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July 20, 2023

Can I Buy My Council House While on Benefits?.

By Emma Jones

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Many residents who are currently renting their council house are […]

Council House Universal Credit

Many residents who are currently renting their council house are also receiving government assistance. This has got them asking: can I buy my council house while on benefits? The quick answer is yes!

There’s a new scheme, known as the Right to Buy, which allows renters to purchase their council property. Not only that, but you can also receive a discount of up to 70% on the home’s market value, which makes it an offer few can afford to pass up.

That said, there are certain rules and regulations you need to abide by. These are usually imposed by your local council or the Department for Work and Pensions. So, if you’re interested in buying your council home and receiving government-based assistance, you’ve come to the right place.

Let’s get started.

Can I Buy My Council House While on Benefits?

Yes, you can. Not only that, but you can also make use of government home ownership schemes to help you become eligible and finalise the purchase.

One such scheme is the Right to Buy plan. With this scheme, council renters on benefits can buy their council house, and even at a discount. Here’s everything you need to know about buying your council house while still benefiting from government assistance…

The Factors that Determine the Amount of the Discount 

As we mentioned above, this deal provides buyers with a hefty discount of anywhere between 35% and 70%.

The exact discount price is determined mainly by two factors.

The first thing the local council looks at when determining the value of the discount is how long you’ve lived in the home. The minimum amount of time you need to have resided in the property is at least three years.

The second thing they take into consideration is the home’s current market worth or the value of the property.

Right to Buy Rules and Regulations

The great thing about the Right to Buy homeownership scheme is that it’s available to all local government tenants irrespective of income. The only condition is that the council house is your home place of residency and proves yourself a secure and reliable tenant.

Also referred to as ‘Rent to Save’, ‘Rent to Own’, or ‘Intermediate Rent’, the same scheme rules apply to renters on benefits as those for other Right to Buy applicants.

The way it works is as follows:

  1. You rent a home at the market rate for up to five years without having to put down the standard initial deposit of 5%. 25% of the rent will be credited towards the purchase of your home.
  2. You need to spend at least three years as a public sector tenant before applying to buy the property. Bear in mind that these three years don’t necessarily have to be continuous. You can combine all the time you’ve spent renting a property from the government, and if they come to three years or more, you can qualify for the purchase of the home.
  3. Then, you have until before the five-year lease agreement ends to apply and put in an offer to purchase your council home.
  4. Once your application is approved, you’ll receive 25% of the rent you’ve paid thus far.
  5. Next, you’ll also receive 50% of any increase in the property value since the time you moved in.

Authorised Benefits

Fortunately, all the benefits provided by the Department of Work and Pensions (DWP) can be used to purchase a government-owned residence.

These DWP benefits include:

  • Income Support
  • Industrial Injuries
  • Employment and Support Allowance (ESA)
  • Universal Credit
  • Job Seekers Allowance (JSA)
  • Disability and Severe Disability Living Allowance
  • Widow’s Pension
  • Maternity Allowance
  • Child Benefits
  • Carer’s Allowance
  • Attendance Allowance

Restrictions after Purchase

The one downside to purchasing council housing while on benefits is that certain constraints may be imposed on you as a new homeowner.

These restrictions are generally set by either your local authority or the Department for Work and Pensions (DWP). Some of these restrictions include rent restrictions after the purchase. Plus, you won’t be able to claim housing benefits once you purchase the property.

Another setback is potential limitations on Capital Gains Tax (CGT) reductions or benefits. Capital Gains Tax is the tax paid on the gain, or profit, you make from selling something after it’s increased in value.

For example, if you buy a painting for £2,000 and sell it for £10,000, you’ve made a profit of £8,000. It’s that £8,000 that you have to pay Capital Gains Tax on.

Keep in mind that anything over £6,000 is considered ‘tax-free.’ Referred to as the Annual Exempt Amount, this sum is expected to come down to £3,000 as of April 2024 in an effort to raise the revenue of the UK’s income tax.

Finding a Lender

The final step in finalising the purchase of a council house is to find a mortgage provider.

While it may be a bit more difficult to obtain a mortgage while on benefits, it’s still doable. First, you need to show proof that you can make regular payments to the lender. Luckily, some lenders accept government benefits as a source of income. In that case, you’ll need to prove that you have no other sources of income other than government assistance.

You’re also required to show that you’re capable of covering additional responsibilities and expenses that may come up. These include everything from routine payments, like utility bills, to those that are less frequent, such as renovation or repair bills.

The good news is that your local authority can help you find an affordable lender. They can also help you manage all the necessary expenditures associated with purchasing your council home.

However, it’s worth noting that the Right to Buy scheme doesn’t guarantee that the applicant will be approved for a mortgage. This relies solely on the requirements and conditions set by each lender respectively.

Work It Out with Your Local Council

The last step is to verify all the facts with your local council to make sure you meet all their criteria.

After the mortgage is cleared, the solicitor will then carry out their due diligence on the purchase transaction. During this time, they’re required to liaise with you, your local council, and the lender until they bring the deal to a close.

Once that’s done, you can finally enjoy your newly bought home and proudly call yourself a homeowner.

The History of Council Housing

Beginning in 1890 with the Housing for the Working Classes Act, a new type of lodging house was created for those who need it the most. They were built and managed by London’s local councils, hence the name ‘council housing.’

