Rent to Buy scheme: what is it and how does it work?

Rent to Buy can help you save for a deposit while renting. Find out how it works and if you’re eligible.

Saving for a house deposit, especially while renting, is arguably the biggest roadblock facing potential first-time buyers. This is where the government’s Rent to Buy scheme can help.

What is Rent to Buy?

The Rent to Buy scheme is designed to help renters in England save for a house deposit. You rent a property that is a part of the scheme at a reduced rate, typically 20% below the market rent.

The properties are available through housing associations, and the scheme is often referred to by several different names, including:

Rent to save
Rent to own
Intermediate rent
Rent-save-buy

The idea behind the scheme is that you use the 20% you save on rent to build up a deposit to buy a home.

The scheme is only available in England and Northern Ireland, but you can use the Rent to Own scheme in Wales. This is now closed to landlords, but some properties are still available to tenants.

Rent to Own works in a similar way to Rent to Buy, but rather than paying a subsidised rent, you can get 25% of your rent back at the end of your tenancy. You can also get 50% of any increase in the property during the time you rent it.

No similar scheme is currently available in Scotland. In London, there is a different scheme in place, known as the London living rent scheme.

What is the London living rent scheme?

The London living rent scheme is very similar to Rent to Buy with a few differences:

Tenancies are for a minimum of three years
Rent on participating new build properties is set at roughly three-quarters of the average rent for the area
A priority is placed on shared ownership properties

The scheme is designed for middle-income households and is funded by the Mayor of London. The benchmark for London living rent levels is based on a third of the average local household income and adjusted for the number of bedrooms in the property.

To take advantage of Rent to Buy, you need to apply to rent a property that’s in the scheme. Rent to Buy properties are new builds set at 80% of the local market rent.

If you’re eligible for the scheme and the property you apply for is available, it will be offered to you to rent. The initial tenancy agreement will be up to two years and can be as long as five.

You can use the deposit you’ve saved at any time to buy a new home and get a mortgage. You can buy the property you’re renting if the landlord agrees or purchase it through shared ownership.

If you don’t keep up with your rent payments or break any of the terms of your tenancy agreement, you may be removed from the scheme.

To be eligible to rent a Rent to Buy property, you must be:

Employed, either full or part-time
A first-time buyer
Be able to afford the rent at full cost, i.e. you can pay the rent and save at the same time

To work out if you’re eligible, the landlord may check your credit history and income. Each housing association has their own specific eligibility criteria, so check these carefully before you apply.

To find and apply for a Rent to Buy property, you can search for eligible homes using the shared ownership scheme service. If you live in London, you can find London living rent properties using the Homes for Londoners property search tool.

You can search housing associations in your area to find Rent to Buy properties. You may need to join a waiting list if there aren’t any homes currently available.

The rent on a Rent to Buy property is normally set at 20% below the market rent, which means you should be able to use this saving to build your deposit. To be eligible for Rent to Buy, you need to prove you can afford to pay rent and save the subsidised amount.

For example, if the market rent on a property is £1,000, using the Rent to Buy scheme, you will pay £800, enabling you to save £200 a month. Over the initial two-year tenancy period, you could build up £4,800 for a deposit.

Is the Rent to Buy scheme a good idea?

Rent to Buy allows you to work towards getting on the property ladder while renting. It can be an effective way to save a deposit, but it might not suit everyone.

Although Rent to Buy offers a way to save while renting, consider if you have any other options to save. For example, if you can live with family, you could potentially save for a deposit even faster.

Pros and cons of Rent to Buy

Pros of Rent to Buy

20% below market value

Pay around 20% below market rent to help you save a deposit

Get on the ladder

Opportunity to buy the property you rent

Shared ownership

Option to use shared ownership to buy the property

Security

Rent through a housing association which can give more security

Cons of Rent to Buy

Price increase

The price of the property may have risen since you moved in, making it more expensive than you expected

Limited choice

You can only rent a new build property that is part of the scheme

Waiting list

There may be a waiting list you need to join

Availability

Not every area has Rent to Buy properties available

Our expert says...

“The cost of renting makes it difficult to put money aside to get on the property ladder, but the Rent to Buy scheme can help.

“Your choice of property will be limited, but if you’re looking for a new home to rent, it’s worth looking into whether Rent to Buy could work for you.”

- Jon Bone \ CeMAP-qualified

Shared ownership schemes allow you to buy a share of a property and pay rent on the rest. You usually buy around 40%, but you can purchase 10-75% of the property. They’re offered by housing associations, so you’ll co-own the property with them.

You will need to take out a mortgage for the part you buy, which means you will make mortgage and rent payments at the same time. So, if you purchased a 40% share of a £300,000 property, that would be worth £120,000. If you provide a 10% deposit of £12,000, you would need a mortgage of £108,000.

You can choose to buy a larger share of the property in the future, which means you’ll pay less rent.

The initial tenancy for a Rent to Buy property is two years. After this time, if you’re not ready to buy a property, you can approach the landlord to extend your tenancy for longer.

Typically, you can only live in a Rent to Buy property for five years before you either have to buy it or purchase another property using the deposit you’ve saved.

Rent to Buy properties are offered by housing associations; therefore, you will rent the property through them.

Most associations offer Rent to Buy alongside shared ownership, giving you the option to purchase the property at the end of your tenancy. Private landlords cannot rent properties using the Rent to Buy scheme.

You are under no obligation to purchase the property; however, you may need to move out of the property if your situation changes.

You can choose to buy the property outright, but if you find you cannot afford this, you can use shared ownership to buy part of the property.

The costs you’ll face are the same as when renting through a private landlord. The main upfront fee will be a security deposit to be held in a Tenancy Deposit Scheme.

If you choose to buy your Rent to Buy property, you will have to pay the costs that come with buying a house, including solicitors fees, stamp duty and surveys.