Memorandum submitted by the Northern Ireland
Co-ownership Housing Association Ltd
HOMES AND
HOUSING: POLICY
AND SUPPLY
The Home Ownership Task Force Report (A Home
of My Own, November 2003) appreciated the need for policy
and delivery to be flexible and responsive to local and regional
housing markets. In addition to affordability, the HOTF recognised
that there were other important barriers to accessing affordable
home ownership and, importantly, recommended integrating public
policy and market solutions.
Homes are more than bricks and mortar; they
provide access to a range of services and to communities. Housing
has a macroeconomic impact. The final Barker Report has
just been published (Kate Barker, Review of Housing Supply,
March 2004) and deals with these issues. The report was fundamentally
concerned with longer term issues of unresponsive and weak housing
supply rather than simply the current house price cycle, and shows
how:
— A weak supply of housing constrains
economic growth and worsens affordability.
— House price inflation has made home
ownership increasingly unaffordable for many groups in the population,
particularly first-time buyers, with knock-on impacts for private
sector rent levels and demand for social housing.
— Diminishing market affordability
has a direct impact on social exclusion and on the housing opportunities
available to young people and others.
Numbers as primary housing delivery targets
haven't worked particularly well in recent years, for complex
reasons. Barker recommended that government establish a market
affordability goal rather than fixing on a specific number of
homes to be provided, in other words focusing on outcomes rather
than outputs. We have lobbied in recent months for a regional
Homes Task Force with the same emphasis and now look forward to
the upcoming consultation process as to how an affordability goal
might be delivered within the Public Service Agreement process.
Wider affordability for all cannot be achieved
without increasing supply. Consequently we also welcome the ODPM's
commitment to begin to put in place greater investment in social
housing as part of the 2004 Spending Review. Locally, DSD has
indicated it will bid for an effective doubling of baseline funding
for Co-Ownership within that review process, an amount sufficient
to deliver 600 homes annually. However, in recent years DSD has
encountered increasing difficulty when bidding for Co-Ownership,
partly we believe because the extraordinary synergies between
the scheme and government policy objectives have not been widely
appreciated across the machinery of government. In this regard,
Co-Ownership's uniqueness has proved a clear disadvantage on the
field of social housing providers.
CO -OWNERSHIP
Key Supply Issues
1. Affordability.
2. Mainstreaming regeneration and sustainability.
3. Delivering high standards and high value.
We are the regional shared ownership provider,
with the necessary accumulated expertise and a product and service
tailored to the Northern Ireland market. Within our corporate
strategy we aim to deliver the highest value for money in terms
of our service to the local community, proving that Co-ownership
is
— the value for money housing option
for government, levering significant levels of funding and offsetting
the cost of social housing for rent; and
— value for money for prospective shared
owners, giving them housing choice and access to a decent, affordable
home.
Our core strategic objectives for 2004-07 take
this forward:
— Providing affordable housing choice
on a regional basis.
— Targeting resources to greatest need.
— Working in partnership to tackle
local market issues and secure the optimum supply of new build
affordable housing.
— Delivering a comprehensive value
for money housing option that levers in funding and offsets the
cost to government of social housing for rent.
Providing affordable homes for low income households
Owner occupation remains the tenure of preference
for most people, even though for some their goal may be hard to
achieve. As a result we are working proactively with the DSD,
Housing Executive, housing associations, private developers, community
groups and other housing interests to deliver affordable housing
choice through shared ownership, right across Northern Ireland.
There is a very real market for shared ownership
here as an intermediate step to help purchasers into decent, affordable
homes and then onwards into full private ownership. With the house
price to incomes gap still widening, localised hotspots springing
up and forecast interest rate rises we anticipate increasing pressure
to bring affordability issues back up the NI housing policy agenda.
The proportion of first time buyers entering
the housing market is traditionally taken as a indicator of affordability,
and this has now fallen significantly from 59% in 2001 to 26%
in 2003 (Source: Council of Mortgage Lenders). Should this situation
be allowed to continue, there is a real risk that the market could
seize up. Increased low cost home ownership activity would enable
the entire market to transact more freely.
At the same time those aspiring first time buyers
who did make it into home ownership earned above average incomes.
For many people in work but unable to afford home ownership that
aspiration could still be achievable through Co-ownership—there
is a marked contrast between the average incomes of full ownership
and Co-ownership purchasers (Table 1). Co-ownership has a big
part to play in bridging the affordability and savings gaps.
A glance at average weekly household incomes
further illustrates the distinction between the various tenures
(Table 2).
