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Memorandum from Three Rivers District Council (CRED 10) The Committee will consider the likely effectiveness of the measures which the Department for Communities and Local Government is taking to deal with the credit crunch, with particular reference to: o achievement of the Government's house building targets, both for market and for social housing; o the financial viability and ongoing business of housing associations; o and measures to help existing and prospective homeowners affected by the credit crunch
Achieving the Government's house building targets. · The LA is still trying to maintain its housing targets, but it is finding it difficult. · Land prices are plummeting · RSLs that can buy land will do cheaply, but will not submit plans to redevelop until the market picks up. · Very few projects are approaching for planning for market sale of housing. · Local authority are seeing RSLs provide more socially rented accommodation rather than shared ownership or market sale as they are aware that people are having problems obtaining a mortgage. · Developers are approaching Local Authorities regarding housing they cannot sell on the open market and offering it to Local authorities or trying to gain their support in trying to get grants from the Housing Corporation. However, we are not able to accept an offer as the homes are not to the required standards of Code of Sustainable Homes.
Financial Viability of Housing Associations.
· RSLs are struggling as they have to assess their financial commitments in each of their projects, in the current climate. · This local authority has helped a RSL with legal costs to help a project go through the planning process. · Developers are approaching RSL's to off load their excess properties in the chance they will be acquired. However, once RSLs talk to Local authorities it is hard to accept the offer of homes which are not considered suitable. · There has been a lack of new projects coming from RSL due to the current climate. · Finally, RSLs are looking at intermediate rented accommodation in order to generate people to eventually get onto the property ladder.
Measure to help existing and prospective homeowners affected by the credit crunch.
· Staff had seen an increase in people approaching the Homeless Unit stating that they have been declared "bankruptcy". These homeless families were eventually housed under the act, due to their unfortunate circumstances. · Staffs have had training on debt counselling in preparation of being able to determine people financial circumstances as they will be required to assess a person "recklessness" as part of the Government measures in the "mortgage rescue schemes" which will come into effect from January 2009. · Working closely with Lea Valley Homes which are bringing out new Low Cost Home Ownership schemes in the next few months. They are currently piloting Rent to Buy scheme and are attending a conference regarding the "mortgage rescue" scheme, and how they will play their part, in this process.
1. This local authority is still trying to maintain our social housing building targets, however we have found that market housing has reduced in numbers from previous years. We are able to attain our 30% of affordable housing on sites which were already discussed. However, we are unaware when building will start on these projects, as developers are waiting for the market to improve.
Some RSL's have stated difficulties in the credit crunch, whereas before the credit crunch RSL's had money to fund ambitious projects.
2. We have to cut prices on land values and in return RSLs are having to provide us with more social housing than first stated, due the lack of people obtaining a mortgage, and therefore they are unable to sell housing in the current market and shared ownership is showing the same problem. The Credit crunch has allowed RSLs to provide more social rented housing and the possible use of intermediate rented schemes to allow people in the long run to acquire home ownership. There is this benefit for Local authorities to receive more social rented accommodation.
3. We have been selling land at the purchase price of £1 to allow affordable housing to be provided. On an elderly development site, we will give the land at a purchase price of £1 to develop the site, which will give us 45 elderly properties on this site for socially renting. On a current scheme we agreed to a decrease the selling price on the land for a new development, to allow the RSL to proceed with planning submission, as soon as possible.
4. Some RSLs have stated that they can buy land now and then they will wait until the market picks up. They are able to get land cheaply at the moment as land prices are plummeting.
5. The financial viability of the RSLs is beginning to show. Most RSLs are performing an economic appraisal on projects coming through; some are having problems with funding, for example: - they are not able to pay for legal costs are part of the s106 agreement and therefore they have to go to Board Members to agree funds to proceed with projects. One project had taken a year to proceed due to several economic appraisals and once the planning application was in, they were unable to proceed with the planning application as they were unable to pay for the legal costs. We would have to wait until the project went before the Board Members in December 2008 for the RSL to consider further funds. It was agreed that TRDC would pay for the Legal costs to help the RSL out, on the understanding that they would pay us back once the project goes to the Board Members in December 2008, to acquire further funds as it was supported by this local authority.
6. At a meeting with RSLs they have all complained about the grant levels for the East of England Region being very low compared to London and this means that there projects are not viable and therefore they are not able to proceed. They are now trying to appeal to the Housing Corporation for more flexible when applying for funding on their projects.
7. Developers are trying to apply for grants from the Housing Corporation and asking the local authorities to support their application, but we are unable to, even though the accommodation would be for homeless families. They are not of the required Code of sustainable homes standards.
8. Measures to help existing and prospective homeowners affected by the credit crunch, involves staff are being trained on debt management, as there has been an increase in people applying for bankruptcy and approaching as homeless and seeking assistance. This has helped staff understand how people can fall into debt and then they can make the necessary enquiries. This is hoping to help them assess applicants regarding mortgage rescue measures which will come into effect from the Government in January 2009. It will be the Local Authority who will assess peoples priority need and financial situation to see if the where "reckless". If applicants showed signs of recklessness then it is unlikely that they will be assisted by CAB and through the mortgage rescue scheme.
9. This local authority is working with Lea Valley Homes to provide products such as Rent to Home Buy. Lea Valley Homes are currently piloting a scheme announced by the CLG in July 2008 aimed at helping prospective first time buyer who are unable to access the housing market. They are currently trying this new scheme is Hoddesdon which is currently New Build HomeBuy and will be converted to rent to HomeBuy. Applicant will rent a property for a maximum of 3 years and half the rent will be ring-fenced towards their purchase of that property. They may then buy the property using 50% of their rent paid as the deposit, however if they do not wish to buy they can continue to rent and they will lose the 50% of the rent paid to use as a deposit.
10. There has also been an increase of people applying to the Housing Register as compared to last year and this is due to the fact that people are facing difficulties and therefore applying for social housing. We have seen an increase of repossessions, mortgage arrears and rent arrears from private tenants, and bankruptcy.
Housing Register applications received in the 6 months from 1st April 2007 - 30th September 2007 compared to the number received from 1st April 2008 - 30th September 2008.
2007 2008
April 65 85 May 55 85 June 69 55 July 58 78 August 71 78 September 53 57 ___ ___
Total 371 438 ___ ___
10. RSLs are getting more interested in "intermediate affordable housing", which is "housing at process and rents above those of social rent, but below market price or rents and which meet the criteria set out above. These can include shared equity products (e.g. Home Buy), other low cost homes for sale and intermediate rent." RSLs are looking at allowing people to remain in intermediate rented accommodation for a period of three years, and then look forward to moving them into low cost home ownership or shared equity product.
October 2008 |