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Cheap deal to help young workers get on property ladder
Ruth Bloomfield and Sri Carmichael19 Nov 2009
Young professionals struggling to get on the property ladder are being offered knock-down rents in some of London's most sought after neighbourhoods.
In a groundbreaking £7 million scheme, Westminster council is targeting those who earn up to £30,000 a year but cannot put money aside for a deposit to buy a house because rents are so high.
Tenants who sign up will pay heavily subsidised rents — up to 67 per cent off the market value. They will be expected to put aside the money they save for a deposit.
Flats will be let out to each person for a maximum of five years. Residents will also qualify for a £500 “incentive payment” each year if they stick to the terms of their tenancy agreement, collectable when they move out. They can only take advantage of the scheme once.
But there is no obligation for tenants to put aside money each month, and nor do they have to spend their savings or bonus payments on buying a home.
The trial — the first of its kind — is open to single people earning up to £30,000 or couples who together earn £40,000. Priority will be given to council and housing association tenants, followed by people on the waiting list, Westminster residents, and those who work in the borough.
The council is buying 30 properties for the trial: tenants will be charged rents as low as £120 a week for period homes in areas such as Bayswater, Pimlico, Marylebone and Westbourne Park. That is less than a third of the £365 average market rent for one-bedroom flats in these areas.
Council officials predict participants could save up to £330 a month, or more than £3,900 a year. It means that after five years, and with the bonus payment collected, a saver could have more than £22,000 for a deposit.
Two of the first flats to be bought are in five-storey Regency houses in Orsett Terrace, Bayswater. No tenant will be charged more than £140 per week.
The first property will be ready to let, fully furnished, in January.
Philippa Roe, Westminster's cabinet member for housing, said: “We have quite a polarised community in Westminster between those people who live on low incomes or on benefits and people who are wealthy enough to buy or rent their own home.
“I estimate you would have to be earning at least £65,000 to afford to live privately in Westminster, and that's wrong. People who are on modest to reasonable incomes should be able to live here. These are people who are key to our community. We hope this scheme will allow them to take advantage of an affordable housing scheme like shared ownership in the future.”
Ms Roe said she was “not too worried” if some tenants decided not to save while they lived in the flats, or spent their bonus payments on something other than a home. “It will help with our housing shortage anyway,” she insisted.
All the flats involved in the trial are former council properties that Westminster is in the process of buying back from leaseholders for an average £230,000. The council is funding the project itself, but a spokesman said it was “negotiating” a grant from the Homes and Community Agency.
Experts say the housing market is suffering “mortgage apartheid”, with only those with big salaries, rich parents or equity in a property able to buy. The average first-time buyer currently puts down a 25 per cent deposit because banks are making it harder to secure loans with smaller sums. To buy a £230,000 flat in London would therefore require a £57,500 lump sum.
For information on the Westminster scheme ring 0845 437 9701.
What you could save
If someone earns £30,000 a year their maximum net pay is £22,624.
Mortgage lenders estimate people can spend up to 45 per cent of their net pay on rent in a year — in this case £10,181.
This means a tenant would be paying £196 a week on rent. However, under Westminster's scheme, a tenant could pay as little as £120 a week — and save £76 a week, equal to £3,952 a year.
Over five years they could put aside £19,760 and collect £2,500 in bonus payments, giving a total saving through the scheme of £22,260.
Reader views (7)
I assume that Westminster council thinks that someone who is already a council or housing association tenant, lives in westminster and earns 30 000 a year is in such a bad financial situation that a special expensive scheme for him must have been prepared... lucky guy
- Tom, london, 25/11/2009 18:14
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This scheme should be targeted towards professionals working in the Westminster area only. I am sure there are other forms of housing for people in the waiting lists.
- Anon, London, 20/11/2009 15:38
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Hold on, if this scheme is for young professionals why are council and housing association tenants the first priority, surely that should go to the people in work, i.e. professionals, who work hard for their money but can't afford to buy a place due to high rents, as the scheme claims to be aimed at?
If this is really intended to benefit the community it should be helping those who chose to work rather than reward those who chose to live completely off of the state. The likelihood is that people choosing to live off the state in the first place will not save the money as intended to buy a home at the end of the scheme but will merely see it as a better lifestyle subsidised by the taxpayer.
- Jade, London, 20/11/2009 10:45
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A mews house in South Kensington SW7 where I live went on the market and I thought of moving there as it was considerably cheaper at £550 per week. However Kensington & Chelsea beat me to it paying over the asking price at £700 per week and subsequently housing a family there. They have moved in with all new goods, drive a brand new car, own a pitbull terrier and order takeways everynight.Can someone tell me, as a person who works long hours for a living where the justice is in that?
- Toby, London, 19/11/2009 13:34
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This is a further distortion of the free market that will just add to the massive financial mess that the U.K. is already in.
- Phil Jones, London UK, 19/11/2009 11:57
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I'm confused - is this practice not very similar to what so many people have complained about regarding tax payers funding MP's 2nd homes....ie a transfer of benefit from the tax payers to a small number of individuals- who can benefit then disappear off out of the borough, or even out of London/UK with the benefits of rent saved?...
Surely if the Council owns these properties, they would do better by their rate payers by charging a market rate and using the £400k per annum difference (30 x £250 per week x 52 weeks) to benefit all of the borough rather than 30 individuals?
...or am I just thinking like a businessman and 'evil' capitalist and failing to see the 'social benefits'?
- Paddy, London, 19/11/2009 09:14
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Not just young workers.We have a family of Somalians living in a penthouse in Marylebone.Hmm,how can they afford that?
- Steve, London, 19/11/2009 08:41
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