MEMORANDUM BY THE HASTOE HOUSING ASSOCIATION
(RWP 39)
HOUSING IN
RURAL AREAS
Summary
Hastoe is likely to close down its programme
to provide rented housing in villages because:
— The funding regime is unsustainable.
It now results in shortfalls of nearly £14,000 to build each
house.
— "Exceptions sites" are
much more difficult to acquire.
— Planning guidance to councils advises
against agreeing "mortgagee in possession clauses".
Background
Hastoe Housing Association set up a specific
programme to build houses for people on lower incomes in villages
in the South of England and East Anglia 15 years ago. The Association
now manages nearly 900 houses in 130 village schemes. The great
majority of our homes are two and three bedroom family houses.
All are let at an average of about £55 a week, except a small
minority which have been sold under shared ownership.
Schemes have proved popular with residents,
and turnover rates are low. Schemes are also popular with many
parishes: in eight cases, we have been invited to build a second
phase.
A declining programme
Although the programme was successful in the
early 90s we have had to scale down our activities. In the last
three years, Hastoe has built fewer than six projects a year—compared
with 27 schemes in 1992. The situation continues to deteriorate;
we will shortly have to decide whether we abandon the programme,
or only build village projects on an occasional basis.
Three main factors are at play.
Unsustainable funding
The following costing shows that Hastoe must
find £13,900 per house to meet the shortfall in capital funding
on each new home for rent in its next five projects.
| £ per unit |
| Land cost | 2,000 |
| Building and other costs | 61,400
|
| Total costs | 63,400
|
| Private sector loan | 22,700
|
| Social housing grant | 26,800
|
| Deficit met by Hastoe contribution | 13,900
|
| Total funding | 63,400
|
The Association pays no more than £2,000 for land for
each house by obtaining "exceptional planning consents".
If we paid market rates, the deficit would be correspondingly
greater.
While projects were viable in the early 90s, building costs
have since increased and public subsidy has reduced significantly.
Hastoe has maintained a policy of limiting rents to about £55
per week in real terms to ensure that working families can usually
afford to pay their rents. We cannot therefore meet the shortfalls
by borrowing more private finance. Last, we cannot meet deficits
of £13,900 per house from our reserves indefinitely.
Diminishing land availability
Virtually all our projects are built on land where a planning
authority has given an "exceptional planning consent"
for social housing. We have noticed a growing reluctance among
landowners to sell such land to us over the past few years. Many
are aware of predictions that 4.4 million more homes will be needed
by 2016 and they are also aware of strategic reviews of county
and district plans. They anticipate that land near villages may
soon be zoned for open market housing and therefore wish to "wait
and see".
A number of parishes also oppose proposals for "exceptional
planning consents". They fear that a small development by
a housing association will give developers or landowners a foot
in the door to obtain subsequent planning consents for much larger
estates.
Providing adequate security for private lenders
Over the past 15 years, the Association has generally been
successful in negotiating a "mortgagee in possession"
clause with landowners and local authorities. This gives private
lenders sufficient comfort to lend because they could—in
extremis—sell one or more houses to redeem a loan following
default by the Association.
In some cases, however, councils are unwilling to agree such
clauses and mainstream lenders are unwilling to lend. Hastoe is,
for instance, currently considering a scheme at West Dean in Sussex
which was first mooted in 1993. While Nationwide Building Society
has been especially effective in supporting the Association's
programme, the Society has recently indicated that it will not
lend at West Dean without an MIP clause. The Association will
therefore shortly have to decide whether to abandon the scheme
or find a total of £37,000 per house from internal sources
to cover both the loan element of £23,000 and the further
contribution of £14,000 that makes the books balance.
Recommendations
1. If government wishes to maintain a rural programme,
it will be necessary to increase the amount of social housing
grant it provides on each village home.
2. Government could encourage landowners, planning authorities
and parish councils to give greater support to "exceptions
site" procedures.
3. Government could issue new planning guidance noting
the importance of MIP clauses and recommending that local authorities
agree them.
Andrew Williamson, Managing Director
February 2000
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