New fund to help nurses and teachers buy homes

Nurses, teachers and police officers who cannot afford to live in London and other property "hot spots" are to benefit from a £250m fund unveiled by the Government yesterday.

Nurses, teachers and police officers who cannot afford to live in London and other property "hot spots" are to benefit from a £250m fund unveiled by the Government yesterday.

Nick Raynsford, the Housing minister, announced that a combination of interest-free loans and low-cost home-ownership schemes would be available to help so-called key workers.

As well as public-sector staff, highly skilled private-sector employees would also be eligible for the new starter homes initiative for low-income first-time buyers.

The new fund is a significant part of the £2.5bn boost for housing made available under the Chancellor's three-year Comprehensive Spending Review from next spring.

In a written answer to Parliament, Mr Raynsford revealed that the initiative will receive £50m in 2001-2 and £100m in the following two years.

Ministers have been worried for some time that public services are finding it difficult to recruit and retain key workers in London, the South-east and other areas with rising property prices.

Junior nurses and firefighters in particular face severe difficulties in getting on to the first rung of the housing ladder. The average house price in London is now £185,000, way beyond the means of most young families.

Details of the initiative will be announced in the next few weeks, but it is understood that the package of measures will include £50,000 interest-free loans to be used as a top-up for homes worth up to £125,000.

As well as the loans, councils will offer low-cost home ownership schemes to allow more tenants to convert rents into mortgages. New joint ventures between employers and housing associations will also be encouraged.

Mr Raynsford stressed yesterday that the funding would be spent in a way that did not "flood" the housing market with buyers and force prices even further upwards.

"This is not a panacea. We don't want to pump money in a way that pushes house prices up. But we are determined to make home ownership a reality for first-time buyers in key jobs," he said.

The minister added that private-sector workers as well as public-sector staff, particularly workers with technical skills, would be eligible for the new loans.

The bulk of the £2.5bn housing settlement will go towards ambitious plans to repair all substandard council housing within 10 years and build 36,000 new homes for rent.

The budget for housing associations to build new homes for rent will be almost doubled, from £690m this year to £1.2bn by 2003-4.

Council home allocations are to be radically revised in selected areas to give greater choice to applicants. £11m will be spent on pilot schemes to give those on the housing list an estate agent-style service that will allow them to indicate which council home they want to live in.

A further £17m will be spent on improving gypsy and traveller sites across the country. Mr Raynsford said that the emphasis would be on improving legitimate sites to discourage travellers from camping illegally.