Memorandum by the Northern Housing Consortium
(CRED 13)
1. We welcome this timely inquiry by the
Communities and Local Government Committee exploring the impact
of the credit crunch on housing markets across the country and
are pleased to submit a response. We look forward to working with
Government and other partner agencies to identify new ways of
working to ensure that the housing market is able to survive the
economic downturn; our members are working on many innovative
solutions and we feel confident that within the right policy framework
progress can be made.
2. The main elements of our response are
listed below and more detail is provided on these in the body
of our submission:
— The measures announced by Government
are welcome and provide a useful foundation on which to build.
— The economic picture is still evolving
and we need to be flexible in our policy response to ensure that
our approaches are "fit for purpose".
— A one size fits all approach is neither
useful nor likely to be successful—regional markets do differ
and we need flexibility within our intervention approaches to
ensure that we are responding effectively.
— There is a need to review the phasing
of our approach to the overall government targets to ensure our
delivery activity is adding value at this moment in the cycle.
— We welcome the commitment ongoing
support for regeneration.
— With the move to the Homes and Communities
Agency we urge for a review of current targets and investment
plans over the next two years to test their "deliverabilty".
— We need to take a long term and responsible
view on the promotion of tenure options.
— We need to consider housing markets
in a more holistic sense and not simply focus on new build targets.
3. The Consortium were pleased that the
Government has recognised the need to act to ensure a range of
policy tools and interventions were in place to both support vulnerable
households and to maintain momentum within the wider housing market.
However, the proposals and initiatives launched by the government
are only part of the answer and should be seen as a temporary
intervention that will help those at the bottom of the housing
market in the short term. We still face the challenge of improving
liquidity and credit access and rebuilding consumer confidence
over the long term.
4. Taking the specific announcements in
turn, our commentary is as follows:
RAISING OF
THE STAMP
DUTY THRESHOLD
5. We welcomed this announcement as it moved
the threshold from £125,000 to £175,000. Average house
prices across the three Northern regions range between £147,000
and £166,000, therefore, on the surface, the raising of the
threshold should help make house purchasing more affordable. It
should be noted, however, that this averaging of house prices
does mask much higher prices within the regions. Furthermore,
the threshold level does not take into account income levels and
a key barrier to home ownership—accessing mortgages.
£300 million shared equity scheme
6. The government clearly sees the merit
in attempting to boost access to home ownership to those first
time buyers who have not been able to get onto the housing ladder
and to support the construction industry by maintaining a supply
of potential buyers. However, the second quarter of 2008 saw over
56,000 first time buyer mortgages offered—and whilst this
is a declining trend (down from nearly 100,000 for the previous
year), the £300 million shared equity package will only help
10,000 new first time buyers over the next two years—so
comparatively small scale. Furthermore, there is a wider principle
around the merit of promoting home ownership to potentially marginal
owners given the current economic climate. If we accept the rationale
that home ownership is the tenure of choice—and it should
be informed choice—then a more attractive route is the development
of rent to buy schemes. However, there are a variety of approaches
being taken by providers in offering rent to buy schemes and some
offer more attractive terms for the renter/purchaser. A good practice
"Understanding Rent to Buy" leaflet for potential customers
would be of benefit and allow customers to ensure they are armed
with the right questions to solicit the information they require
to make informed choices.
£200 MILLION
MORTGAGE RESCUE
7. The Government's intervention to put
in place support structures that can be accessed by vulnerable
households is to be applauded. We know that the repossession action
can have an immensely damaging impact on family life but also
can negatively impact on wider housing market transactions. The
NHC has been working with our Members to understand the scale
of the problems facing them and is working with several projects
to pilot mortgage rescue schemes. Whilst the finances announced
are welcomed, they cannot be the only solution—the figures
alone suggest that as the Council of Mortgage Lenders are projecting
45,000 repossessions during 2008, 12,000 mortgage possession actions
were issued in the three Northern regions in the second quarter
of 2008 alone (clearly not all of these will result in repossession
but it does provide an indication of the scale of the challenge
we face), and the mortgage rescue proposals will directly support
only 6,000 households. We will need to work creatively with our
Members to put in place wider support proposals.
