What is London Living Rent?
What is London Living Rent?
If you have moved to the capital to look for new opportunities or simply to enjoy some of that 'buzz,' you may be worried about your cost of living. The property costs seem to be sky-high, and you may be unable to save enough money to put down a deposit to buy your own place. Yet thankfully, the city government operates a scheme known as 'London Living Rent,' and you may be able to take advantage of that as you search for something suitable. So, what is London Living Rent?
Local government sets living rent targets
In 2017, the mayor of London, Sadiq Khan, launched the London Living Rent scheme to give middle-income Londoners a step onto the property ladder. As part of the programme, the government will subsidise the cost of the relevant property.
What you need to know about London Living Rent
Who is eligible for London Living Rent?
To be eligible, you should live or work in London and the total amount of income within your household should be below £60,000. You may qualify if you currently have a formal tenancy in the private rented sector or live with family or friends as part of an informal arrangement. There are minimum income thresholds, which vary property by property. For example, in the Royal Wharf in Newham, the minimum income for a one-bedroom property is £43,000. You must show that you cannot buy a home (even if it is shared ownership) in the area. There are other restrictions, and you’re not allowed to have any significant credit issues on your files, such as a default, judgement or bankruptcy.
If you find one of the London Living Rent properties, you may be able to take advantage of much lower rent, which should allow you to save towards the cost of your deposit. In the example above, the rent for a one-bedroom flat would then be £989, but as this can vary from development to development you should do further research. Generally, these homes are offered on tenancies that last a minimum of three years, but if you’re eligible, you may be able to buy your home on a shared ownership basis during that time.
How are rental prices set?
The government publishes 'benchmark' London Living Rent figures for each neighbourhood in the city each year. These figures will typically represent a significant discount compared to the average 'market level' rent, so the amount you will pay varies based on the neighbourhood. To come up with figures, government regulators will look at average local incomes and house prices at a ward level and will also consider the number of bedrooms in a specific property. Specifically, the rent for an individual home has to be less than 20% of the assessed market rent.
What do the assessors look for?
The government expects housing providers to look at prospective tenants' abilities and determine their objectives. They’ll want to know if the applicant can afford the property and will ask if they intend to put aside the amount they will save towards a potential deposit. During the time they live in the home, they may be offered the option to purchase on a shared ownership basis and will be expected to make their decision within a maximum of 10 years.
What’s the application process?
If you find a suitable property and want to apply, you will likely need to fill in an enquiry form to get the full details and application form. You typically need to show that you are eligible and, if accepted, will then be sent additional documentation.
The administrator should go over your documents to see if you can afford the property. Ideally, you are willing and able to save a certain amount of money towards that deposit. An independent financial adviser will also contribute to the conversation as the process unfolds. Bear in mind that once you have agreed to a monthly savings amount, this detail will be added to the tenancy agreement. Expect these agreements to be reviewed each year to ensure that you are still on track.
When you are eventually ready to purchase, the property will need to be independently valued to arrive at a purchase price.
Does the government hold your savings amount?
Like some people, you may wonder if the government will actually take money out of your account to put towards your savings target, but this is not the case. Still, they may expect you to be careful with your money so you can save some each month throughout the tenancy. When it comes to saving, it may be helpful to read some of these tips that show you how to save money for a mortgage when you are renting. Alternatively, find out how to reduce some of your energy bills to give you more money to put aside at the end of the month.
Do you have to buy the home you live in?
You may also have the option to purchase a completely different home than the one you live in. You’ll discover that a variety of programme providers may also have shared ownership homes in other parts of London that you might find more suitable.
What about rent increases?
If you are able to get one of the London Living Rent scheme properties, you'll get an assured short-hold tenancy. This means that the rent can only increase by the inflation rate each year while your tenancy is still active.
Is this similar to a rent-to-buy programme?
You may wonder if the London Living Rent scheme is the same as the 'rent-to-buy' programme. There are various rent-to-buy schemes around the country where you can save some money by paying a discounted price and put that towards a home deposit. In the capital, this is simply called the London Living Rent scheme.
A few final tips...
The London Living Rent programme could be just what you’re looking for as you seek to put down roots in the capital. Always remember that the programme regulators may expect you to set aside the money that you save through these lower rent payments so that you’ll be ready to buy the property at the right time.
Urban Jungle is not a financial advisor and information in this article should not be taken as advice or recommendation.