Ross’s rent to own scheme has more Qs than As - David Alexander

The leader of the Scottish Conservatives, Douglas Ross, used his keynote speech at this week’s Conservative party conference in Birmingham to call for a “rent to own” scheme in Scotland to assist tenants in buying their home.

David Alexander
David Alexander

Under the scheme tenants would pay the market rent for a new-build property from a landlord for five consecutive years after which the tenant can apply to buy it.

Landlords would have to sign up to the scheme before it began, and the Scottish government would provide 25 per cent of the rent paid to go toward a deposit on the property.

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The Scottish Conservatives believe that this would help those individuals and families that cannot afford to pay rent and save a deposit for a home. While this sounds like a laudable aim it has many questions which need to be answered and, to be honest, like many of these schemes sounds unfair and unworkable.

The first question the non-renting community will ask is ‘Why isn’t the Scottish Government funding part of my deposit for a house?’ Why would you subsidise one part of the market and not the rest?

Would there be a time limit on the tenant purchasing the property with their subsidised deposit and then being able to resell? Would tenants be limited to doing this once or could they continue to do it throughout their lives gaining a 25 per cent discount on every home they rent?

Will the Government guarantee that the value of the property after five years is assessed independently and that the tenant is not going to be offered this home at a discount? How will the Government guarantee a return for the landlord?

What happens if the house is bought for £200,000 but declines in value over that period, should the tenant be guaranteed to buy a property that may incur a loss for the landlord or investor? Will these properties be specifically built for this purpose, or can this apply to any new build?

The problem with all of these schemes is that they all result in the law of unintended consequences. Pull one brick out of the wall and you don’t know what will happen to the whole structure. Interfere in pricing for one group and you may unduly impact on another.

Do this in one geographic area and the town or village next door may improve or decline. By attempting to intervene with the interlinked and complex property market you have no idea how one intervention will impact on the rest of the market. Once you find out how that intervention has changed things it is too late.

All politicians suffer from quick fix-itis. They want a low-cost solution that can be implemented easily and quickly that will garner the most votes in the short term without really examining the medium to long term consequences of their actions.

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This results in unexpected and unwanted outcomes which often don’t benefit the groups they were intended to and result in a skewed market which benefits no-one.

The long-term problem in housing is extremely simple but continues to be ignored by all parties.

Demand is exceeding supply. Rentals go up because there are more tenants than properties. House prices rise because there are more buyers than homes on the market.

The solution, unfashionable though this may sound, is to build more homes for sale, more homes which can be bought by landlords and property investors to support the private rented sector, and more social housing to ensure that there are sufficient homes to meet demand. Politicians often assume that the housing market comprises just one group of people whose needs can all be met with one solution. The reality is that we need many types of homes in all the sectors to meet the differing demands of our changing economy and until this is grasped all of these policies are simply tinkering at the edges.

David Alexander is CEO of DJ Alexander Ltd

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