Social Homebuy to cost corporation £30m a year

The Housing Corporation will have to spend £30m of its development budget each year on helping social housing tenants buy a share in their home.

The figure emerged last Friday after the launch of the government’s delayed consultation paper Homebuy: Expanding the Opportunity to Own. The document proposes streamlining the existing range of homeownership products.

At the launch – attended by chancellor Gordon Brown and deputy prime minister John Prescott – the government outlined three options to help an estimated 400,000 people onto the property ladder by 2010.

The options would be:

• Social Homebuy: where a discount of up to £16,000 is offered to tenants who cannot afford or do not have the right to buy or the right to acquire
• New Build Homebuy: replacing current shared-ownership schemes where key workers part-rent and part-buy a home with help from a housing association
• Open Market Homebuy: the new name for the existing Homebuy scheme where housing associations give key workers equity loans to help them buy a home on the open market.

Other plans announced include a widely trailed equity loan scheme. The details are still being thrashed out with the Council of Mortgage Lenders but banks may put up loans, likely to be interest-free, for first-time buyers.

Homebuy, which will be out for consultation until 24 June and is intended to be introduced by 1 April 2006, had been delayed because of wrangling over how to make the numbers stack up for Social Homebuy, according to sources close to the negotiations.

The government was able to reassure social housing providers over certain key questions – such as options to reinvest proceeds from Social Homebuy (HT 1 April, page 7) – but the Housing Corporation will bear the brunt of costs associated with giving tenants discounts to buy shares in their homes.

Jon Rouse, chief executive of the Housing Corporation, said: “It’s an opportunity to bid for the spending review in summer 2006, but for the very early part of this (2005/6) we will have to fund it from the existing approved development programme. We will make it part of the bidding process and associations have to come forward with a package.”

Rouse added that the government was still talking about piloting Social Homebuy but said there were no firm details yet.

Another concern highlighted ahead of the details on the social homebuy element of the scheme was what safeguards would be in place to ensure tenants who bought their homes properly maintained them.

An ODPM source said that the government was looking at extending the role of the existing housing association zone agents that administer the £660m Key Worker Living scheme in London and the south east.