Delivering low-cost housing initiatives

Last December the government set up the Homes and Communities Agency to spearhead the delivery of affordable housing in England.

In the next three years it will invest £8bn to fund at least 180,000 affordable homes and by 2010/11 aims to provide 70,000 homes a year.

The HCA has set up an initiative called HomeBuy which will deliver a number of low-cost home ownership schemes in addition to other government schemes.

While the initiative is welcome, judging by conversations I have had with intermediaries confusion still exists regarding differences between these low cost schemes, the bodies administering them and how advisers might make the most of them.

Shared ownership initiatives such as Social HomeBuy and New Build HomeBuy enable consumers to buy a share of their home with a conventional mortgage or savings, with the remaining share being owned by an approved third party organisation, typically a housing association.

The buyer then pays rent on the share of the property owned by the third party.

With shared equity schemes buyers again purchase a percentage of a property with a conventional mortgage but are able to buy the remaining share with a low interest equity loan offered jointly by a developer and the HCA.

So while buyers still have to pay legal and valuation fees they can buy properties without having to raise deposits.