Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by Annington Homes (AFH 42)


  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.


  2.1  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.


  3.1  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.


  4.1  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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