Conclusions and recommendations
1. Information on the impact of the assistance
on local housing markets is scarce. There
is a growing risk that, if misdirected, low cost home ownership
assistance will increase demand for housing in property hot-spots
and contribute to pushing up house prices. The Department should
extend its existing modelling of the national impact of this assistance
to include an assessment of its impact on local housing markets.
2. The Department does not know how many
people who part-purchase can afford to purchase outright at some
stage or how long it takes to do so.
Low Cost Home Ownership assistance allows households to purchase
a share of a home and then to increase the size of their share
until they own the property outright. The extent to which this
assistance is contributing to full private ownership is unknown
and there is a possibility of creating a new category of permanent
part owners. The Department and Housing Corporation need to be
better informed on what happens to low cost home ownership properties
after their initial purchase.
3. In 2004-05 only 15% of those taking advantage
of assistance were previously social housing tenants and the others
helped were not normally in priority housing need.
When targeted at these groups, low cost home ownership assistance
is especially cost-effective as it frees up a social rent home
at as little as half the cost to the taxpayer of building a new
social rented property. The Department should establish a target
for the amount of assistance directed at households whose purchase
of a property will free up social rented housing.
4. Some Registered Social Landlords do not
consider the housing need of applicants for assistance
but automatically add applicants to housing waiting lists to ensure
that they qualify for help. Registered Social Landlords and local
authorities need to work together to improve the quality of waiting
list information so that they are better able to target help towards
those in housing need who can afford to part-purchase.
5. If Registered Social Landlords had encouraged
all beneficiaries in 2004-05 to buy as large a share of a property
as they could safely afford, an additional £63 million could
have been available to help 3,420 additional households.
The Department and the Housing Corporation need to work with Registered
Social Landlords to meet the Government's commitment to improve
the assessments of applicants' finances. They should adopt best
practice in assessing borrowing capacity from banking and private
mortgage lenders.
6. In 2004-05 low cost home ownership assistance
mainly went to households with incomes over £25,000, while
most new social housing tenants had household incomes of less
than £20,000. The current Open Market
HomeBuy product requires a purchaser to buy a 75% share of a property
which makes it unaffordable for those with incomes below £20,000.
Since we took evidence, the Government has stated that it is seeking
to develop an option whereby households can buy 50 to 70% of an
open market property. The Department needs to press ahead with
this option. Any higher subsidy to the individual household receiving
assistance should be more than offset by the savings involved
in releasing an existing social rent property for use by another
family.
7. The impact of helping key public sector
employees through low cost home ownership assistance is not analysed
separately from the effects of other measures public sector employers
have been taking to improve retention.
It is therefore unclear whether this assistance is an effective
way of tackling recruitment and retention problems in the public
sector. The Department should carry out a full cost benefit analysis
of this assistance, including a comparison of its performance
against other measures being taken to address these problems.
8. The Department lacks information on the
take-up rates for key worker assistance at individual institutions,
such as police stations or hospitals, and on the reasons for any
variations in these rates. The Department
needs to identify those institutions with the greatest recruitment
and retention problems and compare with the current pattern of
provision of assistance. The Department and Regional Housing Boards
should take account of this exercise when determining the criteria
for eligibility for assistance.
9. From April 2006, key public sector workers
who receive assistance by sole virtue of their employment are
required to repay this assistance if they leave eligible employment.
Both the individual recipient of this assistance and their employer
are required to inform the relevant Registered Social Landlord
on leaving eligible employment, but employers had not implemented
the necessary controls. The Department and the Housing Corporation
should require participating employers of key workers to apply
controls for the recovery of this assistance.
10. The new arrangements for funding the Open
Market HomeBuy product mean that private lenders rather than the
affordable housing sector will benefit from any rises in the equity
value of homes bought with assistance.
The Department entered into an agreement with five commercial
lenders whereby they part-fund the Open Market HomeBuy product
and receive the gains from increases in property prices that previously
went to the affordable housing sector for reinvestment there.
The Department should compare the costs and benefits of using
both commercial lenders and Registered Social Landlords as possible
sources of funding for low cost ownership products.
11. Registered Social Landlords have made
substantial gains from their involvement in low cost home ownership
but some have been slow to reinvest these gains in affordable
housing. The Government plans to work
with the Housing Corporation and Registered Social Landlords to
recycle such gains back into the provision of affordable housing.
There is however uncertainty over whether the Housing Corporation
has the necessary legal powers and the Department needs to clarify
the legal position
12. Registered Social Landlords' equity stakes
in low cost home ownership properties are currently valued at
potentially between £610 million and £720 million.
One of the Housing Corporation's aims is for Registered Social
Landlords to lever more private finance into the affordable housing
sector which could be achieved if Registered Social Landlords
used their equity stakes as security to raise extra borrowing
from commercial lenders. The Housing Corporation should work with
Registered Social Landlords and commercial lenders to overcome
any obstacles to Registered Social Landlords raising additional
funding in this way.
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