Another indicator of affordability issues and
of how Co-ownership helps to address them is evidenced by the
proportion of our recent purchasers who were single adult/single
income households: 57% in 2003 compared to 34% of NI households.
Equally, Co-Ownership has the flexibility to meet a range of social
needs—15% of purchasers in 2003 were lone parents (compared
to 14% of NI households).
There are recognised mechanisms for establishing
demand for social rented housing. Waiting list numbers are rising,
as is the proportion assessed as in housing stress. However, in
the past there has been no systematic public policy effort to
identify demand for specialised housing needs in Northern Ireland
such as shared ownership, and so there is currently no such established
mechanism for Co-ownership demand. The CIH study referenced below
identifies a minimum demand of 600 annually based on past activity
as a reasonable starting point, while the Housing Executive (linking
demand with affordability and demographic trends) anticipates
that demand will rise.
We welcome the Housing Executive's work in widening
housing needs assessments to refer to specialised housing needs
within the draft area plans because we support the principle of
research to establish a sound evidence base for housing policies.
For our part, we are working to ensure that our contribution to
the Northern Ireland housing evidence base is robust and relevant
and will strategically support the future delivery of affordable
homes on the ground.
In 2003 the Department for Social Development
commissioned two independent studies into Co-ownership—one
from the Chartered Institute of Housing on effectiveness and one
from the University of Ulster on value for money, with which we
co-operated fully. Co-Ownership scored highly across a range of
measures in both studies, because we as an organisation are keenly
aware of the responsibilities that come with our privileged position
as a regional provider and constantly aspire to fulfil them. In
2004, with our help, the Housing Executive will be carrying forward
a further research project with the objectives of:
— supporting Co-ownership's value as
a vehicle for enabling tenure choice and promoting sustainable
home ownership; and
— contributing to the evidence base
for future policy initiatives.
Achieving high standards and high value
Our property value limits and individual case
assessment process focusing on affordability ensure that we are
active at entry level within the housing market. Co-ownership
value limits are significantly below the Total Cost Indicators
applied to housing associations building for rent and were last
raised in May 2002. We understand they will not change significantly
for at least another year, but at the time of writing we anticipate
DSD confirmation shortly that the limits will be discretionary
for partnership regeneration projects. Otherwise our ability to
become involved with development schemes and introduce mixed tenure
(shared ownership in addition to rented social housing) would
be greatly hampered.
We place particular emphasis on the condition
of stock purchased through Co-ownership because, unlike properties
built for rent, the purchaser retains responsibility for repairs
and maintenance. We ensure that the homes we acquire for our purchasers
are of an acceptable condition through a comprehensive bespoke
valuation with any necessary repairs to be carried out as a pre-condition
of purchase, and that they are maintained post-purchase through
external condition checks. We find that our purchasers generally
have great pride of ownership and usually need little encouragement
to "keep up" their homes.
To do its job, Co-ownership must provide value
for the 3 key parties involved
Government
— The level of government subsidy required
to provide a Co-ownership home is slight in comparison with the
much higher level of subsidy required to fund a unit of social
rented housing where, in addition to the higher capital grant,
an ongoing subsidy to the tenant is likely in the form of housing
benefit. In 2003-04, the average input from Co-ownership per property
purchased was £33,385.
— While the funds Co-ownership receives
from the Department for Social Development are in the form of
Social Housing Grant, in practice it is more of an interest free
housing loan which is fully and surely repaid. Furthermore, by
virtue of their investment in property, the funds loaned make
possible a substantial capital return which is itself in turn
ploughed back to provide further Co-ownership homes (Figure 1)
creating extraordinary value for money. During 2003-04 we received
£7.9 million in housing grant and returned £9.9 million
to the Department for Social Development. Indeed, this fits the
pattern from the previous 10 years when we returned 20% more than
we actually received, making Co-ownership a net contributor to
the Northern Ireland social housing budget to the tune of £18
million.
Commercial lenders
— Over the years we have built close
working relationships with lenders and established a reputation
for excellence and consistency in case management, which ensures
that there is no disproportionate administrative input required
from lenders in Co-ownership cases. Our proactivity ensures that
the risk to lenders is minimal, with the consequence that most
have maintained a long-standing involvement in the market. This
is a quite different situation to that in other UK regions; consequently
we are all the more appreciative of the Council of Mortgage Lenders'
public support for Co-ownership here as the sole provider of low
cost home ownership.
