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Rent guarantee – Shapps deals equity release lobby a blow

Rent guarantee – Shapps deals equity release lobby a blow

rent guarantee

Housing Minister Grant Shapps said councils should learn from the Government-backed FreeSpace project piloted by the London Borough of Redbridge, which enabled elderly homeowners to downsize to rented accommodation without a property sale.

In SHIP’s 20th anniversary report, the trade body said that it believes that “with sustained lobbying” the Treasury would take ownership of equity release in 2012. However, the government’s New Deal has failed to flag the benefits of the market.

However, Communities Minister Andrew Stunell called on councils to offer elderly people more choice and control over where they live, so they are not pressured to sell their home or move into residential care.

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Research suggests 25m bedrooms in England are empty largely because elderly companies remain in larger homes instead of downsizing.

Under the scheme the council administrates and organises a move into rented accommodation for elderly people, then assumes responsibility for maintaining and letting their property at an affordable rate.

Homeowners will benefit from the rental income from their home, which will be passed back into their estate at an agreed date, said the government. Ministers added this “win-win project” can be used as a future model for councils across the UK.

Termed the ‘New Deal for Older People’ the Government said it is also providing funding of £200m this year to allow people to adapt their properties, for example, with stair lifts or grab rails to help them live independently for longer and avoid residential care.

Housing Minister Grant Shapps said: “For too long the housing needs of the elderly have been neglected. Older people who should be enjoying their homes have watched helplessly as their properties have become prisons, and many have been forced to sell their homes and move into residential care.

“With nearly a fifth of our population expected to be over 65 by 2020, radical and urgent change is needed to ensure the nation’s housing needs are met.”

Communities Minister Andrew Stunell said up to £26,000 can be saved each year for each person by offering an alternative to residential care.

“So I would urge all councils to help people move into suitable accommodation, or use the funding we have made available to make simple alterations so older people can stay in the home they love close to family and friends.”

The Government has given £51m towards handypersons services and advice, including energy efficiency advice.

Andrea Rozario, director general of SHIP, the trade body for equity release said despite the scarcity of housing for young families, she questioned the viability of the plans, which raise “more questions than answers.”

“There is likely to be a huge cost attached to this scheme, not to mention the high level of administrative work that will need to be done around it. As the Government has made it clear that no-one will be forced into taking part in the scheme, it does beg the question of how many older people will choose to leave their family homes which they are likely to have emotional ties to and move into a smaller property – potentially away from family and friends?”

Alternative accommodation like sheltered housing is not always desirable and they may want to look at alternatives like equity release to boost to their retirement income but keep them in their own homes, she said.

Safe Home Income Plans (SHIP) said it will continue its lobbying efforts to encourage the government to hand responsibility for equity release to a single department this year.

Peter Welch, head of sales and distribution at home reversion provider Bridgewater Equity Release, said: “Some comment has suggested these plans are a blow to the equity release sector. We see this as the complete opposite. The Government’s full support for schemes that assist in releasing equity from homeowners’ properties can only be a positive for the equity release industry as a whole.”

Options such as downsizing should always be explored first by any homeowner wanting to unlock some of the value of their property, he said.

On the government’s plans, he said: “Provided there are relevant protections in the scheme like security of tenure for life in the new property, it will be attractive to many.”

Source: http://www.mortgagesolutions.co.uk/mortgage-solutions/news/2139490/shapps-deals-equity-release-market-blow

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