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West of England “Opening Doors” Improving Access to Affordable Home Ownership

West of England “Opening Doors” Improving Access to Affordable Home Ownership. Geoff Fox Senior Associate. Study Objectives. Evaluate affordability of shared ownership secured through S106 Agreements and delivered by RSLs in 2004/5 and 2005/6.

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West of England “Opening Doors” Improving Access to Affordable Home Ownership

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  1. West of England “Opening Doors” Improving Access to Affordable Home Ownership

  2. Geoff Fox Senior Associate

  3. Study Objectives • Evaluate affordability of shared ownership secured through S106 Agreements and delivered by RSLs in 2004/5 and 2005/6. • Evaluate affordability of HC and LA funded shared ownership schemes delivered in 2004/5, 2005/6, 2006/7 and proposed for 2007/8 • Recommend options to ensure affordability of intermediate housing secured through the planning system for single people, couples and families • Recommend options to ensure affordability of intermediate housing delivered with HC and LA funding for single people, couples and families www.arkconsultancy.co.uk

  4. Study Objectives (cont.) • Monitor and provide regular reporting on the delivery of alternative LCHO pilot schemes: • Improvement for Sale 50/50 retained equity model (Bristol) • Citywide Assisted Purchase (Bristol) • Open Market Homebuy in Rural Areas (North Somerset) • Very Sheltered Housing (North Somerset) • Community Land Trust (North Somerset) • LCHO without subsidy (North Somerset) • Discounted Market Retained Equity (B&NES) www.arkconsultancy.co.uk

  5. Policy Definitions PPS3 states that the definition of affordable housing, for planning purposes, is as follows: • “Affordable housing includes social rented and intermediate housing, provided to specified eligible households whose needs are not met by the market. Affordable housing should: • meet the needs of eligible households, including availability at low enough cost for them to afford, determined with regard to local incomes and local house prices; • include provision for the home to remain at an affordable price for future eligible households, or if these restrictions are lifted, for the subsidy to be recycled for alternative affordable housing provision." www.arkconsultancy.co.uk

  6. Definitions (cont.) Intermediate affordable housing is: • “Housing at prices and rents above those of social rent, but below market price or rents, and which meet the criteria set out above. These can include shared equity products, other low cost homes for sale and intermediate rent.” www.arkconsultancy.co.uk

  7. WOE Home Ownership Programme2006/7, 2007/8, 2008/9 www.arkconsultancy.co.uk

  8. Cost of market renting vs mortgage costsfor owner occupation In WOE www.arkconsultancy.co.uk

  9. Impact of Rental and Service Charges onAffordability www.arkconsultancy.co.uk

  10. Household Income Required – 40% equity share with differing rent levels www.arkconsultancy.co.uk

  11. Shared Ownership Costs Compared WithOther Tenures www.arkconsultancy.co.uk

  12. Typical RSL On-Costs for Intermediate Home Ownership www.arkconsultancy.co.uk

  13. Rent Required to Repay Loan of £14,567.50,to cover RSL On-Costs, As % of Unsold Equity www.arkconsultancy.co.uk

  14. Family Budget based on Housing Costs as 25% Gross Income Income/Expenditure £’s Household Income 25,000 Household Expenditure & Costs Tax and NI 4,581 Mortgage and Rent (25% Gross Income) 6,250 Service Charge and Council Tax 1,250 Water/sewage rates and electric/gas 1,260 Property insurance and maintenance/sinking fund 1,220 Transport 2,000 Food, hsehld goods/services, clothing, communication 4,170 Communication 400 Alcohol/restaurants, recreation, culture and holidays 1,800 Education/childcare and health 2,340 Total Household Outgoings 25,271 Surplus/Deficit (271) www.arkconsultancy.co.uk

  15. Intermediate Home Ownership IncomeThresholds – Kingswood, South Glos www.arkconsultancy.co.uk

  16. Intermediate Housing Income by Thresholdsby Local Authority www.arkconsultancy.co.uk

  17. Affordable Market Values on Intermediate Home Ownership – Kingswood, South Glos www.arkconsultancy.co.uk

  18. Executive Summary • 25% of gross income as maximum household expenditure on housing – in Ark’s opinion. • Affordability criteria is in line with national guidance (SHMA Practice Guidance 2007, v2). • If a household can afford to market rent they should not be regarded as in need of intermediate housing. • RSLs are serious about tackling affordability and are keen to look at selling lower percentage tranches or lowering rents. • Most sales are made to applicants who appear to afford the product, and interviews with prospective purchasers ensure this. • Lack of consistency between RSLs as to measurement of affordability. This impacts significantly upon target household income expected for product purchase. www.arkconsultancy.co.uk

  19. Executive Summary (cont.) • Market rents are currently significantly lower than cost of buying outright in the South West. Report produced by Steve Wilcox in 2007 shows market rents are approx. 60% of mortgage costs. • The above definition means that intermediate housing should aim to assist households between social and market rents. • Households falling in Ark’s established lower threshold of affordability for each SHMA zone would be best accommodated in social rented housing (unless substantial savings or capital assets). • Likewise, households with income above the upper threshold of affordability could be expected to purchase or rent on the open market. • The average price of intermediate home ownership should be at the mid point between the upper and lower income thresholds. www.arkconsultancy.co.uk

  20. Executive Summary (cont.) • Ark has demonstrated that the level of rent charged impacts significantly upon weekly housing costs, resulting on affordability levels. • The RSL can charge rent based on a sliding scale in order to repay a loan over 30 years to cover its on-costs. • LAs should take account of service charges when assessing affordability. • RSLs should have a consistent approach to assessing rental and service charges. • The 4 LAs, working with partner RSLs and the Housing Corporation should establish whether grant funded Newbuild Homebuy can achieve similar levels of affordability as schemes delivered through S106 Agreements. www.arkconsultancy.co.uk

  21. Executive Summary (cont.) • The 4 LAs should review planning policies in light of this study to consider the impact of entry level market rents as a method to establish the upper threshold of intermediate home ownership products. • The 4 LAs should regularly review the raw data contained within this report as it establishes the lower and upper thresholds for intermediate housing as a whole. www.arkconsultancy.co.uk

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