Rent-To-Own in St Lucia
Rent-To-Own in St Lucia
Schemes known as rent-to-own, rent-to-buy, or renting with the option to buy combine the advantages of renting and homeownership by channeling a portion of the rent towards the possible purchase of the property.
The UK has a legacy of rent-to-buy programs dating back to the 1980 Housing Act, which gave tenants of local housing authorities the right to buy their homes. Today there are several successful programs available.
The rent-to-buy program helps first-time buyers get into the property market but renting homes at about twenty percent (20%) less than market rates so that tenants can save money while renting.
These are often brand-new energy-efficient homes. At the end of the lease (usually six to twelve [6-12] months), the tenant must either enter the shared ownership ladder or leave the property.
In a shared ownership arrangement, qualified buyers purchase a share in a property (twenty to seventy five percent [25-75%]) and pay rent on the share they don’t own. The sharedowner is therefore a renter with equity. Shared owners also pay a service charge and are responsible for maintenance costs. The process of buying additional shares is called“staircasing” and requires a minimum purchase of ten percent (10%) of the property’scurrent market value. The shared owner also must pay a lawyer to re-appraise the property as well as taxes and fees. Because of market rises and the variety of costs, increasing shares can prove costly and shared owners may be unexpectedly shut out by price increases.
Shared Ownership Plus is an initiative of Thames Valley Housing that won the 2014 awardfor “Innovation in Leasehold Management.” Shared Ownership Plus makes “staircasing”simpler and removes the extra costs. It allows tenants to buy as little as 1 percent of theirhome’s market value every year at a predetermined price. This program was enabled bygovernment grant funding allocated through a tendering process. The buyer still pays the mortgage, the rent, service charges, and repairs and maintenance. Legally, the shared owner remains a leasehold tenant until they own 100 percent of shares. Eligible buyers must be employed but earn below an income ceiling. The program only allows households to purchase homes with one extra bedroom.
In Scotland, the Highlands Small Communities Housing Trust (HSCHT) gained attention as a World Habitat Award finalist in 2015. The HSCHT rent-to-buy scheme helps low-incomehouseholds in Scotland’s remote highlands access affordable housing. The program revolvesaround a financial mechanism that allows families to save towards purchase while renting a home. HSCHT builds new homes and rents them to families at below market rents. The trust retains part of the rent and makes it available as a lump sum used as a deposit to buy the house. The program is self-financing and does not require government funding, though it is supported by development loans.
After five (5) years, the families can access the cash-back sum to help with the mortgage deposit. The selling price is fixed based on the value at the start of the lease term. This provides certainty for tenants and a possible benefit if the home increases in value. A legal mechanism gives HSCHT the right to purchase the property back when the owner decides do sell it so they can allocate it to another qualified family. This preserves the affordability of the property in the future. This program has also created opportunities for contractors and training opportunities for young residents in a region with limited opportunities.
Brazil is considered one of the South American countries with the most experience in rentingwith the option to buy. Brazil’s federal government launched the Residential Rent Program(Programa de Arrendamiento, or PAR) in the 1990s. This leasing initiative serves families earning between three and six times the minimum salary with a monthly rent equivalent to zero-point seven percent (0.7%) of the value of the dwelling. After fifteen (15) years, families are entitled to make a purchase offer, deducting the value of rent paid. PAR was accompanied by regulatory changes to promote private supply, so it was mostly financed by public banks and viewed as costly.32
The Commonwealth Caribbean
Barbados’ National Housing Corporation’s HELP Pilot Project is an example of a successful Rent-to-Own initiative. Introduced in 2009, HELP assists those earning under one thousand five hundred United States dollars (USD 1,500.00) per month become homeowners. Applicants enter into a seven-year agreement, paying a two-month security deposit followed by monthly payments equal to thirty percent (30%) of their income. During the seven-year period, seventy percent (70%) of the rent (and security deposit) goes towards the purchase, thirty percent (30%) covers maintenance and other charges. If the tenant is unable to complete the sale after seven years, they can extend the agreement for two more years. Inthe event of the tenant’s death, their beneficiary can continue the tenancy.
Other rent-to-own schemes profiled by the Inter-American Development Bank in the Caribbean are being developed by the Government of the Bahamas and re-introduced in Trinidad and Tobago. Under Trinidad and Tobago’s Rent-to-Own Programme, households considered ineligible for mortgage financing may enter into a five-year rental agreement with an option to purchase. Two-thirds of rental payments are treated as a deposit toward the purchase of the property, with the tenancy converted to a mortgage.