Memorandum by Annington Homes (AFH 42)
1. INTRODUCTION
1.1 Annington Homes is one of the largest
providers of affordable homes in the United Kingdom and therefore
warmly welcomes the Urban Affairs Sub-Committee timely inquiry
into affordable homes.
1.2 Annington Homes is not a charity, nor
a registered social landlord, but a commercial company.
2. ABOUT ANNINGTON
HOMES
2.1 Annington Homes became one of the largest
private owners of residential property in the United Kingdom following
its purchase of more than 57,600 homes from the Ministry of Defence
in November 1996. These homes are referred to as the Married Quarters
Estate, used by the Ministry of Defence to accommodate service
families throughout England and Wales. As a result, Annington
owns all types of properties from two bedroom flats to eight bedroom
houses in all areas from Cumbria to Cornwall and South Wales to
Suffolk.
2.2 Most of these homes were leased back
to the Ministry of Defence for continued use as service accommodation.
A key feature of the purchase is that Annington is guaranteed
an annual release of some 600-700 empty houses that are surplus
to Ministry of Defence requirements. The reality is that since
November 1996, the Ministry of Defence has released more than
12,000 surplus units to Annington. The Ministry of Defence continues
to manage and maintain the properties it rents whilst Annington
has sole responsibility for the surplus units as they are handed
over.
2.3 Whilst there are opportunities to rent
some of these surplus properties in the private market and, in
certain circumstances, even to redevelop and build new ones, Annington's
primary business is the sale of second-hand homes. The majority
of these are two and three bedroomed flats and terraced houses
on large estates, often unglamorous and dilapidated, and in areas
remote from community and transport infrastructure.
2.4 Since November 1996, Annington has developed
a track record in selling homes at affordable prices. In the financial
year ending 31 March 2002, Annington sold 1,999 houses to private
individuals at an average price of £66,647, well below the
average in England and Wales that has recently been reported by
the Land Registry to be as high as £121,881.
2.5 Annington's supply of affordable homes
attracts a range of house purchasers:
— more than 50 per cent of those buying
an Annington home are first time buyers, the majority coming out
of parental homes or long term rental;
— more than 50 per cent are aged 21-30;
— over the last three years, an average
of 30 per cent of Annington's homes are sold to Service or ex-Service
personnel;
— a further 25 per cent are sold to
people that the Government would classify as "key workers".
2.6 Annington's sales launches attract unprecedented
interest and demand, that is widely reported in the media. Sell-outs
of entire sites on the launch day are not unusual, the largest
being at Brampton, Cambridgeshire in September 1999 when 150 properties
were sold in two days. This level of demand has been witnessed
on a broad geographic spread throughout England and Wales—almost
without exception.
3. PROVIDING
"AFFORDABLE HOMES"
3.1 What does "affordable" mean?
"Affordable" will always mean different things to different
people but, in essence, something is "affordable" if
it is within one's means. The average national wage is said to
be c. £444 per month gross, equating to c.£23,000 per
annum. Whilst 4X multiple of salary is not uncommon in the mortgage
market, traditionally mortgages have been based on 3X. Whilst
this produces an automatic gap between the average price of a
property and 3X, or even 4X, multiple of the national average
wage, the cost of money is lower than it is has ever been in what
must be one of the lowest interest rate environments on record.
Each region and locality has it's own dynamics but other factors
also generate the demand for property, including the availability
of stock, employment levels, rents etc. An almost universal factor
driving demand and thus prices, is the lack of available stock,
frustrated and exacerbated by a painfully slow planning process.
3.2 Annington has three guiding principles
that underpin its philosophy:
— Annington Homes believes in offering
value for money. Annington will always try to offer it's houses
at the most competitive prices and, through the use of the most
appropriate financial incentives, make house purchase an affordable
option for more people. In any area that Annington is attempting
to sell houses it tries to gauge affordability levels. The single
most important factor that prevents first time buyers entering
the housing market is the ability to fund a deposit. This may
be because they have not worked for a sufficiently long enough
time to save for a deposit or more often because they are in employment
where there is limited scope to save or where there is no bonus
culture that would otherwise provide a "windfall". This
is very much the case with public sector workers. Annington has
devised a means to respond to this need by offering, on some sites,
an incentive package entitled "£99 Move In 5 per cent
Deposit Paid". Here, for a £99 reservation fee, someone
can purchase a property with Annington funding the 5 per cent
deposit. Annington also offers up to £500 toward legal and
surveying fees and pays Stamp Duty. This enables someone then
to fund up to a 95 per cent mortgage, which is infrequently cheaper
in terms of monthly repayments than a monthly rent. This incentive
is the major driver of sales for many people buying an Annington
home and results in people queuing, often for weeks prior to a
launch, and subsequently sell-outs in very short periods of time.
Rapid sales such as this make good business sense for Annington,
because money today is worth more than money tomorrow and saves
Annington the costs of managing a site over a protracted period
of time with all the associated costs that go with it. Annington
has tried many other forms of incentive but it is the "cash
in pocket" attraction that makes this so popular;
— Annington believes in creating environments
in which people want to live. Where it is appropriate, effort
is concentrated on making "street scenes" interesting.
This might range from planting new landscape to changing the external
appearance of a property. This is common sense;
— in most cases Annington will ensure
that homes meet its "Safe and Sound" specification before
a sale is completed. This means that Annington rectifies any issues
that might affect the availability of a mortgage, ensures that
the house is "weatherproof" and checks the electrical,
heating and plumbing systems. These properties will then benefit
from the "Annington Seal of Approval". If this is not
the case, it will be clearly stated that these homes are "sold
as seen". Annington does not invest in frills that would
only increase the price of a house—in order to keep the
price of the house down, Annington only invests in what it needs
to.
4. CONCLUSION
4.1 Annington Home's own position is unique
in that it can only provide homes located in areas released to
it by the Ministry of Defence. However, Annington's role in returning
housing stock to the housing market ensures that it is one of
the largest suppliers of affordable homes in the UK. The widespread
demand for it's houses reflects the general lack of affordable
housing and the need for government to consider future provision
of such stock.
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