Alternative Routes To Homeownership: The Free House Phenomenon

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The dream of owning your own home is very much alive and well in the UK. However, raising enough cash to cover swelling property prices and deposits remains out of reach for many. While getting a foot on the property ladder often requires compromise, some are now acquiring homes completely free through unorthodox and creative methods. From house part exchange deals to community trust models, this article explores the emerging “free house” phenomenon making waves in the property market.

Understanding Traditional Barriers to Entry

To assess the rise of free homes, it helps to first understand the traditional limitations faced by prospective buyers:

  • Raising deposits – Lenders typically require 10-20% of the property’s value upfront. For a £300,000 home, this means saving £30,000-£60,000 plus fees – a tall order for most.
  • Mortgage affordability – Stricter loan criteria since the 2008 crash means high rental and living costs often preclude mortgage approval.
  • Liverpool Share Deals – While these involvement schemes allow shared ownership without deposits, they still require hefty mortgage loans on the portion owned.
  • Limited stock – Increasing demand against restricted housing supply growth has raised prices beyond wages in many areas.
  • Financial status – Missed bill payments, defaults, or poor credit histories can mean rejection of the credit needed to buy.

These factors have priced many out of the market entirely. However, innovative models offering homes for free are now providing alternative routes forward.

Progressive Developer Models

Some housing developers have started experimenting with alternative pricing and ownership structures. While not free outright, these can greatly reduce or eliminate deposit and mortgage barriers.

  • Low or No Deposit Deals

Rather than mandatory 10-20% deposits, some developers now offer deals with deposits as low as 5% or even 0%. Reducing this major upfront cost hurdle makes purchases accessible to far more buyers. However, mortgage affordability criteria remain stringent.

  • Rent-to-Buy

This model allows buyers to initially rent a property at sub-market rates. A portion of the rent then goes toward the home’s purchase price. After a defined period, such as 5 years, the full purchase amount has effectively been paid without requiring savings or financing.

  • Affordable Housing Lotteries

In some upmarket developments, a set percentage of homes are offered via lottery at below-market rates to qualifying buyers. This enables affordable full ownership without high mortgage borrowing. This means testing often applies.

While innovative, these models still have limitations like credit checks and affordability assessments. The search for truly free housing options has led to more radical solutions.

House Part Exchange Deals

House part exchange schemes are allowing some buyers to fully own suitable homes without any mortgage borrowing at all.

The process works as follows:

  • A buyer offers up their current unsold property as a straight swap for a newly built home from the developer.
  • The developer values the part exchange property through surveys and local agents.
  • Based on valuations, the developer calculates the price difference between the part exchange home and the new property.
  • The title deeds are simply swapped and the buyer covers any price difference.

This means buyers can essentially trade their current home for a suitable new one. By wholly eliminating deposits and mortgages, homeownership opens up to those previously excluded.

Part exchange terms, valuations and price differences vary greatly between developers. But for some, it provides the only path to homeownership without savings or borrowing.

Community Land Trusts

Community land trusts are non-profit, community-based organisations pioneering innovative models for affordable housing provision.

They operate by:

  • Acquiring land via councils, charities or public donations.
  • Developing properties cooperatively using voluntary labour where possible.
  • Providing homes at zero or minimal upfront cost to members who do not qualify for traditional routes.
  • Retaining ownership of the land while members own the physical house.
  • Using shared equity and income percentage models so homes remain affordable permanently.

With rapid growth since 2010, over 225 community land trusts now exist in England and Wales. Through community-spirited innovation, these schemes are empowering housing access.

Inheritance Windfalls

Unexpected inheritances from relatives allowing outright purchases with no mortgage are an increasingly common route to free homeownership.

Average inheritance sums have doubled over the past decade fuelled by rising property prices. It is estimated over £1 trillion of wealth will pass between generations in the coming years.

For many fortunate recipients, six-figure windfalls can comfortably cover outright purchases of suitable homes in cheaper areas without financing. This enables mortgage-free ownership, often unexpectedly early in life.

The Challenges of Free Homes

While the idea of a free home sounds appealing, the reality also comes with pitfalls to consider:

  • Restricted locations – Developers and trusts typically offer free homes only in selected areas and developments.
  • Limited property types – Most free deals are for new builds only, with limited options for customisation.
  • Ongoing costs – Repairs, utilities and taxes still require savings and budgeting like traditional ownership.
  • Loosened mobility – Part exchanges and passed-on homes often root people geographically.
  • Shared land ownership – Community trust models prevent tapping the land’s value for financing.
  • Family pressures – Inherited homes can provoke tricky dynamics and expectations.
  • Investments lost – Inheritances may have greater utility if invested financially rather than in property.

Free can be misleading – while the upfront cost is removed, limitations, responsibilities and alternate opportunities still warrant careful thought.

Government Support Prospects

With ‘generation rent’ concerns growing, the UK government is under pressure to support alternative and affordable models further.

Proposed policies include:

  • Community Housing Fund – A £60 million annual fund starting in 2018 to provide infrastructure for community-led housing initiatives.
  • Housing Association Partnerships – Developing affordable homes in collaboration with housing associations.
  • Temporary Accommodation Support – Backing LTAs to develop interim accommodation for those transitioning to permanent homes.
  • Rural Exception Sites – Making rural land available for affordable housing developments.
  • Cooperative Housing Models – Exploring frameworks to enable cooperative and mutual home ownership structures.

With sufficient backing, grassroots affordable models could rapidly scale and expand their impact and availability nationwide.

Conclusion

While far from mainstream currently, the free house models emerging offer inspiring examples of social innovation in home ownership. Through progressive policymaking, sufficient government support exists to replicate and expand on these successes.

By empowering accessible homeownership for all, living conditions and security stand to improve for many vulnerable and excluded groups. While buying a free house still requires great care and diligence, the foundations are being laid for an inclusive property ladder open to all.

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