UK Politics

Can Lib Dem 'rent-to-own' housing plan work?

Image caption Mr Clegg said the dream of home ownership is a distant one for too many people

The Liberal Democrats' latest housing initiative might sound too good to be true: a new home of your own with no deposit, and paying no more than the market rate for rent.

Nick Clegg said Lib Dems had been working on it for years but the Conservatives wouldn't go ahead.

It even sounds reassuringly simple: rent to own.

Like many political ideas though, it is a bit more complicated than that. The Conservative mayor of London has already embraced the idea

Boris Johnson announced in January that he would provide up to £40m of loan finance to the social enterprise behind the scheme - Gentoo.

The idea, already trialled in Sunderland, is set to be introduced in London whether Lib Dems get into government or not but several things are clear.

1) It won't be cheap

Gentoo's customers in Sunderland pay £700 to £800 a month. When the London project gets under way it is expected to charge £1100 to £1200.

Lib Dems say they want government to subsidise these schemes to bring down costs to the market rental rate, but in the South East of England it won't come cheap

2) So it won't help the poorest

Lib Dems are upfront about the fact that this is not social housing. Housing associations will be encouraged to devote their resources to helping people who cannot afford to save for a deposit, but might be relatively well off.

3)Lib Dems want 30,000 of these homes a year, but they are not making any promises

Gentoo has got 90 buyers onto the housing market in Sunderland and wants to help many more. But the scheme relies on a social enterprise or housing association building homes and then, where a commercial housebuilder would take a profit, subsidising their buyers instead.

Scaling the plan up will require many more organisations choosing to do a lot more building on these terms. Lib Dems don't have them lined up ready to go.

4)The Lib Dems have yet to decide on the details

They don't yet know how they would subsidise the scheme or how much it would cost. They would issue a prospectus to the affordable housing sector if they were in government again

5) It's called rent to own, but it isn't really about rent

Homebuyers under the scheme won't be renting, they'll be buying chunks of equity with their monthly payments.

6) It's only part of the Lib Dem plan

The Lib Dems say they intend to boost housebuilding to 300,000 homes a year - a higher total than Labour's. They could, if they chose, take some of the credit for the Conservative plan to provide cut-price homes for first-time buyers.

The Tories intend to expand a scheme developed under the coalition government.

But while Conservatives are most proud of reinvigorating Margaret Thatcher's totemic right to buy social housing, today's scheme is more to the taste of Lib Dems.

With house prices such a prominent problem, it is no surprise that Nick Clegg's party want its own distinctive policy.

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