Mortgage squeeze sees professionals and pensioners turn to social housing

HOUSING associations, which normally provide homes to lower income tenants, are taking advantage of the mortgage squeeze to attract young professionals and middle class pensioners.

Several of the country's biggest social housing groups are eyeing a move into the middle class market as the lack of affordable mortgages, student debts and mounting unemployment are pricing many Scots out of the mortgage market.

Organisations including the Clyde Valley Housing Association and Edinburgh's Link Group are looking into the move after being inundated with requests from middle class graduates, families and pensioners since the beginning of the recession.

They argue that the next few years will present a "once in a generation" opportunity to move away from the British obsession with home ownership, to a more relaxed continental European model where renting is a socially acceptable alternative at any age, and for people from any economic background.

They say the sub-prime crisis has proved that home ownership often comes at a considerable cost, with many people borrowing beyond their means. The Financial Services Authority estimates that 2.5 million Britons are at risk of falling into negative equity this year.

With private rents still proving too high for university graduates and pensioners in particular, housing groups suggest there is a gap in the market for a new generation of social accommodation, which would be of a similar standard to flats offered on the private market. They would be offered at rents higher than existing social homes, but at prices below those currently offered by private landlords.

Tom Barclay, chief executive of Clyde Valley Housing Association, said: "It's a real acceptance to be renting in continental Europe. We (in Britain] should stop rationalising it as something just for people at the lower end of economic activity. It is just as acceptable for other young, old and professional people to be involved in renting.

"In our society we have seen buying your house as an investment but people are getting into significant negative equity positions. It is a very high risk, volatile position to get into."

Barclay, who is also the social housing spokesman for the Royal Institution of Chartered Surveryors (RICS) in Scotland, added: "People are now entering our waiting lists who would normally have entered the private market as a first time buyer."

The Link housing group has already used the downturn in the construction industry to acquire several properties in North Lanarkshire, Falkirk, and Argyll and Bute, which it is considering renting out to what is known in the industry as the "middle market". It has asked property consultants DTZ to assess demand for a new generation of rented housing, and is currently awaiting the results.

"There probably is quite a swathe of folk out there who would want to take advantage of it," said Craig Sanderson, chief executive of Link. "The way people have been drawn into owner occupation by right-to-buy schemes and irresponsible lending is too much."

Sanderson admitted that housing associations would need some subsidy from government to offer the new service as they would be offering rents below the market value.

But he added: "The amount of grant the Government would have to make available would be lower if it was going into middle market rent."

A spokesman for the Scottish Government said it was open to the idea of subsidies for a more upmarket range of housing association homes.

He said: "In these challenging economic times we want to respond to market demand for more variety in affordable housing by also supporting the development of mid market rent housing. This will enable social landlords to broaden their tenant base and, in the process, create more mixed communities.

"We would expect to target this housing at people in work and unable to afford owner occupation but able to pay more than a social rent – including people who may wish to buy a house later in their careers."

However, some property experts have warned that social housing initiatives could become so attractive in Scotland that they stand to harm prices in the private market.

John Brown, a director at DTZ Residential in Scotland, said: "The wheel of fortune has turned (in favour of social housing] but we must not let the private housing industry collapse."