A more general point around repossession is
the increasing trend we see of private sector tenants losing their
home despite being up to date with rent payments (and not in any
breach of their tenancy) due to the landlord defaulting on mortgages.
We are working with our members to understand the (potential)
scale of this incidence.
£200 MILLION
TO PURCHASE
UNSOLD STOCK
FROM HOUSEBUILDERS
FOR AFFORDABLE
HOMES
8. We welcome the principle of this proposal
as it will ensure that, at a time of great stress within the social
housing system—and with the delivery of affordable housing
impacted upon by the general downturn amongst private developers—new
social housing supply is being maintained.
However, we do feel that there is potential
to revisit the mechanisms of this approach and facilitate a more
market responsive instrument.
A regionalised operating framework rather than the
national clearing house approach would allow strategic decisions
to be taken regarding the place, price and standards formula—and
that HCA at a regional level should have flexibility to set these
standards. Clearly the allocation of funding at a regional level
needs to be addressed.
REGENERATION SCHEMES
9. We welcome the welcome the Government's
intention to work with RDA's to support critical regeneration
schemes. The embedded market renewal and regeneration activity
taking place across the North is crucial to rebalancing our housing
markets and economic aspirations and the current credit crunch
can jeopardise the success and impact of these schemes. We look
forward to working with government, the RDAs and the HCA to explore
the range of possible interventions.
BRINGING FORWARD
AFFORDABLE HOUSING
FUNDS
10. The government's intention in supporting
the housing market and ensuring that social housing delivery does
not dry up is admirable. However it is still a difficult climate
in which providers are seeking to operate. Whilst we have seen
developers keen to offload unsaleable properties, we have not
seen a similar level of land coming to the market place.
The Consortium has been commissioned by the
Housing Corporation to undertake a research project exploring
means of facilitating land assembly across the North to deliver
affordable homes. Residential land valuations across the North
have risen by over 400% in the past decade meaning public sector
delivery bodies frequently find themselves out manoeuvred in open
market competition. Whilst some of this valuation spike is fuelled
by "hope" value, there is a long way to fall for residential
land values to become more affordable for the public sector. We
need to open up new methods of accessing private sector land,
make public sector land subject to more strategic valuation assessment
and disposal strategies and find ways by which risk can be shared
amongst the delivery sector. Our research recommendations address
these issues including the use of land options, reform of the
Surplus Public Sector Land Registry, early use of equity investment
stakes by the Homes and Communities Agency to purchase land.
Whilst the stretching delivery targets remain
in place, we do feel it is important that we consider the phasing
of these targets and have a short and medium term investment and
delivery plan—at a regional level. Whilst on paper there
may not been much headroom for manoeuvre by HCA in the first two
years of operation given the volume of committed programme, we
urge this to be subject to timely review to allow new initiatives
to be considered and funded.
SUMMARY
11. The government is to be applauded for
taking action to support the housing market but we do feel that
there is potential to make this support more flexible and fit
for purpose at a regional level—otherwise we run the risk
of prioritising absolutely delivery over strategic place-shaping—a
decision that may present significant risk in the longer term.
The political focus on home ownership as the primary tenure of
choice needs to be reviewed as clearly we face marginal homeowners
experiencing the devastating consequences of repossession (and
the wider social impact). It will be interesting in the coming
months and years to assess if there is a shift in this focus—and
whether this is led by Government policy, financial institutions
reverting to more sustainable mortgage lending levels, or whether
consumer confidence in the home ownership promise has been shattered.
Government policy, even in this period of economic
pressure should address all aspects of the housing market—including
regeneration, and existing stock and not just focus on new delivery.
November 2008
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