Brits who are on a low income will be able to use housing benefits to pay off their mortgage under the government's latest plan. Boris Johnson is extending the right to buy scheme which will provide more people with a way onto the property ladder.
The Prime Minister unveiled the plans during a speech in Blackpool today (June 9) which came after he survived the Tory MP's no confidence vote earlier this week.
Housing benefits, which cost the Government around £30 billion a year, cannot currently be declared as income or used towards a mortgage. So now, instead of taxpayers' money going to private landlords or housing association, the new rules will allow lower-paid workers to put their benefits towards a mortgage.
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The right to buy scheme will also help tenants of social housing by giving them the opportunity to buy the home they live in at a discounted rate.
But as people have already begun to point out flaws in the new plan, the Prime Minister’s official spokesman said the risk of extending mortgages to lower-income individuals had been considered.
“We are aware of any risk and are making sure we are aware of the lessons we were right to have learned from the housing bubble, that’s something that’s been at the forefront of mind in developing this policy,” he said.
“We know these are individuals who are working hard but are in receipt of UC because of having low earnings are able to steadily pay rent and, therefore, would be able to pay mortgage payments.”
Downing Street said the move to allow housing benefits to pay for mortgages would effectively 'discount savings into ISAs' from the Universal Credit eligibility rules.
“This would enable people who are privately renting also to save, for people on benefits to save to get a mortgage, effectively by exploring discounting savings into lifetime or help to buy ISA from Universal Credit eligibility rules.
“So, anyone who is able to save specifically for a deposit will be exempt from the UC taper and will be eligible for the Government top-up, which is a 25% bonus to your savings up to a maximum of £1,000 a year.”
Discussing plans to allow housing benefits to contribute towards mortgages, the Prime Minister's official spokesperson said: “The bill for housing support is around £30 billion a year and it could reach £50 billion by 2050 if we don’t take action.
“That’s money currently going to private landlords or housing associations, so we’re looking to change the rules so rather than taxpayers’ money going to private landlords those on housing benefits can spend their benefit on rent or towards a mortgage either for full or shared ownership.”
The scheme has also raised questions as to how housing supply, which is already low, will meet this increased demand.
Shadow cabinet minister Lisa Nandy has said the Government’s latest housing plans will “make the housing crisis worse”, adding that the Labour Party would “crack down on unfair leasehold charges” instead.
The shadow levelling up secretary told Sky News: “We should be taking more action to increase the supply of affordable homes.In the end, it’s the only way to really solve the housing crisis for most people.
“The measures that the Government announce today won’t begin to do that for most people, and in fact some of them will make the housing supply crisis even worse.
"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.
“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."
Another hole in the plan is that people only qualify for housing benefits if they have less than £16,000 in savings.
“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.”
