Hire-purchase plan to help Londoners on to property ladder

HUNDREDS of London families will be helped onto the property ladder by a hire-purchase scheme which Mayor Boris Johnson is announcing today.

In the £42million plan for 500 flats, couples and families will pay rent at 80 per cent of the market value but should they choose to buy - which they are free to do any time - the amount of rent they have paid will be deducted from the total cost of the property.

The scheme coincides with a squeeze in mortgage lending and demands by high-street banks for at least a 20 per cent deposit - meaning that a buyer will need to find £40,000 before he or she can even think of making an offer on a typical first home within zone two costing £200,000.

Launching the First Steps scheme, Mr Johnson said: "London is leading the way in tackling this housing crisis as we begin the process of helping thousands of Londoners who have been left stranded for so long in both boom time and now during the downturn. The money we are investing today is also a major shot in the arm for London's development sector and the economy.

"As this rolls out, thousands of construction sector jobs will be saved but more importantly the sector will emerge strong to build and grow London when the recovery comes."

The homes are aimed at first-time buyers and will be available to those with an annual income of less than £72,000. Crucially, buyers do not have to be key workers.

The Mayor devised the scheme with the help of the Homes and Communities Agency which is focusing on five sites - the Aylesbury Estate in Southwark, the Heart of East Greenwich on the site of the former Greenwich District Hospital, the former StAndrew's Hospital in Tower Hamlets, the Woodberry Down site in Hackney, and the Holloway Road project in Islington.

The Mayor's housing director, Rick Blakeway, said: "This is a really fresh way of helping people get on the property ladder.

"It means people can try out a property first and the rent isn't dead money."

The agency's London Board also confirmed that it will immediately put another £93million into use at five stalled development sites.

This will see a further 1,500 units started over the next year, with the potential to build 6,000 more, of which more than half will be affordable housing.

Mr Blakeway said he expected the value of properties to stay in line with other homes but admitted there was no way of stopping the value increase.

Economic expert Tony Travers said: "The problem we have is that the only homes being built are social housing and there's a big gap in the market.

"This is a small but significant way of tackling that. It also goes part of the way to stopping the downward spiral of our construction industry."