Housing associations 'should buy up' repossession risk homes

Homes at risk of repossession should be bought be housing associations, to stop the property downturn resulting in a crisis.

The rising cost of living putting extra pressure on households and increased difficulties in finding a mortgage means the threat of repossession is now rising.

The Council of Mortgage Lenders (CML) estimates 45,000 homes will be repossessed in 2008.

The National Housing Federation (NHF) is calling on the government and housing associations to step in to aid homes under threat.

The NHF proposes a nationwide mortgage rescue scheme run by housing associations, utilising money already committed by ministers and housing associations to building new social homes over the next three years.

According to the NHF these monies should be redistributed to allow housing associations to operate fair mortgage rescue schemes.

Housing associations would also buy up thousands of high quality, but currently unmarketable, privately built homes at discounted rates in order to ensure plans for bringing on stream higher numbers of social housing can still be met.

The NHF argues the proposals are still viable, despite the current housing market problems.

With the current market downturn, a number of unregulated firms are already purchasing properties from households in mortgage difficulties at 20 per cent less than the market value and then renting the homes back to the households on an assured shorthold tenancy, giving no security for the tenants, finds the NHF.

However, under the Federation's proposals, housing associations would buy the properties of households in trouble at a fair price and then allow them to either change tenure to low cost home ownership, enabling the household to buy their property back when their financial situation improves, or to social renting, enabling the household to remain in situ as social tenants.

Such schemes are already being run by a number of housing associations across the country.

"A weakening housing market will increase the number of unsold or difficult to sell properties - and sites available for purchase at prices lower than in recent years," said NHF chief executive, David Orr.

"This will create opportunities for housing associations and the affordable housing programme to continue to provide and, possibly, increase the supply of affordable homes. But only if the situation is managed effectively."

Under government targets published last year housing associations are due to build around 157,000 new homes up to 2010/11, using £8.4bn of public money and £12bn of housing association money.

However, many experts believe that it may not be able to achieve this target in the way originally envisaged, because of the market downturn.

Chris O'Toole