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The New ‘First Buy’ Scheme

The new First Buy scheme introduced in the budget today looks remarkably like the old Homebuy Direct scheme, except not quite so generous. Like Homebuy Direct it is to be targeted at new property only, and as with Homebuy Direct it is to be part-funded by housebuilders. The sum of money available is remarkably similar too – the previous scheme allocated £275million, and helped around 9,000 people; the newer version allocates £250million, and is aimed at helping 10,000. Unlike the previous scheme, though, the newer version requires the buyer to find 80% of the purchase price (5% as a cash deposit, and 75% through a mortgage), with the housebuilder and the government each contributing 10% in the form of an equity loan. The loan will be interest-free for the first 5 years; from year 6 an interest rate of 1.75% will be charged, with the rate index-linked thereafter. Although the administrative details aren’t yet clear, it’s probable that the loan will be repayable on sale as with Homebuy Direct and so the property will only remain in the grant-funded sector for a few years – and depending on the growth or otherwise of house prices, may actually be a good investment for the taxpayer.

The measure has been broadly welcomed by most in the industry, although all recognise that it will have limited impact; Shelter describe it as the equivalent of ‘a sticking plaster on a broken leg’, and the first time buyer campaign group Priced Out describe the Chancellor as ‘a shopkeeper trying to shift overpriced stock with a clever financing scheme’.

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HCA Affordable Homes Framework 2011 – 2015

The HCA Affordable Homes Framework for the next 4 years is described in the press release on the Department of Communities and Local Government Website as “providing a potential lifeline to some 4.5 million people on social housing waiting lists”. However, the new level of funding for the next four years means that ‘potential’ is probably a more appropriate word than ‘lifeline’.

The overall funding level over the 4 year period is for £4.5billion, which the government project will provide about 150,000 new homes. However of this about £2.3billion is already committed to provide 65,000 new homes, meaning that £2.2 bn. is available for the remaining 85,000. Of this £2.2bn, £400m is earmarked for special projects such as Mortgage Rescue and housing for travellers. Simple arithmetic gives an average grant figure of £21,176  per unit for these 85,000 units nationally. This level of grant – perhaps only around 10% of the cost of producing a new 2 bedroom apartment in London overall, and considerably less in the more expensive parts – must raise serious questions about whether it is possible to make any new scheme ‘stack up’ without a large injection of subsidy from elsewhere.

Policy Exchange proposal

The Policy Exchange proposal to change the Use Classes Order so that commercial accommodation which has been left empty for long periods can be converted into homes seems on the face of it to be a very sensible idea

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