Let benefits claimants use government handouts to buy a house, says Boris: Tenants will be offered new package to help them use taxpayer money to pay mortgages as No 10 rekindles ‘Right to Buy’
Boris Johnson was today accused of bodging together a bold plan for low-paid workers to use benefits income for mortgages as he bids to relaunch his premiership.
In the wake of the Tory confidence vote meltdown, the PM is making a major speech in Lancashire vowing to revive Margaret Thatcher’s housing revolution for low-income families.
He will announce moves to extend the ‘Right to Buy’, which helped millions purchase their council properties at huge discounts in the 1980s and 1990s, to housing association tenants.
He has also drawn up proposals to help families on Universal Credit get on the property ladder. One idea is to allow benefits to be counted as income when applying for a mortgage – which could open up the dream of home ownership to millions more.
Mr Johnson is set to argue that £30billion in housing benefit that currently goes towards rent for three million people could help secure and pay for mortgages.
The PM is also expected to talk up the potential for accelerating housebuilding through a new generation of pre-fab homes.
However, critics complained that the ideas are not ‘thought through’, pointing out that UC is only available to families with less than £16,000 in investments and savings, meaning they would have very limited access to mortgages.
Most lenders ask a minimum of 10 per cent deposit. Levelling Up Secretary Michael Gove indicated the government was looking at creating a savings vehicle that would not count toward the benefits limit, but it is unclear how that would work or how banks would be made to accept the handouts in their calculations.
He also admitted that there is no new funding attached to the Right-to-Buy extension, with only pilot projects mooted at the moment. He refused to say how many people would actually be able to take advantage of the schemes, which give discounts of up to 70 per cent depending how long people have lived in properties.
The package seems squarely aimed at the Red Wall which delivered Mr Johnson’s huge 2019 majority. He is heavily dependent on the support of MPs from those areas for his survival, after seeing off a coup attempt earlier this week.
In other developments today as the PM attempts to get back on track:
- The average price of a litre of petrol at UK forecourts reached a record 182.3p on Wednesday, according to data firm Experian Catalist. It means the average cost of filling a typical 55-litre family car is £100.27;
- There are claims that Mr Johnson and Chancellor Rishi Sunak have ruled out cuts to personal taxes this Autumn, despite calls from Tory MPs and the OECD;
- Tory Eurosceptics are said to have been brought in to help draft legislation scrapping the Northern Ireland protocol, which could be published as early as next week.
In a major speech in Lancashire later, Boris Johnson will unveil new proposals to boost home ownership
The PM (right) will try to revive Margaret Thatcher’s housing revolution today with a new package to help low-income families buy their own homes. But Michael Gove (left) admitted there is no new funding and refused to say how many people would be able to use the scheme
What is Boris proposing on housing… and will it make any difference?
Renewing a pledge made by David Cameron, Boris Johnson will announce a push to extend the Thatcherite scheme, which helped millions purchase their council properties at huge discounts in the 1980s and 1990s.
Housing association tenants could be able to take advantage of prices 70 per cent lower than market value, depending how long they have lived in the property.
However, Michel Gove admitted there is no new funding attached, with only pilot projects mooted at the moment.
He refused to say how many people would be eligible, merely insisting it will be more than 1,000.
Another property will need to be added to housing association stocks for every home sold.
Benefits for mortgages
Plans are being drawn up to help families on Universal Credit get on the property ladder.
Benefits could be counted as income when applying for a mortgage.
Mr Johnson is arguing that the £30billion in housing benefit that currently goes towards rent could help people secure and pay for mortgages.
However, critics have pointed out that UC is only available to families with less than £16,000 in investments and savings, meaning they would have very limited access to mortgages.
Most lenders ask a minimum of 10 per cent deposit.
Mr Gove indicated the government was looking at creating a savings vehicle that would not count toward the benefits limit, but it is unclear how that would work or how banks would be made to accept the handouts in their calculations.
Encouraging a wave of modular or “flatpack” homes to be built is another new measure being actively considered.
However, the potential incentives have not been spelled out, and the PM might not give any more details in his speech.
Whitehall sources declined to comment on details last night, but one confirmed there will be ‘something for hard workers on benefits’.
Another source said people would be ‘incentivised to save for a deposit no matter what their financial situation’.
The source added: ‘Currently, too many people are spending huge sums of money in the private rental market when that money could be better spent on investing in their future in the form of mortgage payments on their own home.’
But plans to open up Right to Buy to all 2.5million housing association tenants appear to have been scaled back due to the cost, which one source warned could reach £3billion a year.