Since that time, council housing has been known as government-owned public housing rented to low-income households. These were people who couldn’t afford to rent in the private housing sector nor could they afford to purchase their own homes.

Nowadays, council housing is found spread out in various areas throughout the UK and caters to a wide array of residents. 

And now, thanks to the Right to Buy scheme, individuals who are living in council housing are finally being given the opportunity to purchase their own homes for the first time, with significant discounts thanks to the amount they’ve paid in rent over the years. This marks a significant moment in the history of council housing in the UK. 

FAQS

How does council housing work?

To apply for a council home, you need to go through your local council. If your application is accepted, you’ll be put on a waiting list.

This list includes other accepted applicants in need of a council home. Your local council will then prioritise applicants based on who needs a home the most urgently.

When your name reaches the top of the list, you’ll be provided with a home, which you can rent for a maximum of five years – which can be renewed, in most cases, after this term is up. 

Who Qualifies for Council Housing?

As long as you have less than £16,000 in savings, then you qualify for council housing. Otherwise, local councils won’t even consider you as a potential applicant. You can apply for council housing if you meet one or more of the criteria listed below. These conditions are referred to as eligibility rules. Still, each council has its own list of local rules and regulations regarding who can apply.

 

Nevertheless, there are certain conditions as to who can qualify, which all local councils need to adhere to, such as the following:

  • You’re legally considered homeless
  • Your family falls into the low-income category
  • You’re living in extremely dire or overcrowded housing conditions
  • You need to move because of a medical reason or disability
  • You have less than £16,000 in savings
  • You have a local connection to the area, such as family or a steady job

How can I apply for the Right to Buy scheme?

Follow these four steps to help you purchase your council house:

  1. Fill in an RTB1 application form.
  2. Send the completed RTB1 form to your landlord by recorded delivery to ensure that your landlord receives it.
  3. Wait for your landlord to reply. If they’re willing to sell, they need to let you know within four weeks of receiving the application or eight weeks if they’ve been your landlord for fewer than three years. If your landlord isn’t willing to sell, the reason must be clearly stated.
  4. If your landlord is ready to sell, they need to send you an offer. This offer should include:
  • The selling price of the property and how they worked it out
  • A brief description of the property
  • The level of discount you’re eligible for
  • An average of service charges for the coming five years
  • Any potential structure problems with the property

Can I get a mortgage while on benefits?

Yes, you can. You just need to provide evidence that you can afford to pay the mortgage payments on time as well as other additional fees.

Getting approved for a mortgage application is entirely at the lender’s discretion. The Right to Buy scheme has no say in who gets approved and who doesn’t. However, if you’re on benefits, there’s no reason you can’t apply for a mortgage as long as all the lender’s conditions are met.

Is there a Right to Buy in Scotland, Wales, and Northern Ireland?

Yes, the Right to Buy homeownership scheme is also available in these countries. Yet, each follows different rules and regulations.

For example, in Scotland, it’s known as the Right to Acquire initiative. Under this scheme, tenants can apply to purchase their home at a discount after they’ve been renting it from a public sector landlord for at least five years.

In Wales, it’s called the Preserved Right to Buy, and in Northern Ireland, it’s called the Choice Based Lettings. Both schemes follow the same regulations as Scotland.

Do Armed Forces Veterans Qualify for Council Housing?

During their time serving with the Armed Forces, all personnel are provided with high-quality subsidised accommodation at their place of work or close by.

Yet, once it’s time for them to leave, they need to begin searching for civilian housing options. If they have less than £16,000 in savings, this means they qualify for social housing.

However, it’s worth noting that councils have long waiting lists and it could be years before you get a house. In the meantime, there’s very little your local council can do for you in terms of accommodation.

They do, however, have an obligation to provide you with temporary housing if you have absolutely no place to go and you’ll be left out on the street.

After you get a council house, the same rules apply to you in terms of purchasing the property under the Right to Buy scheme after renting for 3 years.

Can I Buy My Council House While On Benefits Summary

As you can see from our guide, the government has set up several plans of action to help anyone hoping to buy their council home, even while they’re on benefits.

While there are certain conditions and criteria you must meet, the process is usually clear, forthright, and streamlined. Talk with your landlord, local council member, and consult with one of experts at When The Bank Says No. We’ll be able to help you determine which option is the best for your financial situation and housing needs. 

Emma Jones

Emma began her career in Lloyds Banking Group, first in the unsecured loans department at HSBC and later as a mortgage advisor at Lloyds. During 9 years in these roles and a further 2 years at Yorkshire Building Society, Emma was able to observe the impact of the recession, and how the the banks let their customers down by denying loans and mortgages.

Wanting to be a driving force for change, she stepped into a market advice role where she has been able to help clients when others couldn’t. Identifying a gap in the mortgage space, Emma went on to establish When the Bank Says No. As a keen property investor, she has been the focus of features in publications including The Sunday Times and This is Money.

Emma’s greatest joy is overcoming the low expectations of their customers, many of whom have all but given up on getting a mortgage due. Emma and her team’s passion for helping people overcome the challenges they may face when applying for a mortgage have fuelled the success of When the Bank Says No.

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