Memorandum by the Department for Communities
and Local Government, the Homes and Communities Agency and Tenant
Services Authority (CRED 60)
EXECUTIVE SUMMARY
1. This memorandum provides the Department
for Communities and Local Government's response to the Communities
and Local Government Committee's inquiry on "housing and
the credit crunch". It also incorporates evidence from the
two new shadow organisations—the Homes and Communities Agency
(HCA) and the Tenant Services Authority (TSA)—who both come
into effect on 1 December 2008. More detail on the roles of the
HCA and TSA is set out at Annexes A and B.
2. The memorandum sets out the impact of
the current global economic situation on the housing market, and
the Government response, including the work of the HCA and TSA.
The evidence specifically covers the three issues identified by
the Committee: the impact on Government housing supply targets;
the financial viability and ongoing business of housing associations;
and measures to help existing and prospective homeowners.
THE CURRENT
ECONOMIC SITUATION
AND IMPACT
ON THE
HOUSING MARKET
3. The Government is proud of its record
on ensuring that everyone has access to a decent, affordable home
that meets their needs. Housing supply has increased substantially
over the last few years to its highest level since the 1980s,
helping to meet growing demand and affordability. 110,000 households
have benefited from our shared ownership and shared equity programmes,
enabling them to get a first foot on the property ladder. A million
more households own their own home than in 1997. Social tenants
too have seen real improvements in the quality of their homes,
and this has been alongside concerted action to cut the number
of rough-sleepers and end the long-term use of bed and breakfast
accommodation for families with children.
4. Following a sustained period of growth
and house price rises, the housing market is experiencing significant
challenges as a result of turbulence in the global financial markets.
The collapse in securitisation since August 2007 following revelations
of the scale of losses in the US sub-prime market has led to significant,
and possibly unprecedented, credit rationing by financial institutions.
The issuing of Residential Mortgage backed securities (which by
2006 provided approximately two-thirds of net new lending) has
almost disappeared.
5. Perhaps more importantly, there has also
been a loss of confidence, both within the financial sector and
among consumers. Housing transactions have fallen from 1.7 million
in the year to September 2007, to 1.1 million in the year to September
2008 (according to data from HM Revenue and Customs); the number
of first-time buyers has fallen from 380,600 in the year to September
2007, to 235,800 in the year to September 2008 (according to the
Council for Mortgage Lenders); and house prices have fallen as
a result—by 13.7% in the twelve months from October 2007
according to the Halifax based on mortgage approvals (although
by only 5.1% in the twelve months from September 2007 according
to CLG's land register based on completed sales).
6. With fewer first-time buyers entering
the market, a reduction in the availability of buy-to-let mortgages
and fewer transactions, there has been a rapid and severe impact
for housebuilders. New starts in the second quarter of 2008 are
19% down on the previous year, and completions are 13% down (data
for the third quarter will be available on 20 November and we
would be happy to provide this to the Committee separately). At
least 6,000 jobs have been lost in the housebuilding industry
and there is likely to be a rise in the number of unsold units.
7. The current credit and economic conditions
are creating difficulties for existing homeowners through increased
costs of borrowing and the tightening of lending criteria, which
have only recently been offset by a significant fall in interest
rates. In addition, the impacts on the economy in general, employment
rates, and in particular the rise in repossessions, are also having
an impact.
8. Data from the Council for Mortgage Lenders
(CML) shows that 18,900 properties were taken into repossession
in the first half of 2008 and that 45,000 homes are estimated
to be repossessed by the end of the year. It should be noted,
however, that the number of repossessions between January and
June equates to only 0.16% of all mortgages, less than half the
rate seen in the early 1990s. Only 4% of those registered homeless
so far in 2008 are as a result of mortgage arrears compared with
10% in the early 1990s.
9. The Government is committed to robust
and decisive action to respond to these economic challenges. In
doing so, our objectives are:
— Financial stability—to
support a healthy, stable lending system and mortgage market.
— Economic—to support
jobs in the construction and other sectors, preserving confidence
in the housing market, and delivering long-term growth.
— Social—mitigating the
short to medium-term impacts of a downturn on households and individuals,
such as through repossessions on vulnerable families, and ensuring
that everyone has access to decent housing.
— Fiscal—minimising costs
to the state (such as through expensive temporary accommodation),
securing value for money for taxpayers, ensuring that the private
sector plays as full a role as possible, and supporting the Government's
overall objectives.
10. Throughout this challenging period,
our response has sought to pursue and balance these objectives.
THE GOVERNMENT'S
PRIORITIES IN
RESPONDING TO
THE CURRENT
CHALLENGES
11. The speed of change in the global credit,
and consequently housing, markets since August 2007 has been rapid
and unprecedented. In response, the Government has consistently
sought to respond proportionately and in a timely fashion. In
terms of the wider global credit markets and financial system,
the Government has acted decisively and ahead of many other countries
to set out a substantial package designed to support the UK banking
system and to improve the availability of credit for mortgage
lending. As part of the 13 October announcement, the banks using
the recapitalisation scheme have made an explicit commitment,
as part of their agreement with Government, to maintain over the
next three years the availability and active marketing of competitively
priced lending to homeowners at 2007 levels. Early indications
are of rising interbank lending, combined with the recent lowering
of interest rates, but we wait to see if this is confirmed by
the Bank of England interbank lending figures released at the
end of November.