The new scheme has not been given any additional funding. Instead, Mr Gove has been asked to use existing funds at his Housing Department.
In a round of interviews, Mr Gove confirmed there will be a ‘cap’ on the number of people who can take advantage of the Government’s new housing scheme.
When asked what the limit would be, he suggested it would be more than a thousand but said: ‘That’s something I will be discussing with housing associations.’
He also refused to give a figure for how many benefits claimants might be able to use that money to get mortgages.
‘I don’t know and I can’t know… by definition that figure can only be a guesstimate,’ he told Talk TV.
Speaking on Sky News, he added: ‘We’re looking specifically at a savings vehicle that people can use in order to save for that deposit.
‘Because home ownership is not just good for individuals, it’s good for society overall.
‘We want people to have a stake in the future, we want people to be able to invest in their own home, we want people to have somewhere safe and secure, warm and decent, in which they can raise their children.’
Pressed on where the funding for the scheme will come from, he said: ‘It will come from the overall parcel, the overall envelope, of Government spending.’
Mr Gove said the Government will make sure there are new houses to replace those bought by lower-paid workers under new plans where they can use housing benefits to buy their homes and an extension of the right to buy for housing association tenants.
He told Sky News: ‘One of the things that we will be doing is making sure that there is a replacement – a like-for-like, one-for-one replacement.
‘Yesterday I introduced legislation into the House of Commons that means there will be a new levy on developers.
‘That means that when new developments occur, when new homes are built for sale by the big housing companies, we will extract some of the money that they make and some of that money will be set aside explicitly to make sure that there is more affordable housing or council housing for people who need it.’
Mr Gove added: ‘The way in which the levy works means that people can be assured that when planning permission is granted for new developments that there will be money in due course.
‘Councils can borrow against that in order to invest.’
Shadow levelling up secretary Lisa Nandy said there were ‘real practical problems’ with the ideas.
‘In principle, it’s a great idea to try to get more people the security of their own home, particularly people who find themselves in the benefits system,’ she said.
Right to Buy became one of the policies of Margaret Thatcher, whose statue is pictured in Grantham, with around two million families given the chance to buy their home at a discount of up to 70 per cent
‘The problem is that, as always, the Government has not thought through the detail.
‘There’s no sign that any of the lenders are on board with this.
‘The Government can say that it wants to open up mortgages to people on housing benefit, but unless the lenders agree to do it, it’s not going to happen.
‘There are real practical problems as well. To qualify for Universal Credit, you’ve got to have savings of less than £16,000, which means that most people who the Government are trying to reach with this announcement are not going to have anything near the amount that they need for a deposit on a home in order to qualify for that mortgage.’
Today’s speech has been billed as the first step in a re-launch in the wake of Monday’s bruising confidence vote, which the Prime Minister won by a margin of 211 to 148.
He yesterday insisted that ‘nothing and no-one’ will get in his way as he tries to re-focus the Government’s efforts on public priorities after months of political infighting.
In his speech, the PM will warn that the economy faces ‘strong global headwinds’, but insist that the Government has ‘the tools we need to get on top of rising prices’. He adds: ‘While it’s not going to be quick or easy, you can be confident that things will get better, that we will emerge from this a strong country with a healthy economy.’
The PM will pledge to bring forward further reforms in coming weeks to ‘help people cut costs in every area’.
‘We will use this moment to accelerate the reforming mission of the Government, to cut the costs that Government imposes on businesses and people,’ he will say.
‘With more affordable energy, childcare, transport and housing we will protect households, boost productivity and above all increase the rate of growth of the UK.’
Right to Buy became one of Mrs Thatcher’s totemic policies, with around two million families given the chance to buy their home at a discount of up to 70 per cent.
One pilot scheme in the Midlands found it cost the taxpayer £65,390 per home sold
Proposals for renters to be able to buy discounted housing association homes are not new, and appeared in David Cameron’s 2015 manifesto.
After that failed to materialise, Mr Johnson committed to considering new pilots for the scheme ahead of the 2019 general election. But industry experts have warned that giving tenants the right to buy is far more complex and expensive than the sale of council houses in the 1980s.
Unlike council houses, most housing association properties are financed through private sector debt, which needs to be paid off. One pilot scheme in the Midlands found it cost the taxpayer £65,390 per home sold.
Pilot schemes have also operated on the basis that a new property would be built for every one sold. While the plan could help avoid criticism of the original scheme, it also adds cost and complexity.