2. Rent to Buy - Capital Funding Guide - Guidance

May 08, 2024

1.1 Purpose

1.1.1 This chapter sets out the requirements and procedures which must be followed when developing affordable housing as Rent to Buy.

1.1.2 This chapter does not reflect all elements of general programme requirements and should be read in conjunction with the other chapters of the Capital Funding Guide (CFG).

1.2 Context

1.2.1 Rent to Buy is a scheme which allows working households to rent a home at Intermediate Rent providing them the opportunity to save for a deposit over time to purchase their first home.

1.2.2 Unless otherwise stated the policies, requirements and procedures of the Shared Ownership and Affordable Homes Programme (SOAHP) 2016 to 2021 or Affordable Homes Programme (AHP) 2021 to 2026 should be applied to the provision of Rent to Buy homes. This section should therefore be read within the context of the other chapters of the CFG and Homes England’s SOAHP 2016 to 2021 Prospectus and AHP 2021 to 2026 funding guidance.

1.3 Main features of the scheme

1.3.1 Organisations must be Registered Providers with the Regulator of Social Housing to own and / or manage Rent to Buy homes.

1.3.2 Registered Providers delivering Rent to Buy will be expected to let the homes to working households who are looking to buy a home but are not able to save for a deposit.

1.3.3 The homes will be let at an Intermediate Rent (see Section 2.2 below) for a minimum of five years during which it is expected that tenants will save for the deposit to purchase their home.

1.3.4 After the initial five year letting period the provider may continue offering the property as Rent to Buy; sell the home on an outright basis with the tenant being given the right of first refusal; or retain and convert the home as rented housing on either an affordable or market rent basis.

1.3.5 Where appropriate, the normal grant recovery obligations will apply (see the Grant Recovery chapter)

1.3.6 A tenant can also purchase their property within the five years rental period but at the discretion of the provider. A purchase under Shared Ownership is permitted as it remains as affordable housing. Tenants must meet all the shared ownership eligibility, affordability and sustainability requirements.

1.4 Applicant eligibility

1.4.1 Rent to Buy homes are not subject to local authority nominations although landlords may choose to work with the local authority to identify potential tenants. There are no local or other prioritisation criteria to be applied to the Rent to Buy product, other than on rural exception sites.

1.4.2 Rent to Buy tenants must be working households and intending to buy their own home in the future at time of letting. Whilst this should be the intention at the outset household circumstances can change over time such that this may not be possible. In such cases then the options to providers as set out in paragraph 1.3.4 (above) apply.

1.4.3 To be eligible for Rent to Buy tenants must be first time buyers having not previously owned their own home. An exception to this is where an applicant is looking to return to home ownership following a relationship breakdown.

1.4.4 There are no local or other prioritisation criteria to be applied to the Rent to Buy product, other than on rural exception sites. On such sites the priority for allocations will be set out in the section 106 agreement agreed between the local planning authority, developer and Registered Provider. This will often stipulate that priority will be given to applicants with a connection to the local area and, additionally, provide a cascade out to the subsequent areas that will be given priority. The National Planning Policy Framework provides a definition of rural exception sites as small sites used for affordable housing in perpetuity where sites would not normally be used for housing. Such sites seek to address the needs of the local community by accommodating households who are either current residents or have an existing family or employment connection.

1.4.5 Providers can offer Rent to Buy on sites where there may a restriction on outright ownership, for example 80% on rural exception sites. However, providers should take their own legal advice as to the appropriateness of offering Rent to Buy on sites where outright ownership is restricted.

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