey said it would be “thousands” but gave no timeline for that.
https://www.mirror.co.uk/news/politics/8-huge-unanswered-questions-boris-27193765 8 big unanswered questions in Boris Johnson's 'buying a home with benefits' shock