Individual purchasers
— Investment in equity can generate
a substantial and unique return for low income households with
little spare cash for other forms of savings. The knock-on effects
can be massive. In 2003 from around 900 Co-ownership homes valued,
we estimated an average return for our purchasers of £16,250
on their initial equity investment. Many of them were able to
take advantage of that beneficial change in their circumstances
by moving onwards into full home ownership. 75% of Co-ownership
purchasers have been able to staircase so far, which contrasts
markedly with staircasing figure of less than 10% in England.
Working in partnership to address local specialised
housing needs in both urban and rural contexts, tackling local
market issues and securing the optimum supply of new build affordable
housing for local people
Homes are more than shelter; they provide access
to a range of services and to communities.
We are committed to ensuring that Co-ownership
going forward carries through New TSN policy, not only socially
but also spatially. Historically, we have provided homes for purchasers
in both urban and rural areas. Now we are focusing in on urban
and rural areas of need. We are actively encouraging developers
to build affordable homes for subsequent purchase through Co-ownership
by identifying and channeling demand in urban regeneration areas
with the particular support of local residents' associations and
community groups. In rural areas we are scoping local market issues
and working together with the other main rural agencies to produce
an appropriate response. The need is there—out of the 23
rural areas where the Housing Executive carried out latent demand
testing in 2003-04 to investigate hidden demand for social housing,
22 returned an interest in housing through Co-ownership. In both
urban and rural areas we believe co-operation and inclusion are
key to arriving at an integrated market solution.
Our total of 18,000 homes provided through Co-ownership
to date is an extraordinary achievement in the regional context,
and no less so is the level of staircasing activity: over the
last five years an average of 638 homes annually or 15% of total
housing stock have staircased fully compared with around 4,000
units or 5% per annum jointly for England and Wales (ODPM, Evaluation
of the Low Cost Home Ownership Programme, September 2002). Experience
has led to expertise and we have been able to develop highly effective
ongoing advice/support services for our purchasers and housing
management practices to maximise staircasing potential. There
is a clear benefit here for both us and our purchasers: they are
able to maximise the value of their equity investment while we
are able to maximise the number of homes we can purchase for others
by committing the surplus equity proceeds to this purpose after
repayment of the grant involved to DSD.
Co-ownership is now built into the mainstream
planning process. The Regional Development Strategy 2025 and latterly
PPS12 Housing in Settlements address all housing and recognises
the need for an inclusive, strategic approach which mixes tenure
types to cater for a range of identified needs.
IMPLICATIONS
Uncertain and indeterminate funding over recent
years has greatly impeded this organisation's ability to effectively
fulfil its remit; not only because, of course, we would have liked
to receive more money but also because, by virtue of the contractual
commitment and timeline involved in buying properties for people,
audit prudence stipulates that we do not contract to purchase
a home for someone unless we have the requisite public funding
in place to make good that commitment when the time comes. Therefore,
the number of homes provided each year has had to fluctuate in
line more with funding than with demand (Table 3).
Public Service Agreement commitments deal with
units and two years ago the commitment was there to fund 600 units
annually through Co-ownership. In 2003-04 the commitment was for
300. This halving of supply was not a policy decision or in response
to demand evidence but solely dictated by the level of funding
available. For the year ahead we realise that DSD hopes once again
to be able to fund up to 300 homes but it is entirely dependent
on available grant. As an organisation we have repeatedly demonstrated
capacity to manage activity in line with available funding—up
or down—but without a reliable indication of funding, even
for each year in progress, cannot employ our resources to best
effect within a wider strategic framework for housing.
Co-Ownership enables:
— a more flexible housing market which
adapts to and reflects the needs of the community;
— access to decent, affordable homes
which better meet individuals' aspirations both in tenure and
in location within communities;
— a more equitable distribution of
housing wealth;
— optimal supply of affordable homes
in areas of need.
Table 1
| NI Mortgages |
Average Income |
| All first time buyers | £24,397
|
| Co-ownership | £13,446
|
| Source: CML Survey of Mortgage Lenders
|
| |
Table 2
Weekly
Average | Public rented
| Buying with
Co-ownership | Buying with
mortgage
| All households |
| Household | |
| | |
| Income | £208 | £317
| £620 | £429 |
| Source: NISRA NI Expenditure and Food Survey 2001/2: NICHA
| | | |
|
| |
| | |
Table 3
| Year | Grant Funding
| Homes Provided |
| 2003-04 | £7.9 million
| 450* |
| 2002-03 | £12.9 million
| 801 |
| 2001-02 | £9.9 million
| 645 |
| * Estimated outturn @ 29.02.04
|
| | |
Figure 1
Source: NICHA
March 2004
| 
