Government lowers homes target

The scheme was designed to help public sector workers

The government has lowered its target to help 10,000 "key" workers get a foot on the property ladder by March 2004.

Only £100m has been spent in the Starter Homes Initiative, of the £250m made available at the beginning of the scheme two years ago.

The government now hopes to help 9,000 people by the end of the scheme, after it was revealed that only 3,300 had benefited so far.

The disappointing figures are mainly due to the rise in house prices in the second year, and "the set-up period" the project faced, according to a spokesman from the ODPM.

Alterations have now been made to the initiative in response to the changing market, and in an effort to lure applicants, Deputy Prime Minister John Prescott has announced a new publicity campaign.

Raising awareness

A regional radio campaign will run for three weeks from the end of August and intends to target key workers in housing "hotspots" in London and the South East.

Speaking during a visit to a key worker housing development in Surrey, Mr Prescott said:

We want every teacher, health worker, and the police in London and the South East to know that funding is available to help them into ownership

Deputy Prime Minister John Prescott

"We want every teacher, health worker, and the police in London and the South East to know that funding is available to help them into ownership."

The SHI works by providing equity loans and shared ownership arrangements, to help with the cost of buying a first home.

An equity loan is a lump sum contribution towards the purchase price of a property. Instead of making monthly repayments, the worker would pay the loan back when they sell the property.

The amount repaid would be the equivalent percentage of the property at the point of re-sale.

Loan increase

The Housing Association has now increased the amount it is prepared to loan to workers outside London. People can now borrow up to £20,000, which is twice as much as before.

The average loan for London key workers is currently £30,000.

Most schemes are run by a housing association on behalf of the government, or in some cases by police forces, education authorities and NHS trusts.

Properties are allocated for workers, unless they opt for the Do it Yourself Shared Ownership (DIYSO) scheme, when they can then go onto the open market to find their own home.

A housing association then enters into a part-buy part-rent, arrangement with the buyer.

The government is urging people to apply for SHI now, as the scheme ends in March 2004, and contracts typically take three months to exchange.

However, the government has said it intends to replace SHI with a similar scheme called the "Challenge Fund". And £1bn has been promised for key workers schemes over the next three years to 2006.

BBC Radio 4's Inside Money was broadcast on Saturday, 9 August, and Monday, 11 August, 2003.