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Gov’t launches £400m ‘housing bank’ for new homes

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A £400million government loan scheme aimed at bringing forward affordable housing by offering low-cost loans to social landlords and other developers has gone live

Split 50:50 between London and the rest of England, the fund aims to spur the construction of up to 10,000 largely one-and-two bedroom apartments over the next three and a half years.

In return for loans at rates as low as 1 per cent, social landlords and developers will be required to offer the properties at rents of a maximum of 80 per cent of market rates for seven years, when the tenants will be given a first option to buy the homes.

While housing associations have welcomed the funding commitment, immediate questions have been raised about the programme’s attractiveness for investment and the level of help it offers to its target residents.

Stuart Ropke, assistant director for policy and research at the National Housing Federation, said he applauded any measure that could help accelerate the supply of new homes, but said the longer-term effects of the programme were less clear.

‘We are concerned most tenants will be unlikely to be able to afford to buy after seven years and we need to consider how we will meet their long-term housing needs,’ he said.

Jeremy Stibbe, executive director for development and sales at affordable housing provider Peabody, said rent-to-buy could go some way to overcoming the ‘significant barriers’ to home ownership that many people faced.

‘This product should get new homes built across the country,’ he said.

‘For London there remains a significant challenge to boosting home ownership because of a lack of affordability.

‘For this reason there will need to be sufficient levels of investment to make the product affordable enough in the capital for customers to save for a deposit to buy.’ 

Another housing association told the AJ off the record that the policy appeared more likely to increase demand for new homes than it was to aid their supply.

‘We can already borrow fairly cheaply, so I’m not sure how much difference this will make,’ the source added.

London Mayor Boris Johnson will administer the capital’s £200million allocation of the fund, where it will be known as the London Housing Bank.

He said developers and housing associations could bid for loans to bring forward phases of developments that may otherwise not happen for a considerable period of time, and would be given up to 16 years to repay the capital.

‘We hope to provide thousands of brand new homes many years sooner than would otherwise be possible,’ he said.

Johnson has acknoledged that the capital needs around 42,000 new homes each year to keep up with the demands of its growing population, however the most recent consruction levels are roughly half of that figure.

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