The UK government has announced new initiatives to increase affordable housing and help more people become property owners.
The UK will include £700 million for affordable housing in a £12.2 billion investment listed in the Budget. The government will introduce a new shared ownership model that would see the minimum initial share to buy in a property reduced from 25% to 10%.
The program would also enable people to purchase additional shares in their home in 1% installments with heavily-reduced fees.
Affordable homes program
Under the new measures, around half of the new homes will be available for affordable home ownership while the remaining will be up for discounted rent, including 10% for supported housing for people with physical or mental health challenges.
A 10-year period for new shared owners will also be included in the shared ownership model where the landlord agrees to cover repair costs and property maintenance.
Meanwhile, a majority of the rented homes will be delivered through the new program, giving tenants the right to purchase a stake in their home.
The UK government has already allotted £700 million to a program that will run from 2016 to 2022 but an additional £11.5 billion investment will be delivered in the form of an Affordable Homes Programme between 2021 to 2026.
The program is expected to provide up to 180,000 new homes across the UK, depending on economic conditions. £7.5 billion worth of new homes outside London will be provided by the government's housing accelerator Homes England.
Housing Secretary Robert Jenrick said: "Today's announcement represents the highest single funding commitment to affordable housing in a decade and is part of our comprehensive plans to build back better."
"This government is helping hard-working families and prospective first-time buyers get their feet on the housing ladder in an affordable way." Jenrick explained.
He added: "Thanks to the range of flexible ownership options being made available, more families across the country will be able to realize their dreams of owning their own home, with half of these homes being made available for ownership."
Tougher market for first-time buyers
A report by the Resolution Foundation has suggested that the UK property market would be more difficult for first-time buyers despite forecasts of falling house prices.
Results from a survey of agents show that a medium-term downturn in the housing market is expected following a short-lived boom after lockdown.
House price falls are usually perceived as a chance for property to become more affordable for first-time buyers. The Resolution Foundation’s Housing Outlook report says that some young people in stable jobs, with savings, and who have had the chance to put more aside in lockdown will benefit.
However, the report identified four major obstacles the typical first-time buyer must face in the UK property market.
The first one is that lenders will be requiring a larger deposit to protect themselves against borrowers being unable to repay. This is because typically, first-time buyers aged around 30 and saving 5% of their income, will need to save for more than 20 years to pay for it.
Another factor is that saving would be more difficult to do as some people have either had to cut or use some of their savings during lockdown due, in part, to lower incomes.
The third obstacle is the government’s stamp duty holiday in England and Northern Ireland, which removes the advantage first-time buyers have over movers.
Lastly, the need to transfer residence will be more expensive as young workers may find the need to relocate, which would lead to additional travel costs that could eat up a portion of their savings. On the other hand, moving to the city for work is likely to mean higher housing costs.