12. In pursuit of CLG's housing objectives,
we have sought to:
— support individuals at short-term
risk of repossession, with a particular focus on preventing homelessness
amongst vulnerable households;
— promote confidence in the housing
market by preventing avoidable repossessions which can cause unnecessary
public concern;
— promote construction activity over
the medium-term to support the delivery of affordable and private
sector housing, and ensure that the housing delivery system continues
to be viable in the new credit environment; and
— consider how best to ensure that
we have a responsive housing market capable of meeting our long-term
needs and housing objectives.
13. We have announced three major packages
designed to respond to the current conditions in the housing market.
14. On 9 May 2008, the Chancellor of the
Exchequer Alistair Darling and the then Housing Minister, Caroline
Flint, announced a £10 million package to expand access to
free legal representation for households at risk of repossession;
strengthen the capacity and expertise of the National Housing
Advice Service to provide independent expert debt advice; and
provide more specialist training for Citizen Advice Bureau staff
and local authorities to help families get their finances back
on track.
15. On 16 July 2008, CLG set out a series
of further measures and reforms to alleviate the challenges in
the housing market, including a pilot new "Rent to HomeBuy"
scheme targeted at first-time buyers; new public private partnerships
and proposals for growth points to increase the supply of affordable
homes; allocation of £510 million funding to reward councils
who are planning and identifying land for future development;
and new consumer information for families at risk of repossession.
16. On 2 September 2008, CLG announced a
number of further measures as part of a series of Government actions
to increase confidence and help ensure stability and fairness
in the housing market:
— A £300 million new shared equity
scheme "HomeBuy Direct" to support up to 10,000 first-time
buyers to get onto the property ladder.
— A £200 million mortgage rescue
scheme to support up to 6,000 of the most vulnerable homeowners
facing repossession to be able to remain in their home.
— £400 million of funding being
brought forward in order to deliver up to 5,500 new social homes
over the next eighteen months on top of current assumptions.
— £100 million of targeted support
(from the Department of Work and Pensions) through the Support
for Mortgage Interest (SMI) scheme for homeowners with mortgages
who lose their jobs.
— Work with the Regional Development
Agencies (RDAs) and HCA to support the most critical regeneration
schemes under threat in the current market conditions and with
the greatest potential to transform their communities.
17. The package of measures was supported
by an HM Treasury announcement on the same day that there would
be a one-year stamp duty holiday on all purchases of residential
property worth not more than £175,000. The relief will apply
to purchases made on or after 3 September 2008 and before 3 September
2009. The holiday is designed to demonstrate the Government's
support for homebuyers at a time of difficult conditions and means
that around half of all residential purchases, including many
by first-time buyers, will be exempt from stamp duty.
18. Although we have made good progress
over the last ten weeks, it is largely too early to tell whether
the series of Government announcements over the summer and early
autumn has yet had an impact. In particular, the CLG objectives
are unlikely to be achieved within such a short period of time.
For example, we are on track to make the first homes available
to purchasers through our new "HomeBuy Direct" early
in 2009 and have made significant progress on the new mortgage
rescue scheme, talking to over 300 local authorities, in order
to be up and running as planned very early in the New Year.
19. The memorandum now discusses the three
issues identified by the Committee in more detail.
ACHIEVEMENT OF
HOUSING SUPPLY
TARGETS
20. The 2007 Housing Green Paper "Homes
for the Future: More Affordable, More Sustainable" set
out ambitious new housing supply targets in order to reverse decades
of undersupply and problems of affordability, particularly for
those seeking to buy their first home. The Green Paper raised
housing supply targets to 240,000 additional homes a year by 2016,
with at least 70,000 more affordable homes a year by 2011, of
which 45,000 would be new social homes.
21. The 240,000 new homes a year by 2016
target was developed from 2004-based household projections (derived
from ONS population data) which anticipated that households would
grow by 223,000 households a year to 2026, plus the need to address
decades of undersupply. Similarly, the target for new social homes
was based on newly arising housing need and a backlog of demand.
22. Although the housing market is facing
a major short to medium-term challenge as a result of reduced
credit and a loss of confidence, it is important to recognise
that this does not negate the long-term supply and affordability
challenges. The number of households continues to grow, people
are living longer, lifestyles are changing and there is a legacy
of undersupply (although the confirmed net housing supply of 199,200
in 2006-07 shows that good progress was being made before the
current economic situation took effect).
23. Modelling from the National Housing
and Planning Advice Unit (NHPAU) still indicates that affordability
could decline further over the next 10 years—even with higher
borrowing, lower real income growth and a short-term downward
house price adjustment. The Government therefore remains committed
to the 240,000 target in order to increase housing supply and
respond to long-term demand.
24. We recognise that meeting our housing
supply targets will be very challenging in the current market
conditions, and therefore that meeting our long-term cumulative
targets of two million homes by 2016 and three million by 2020
will be extremely challenging. It remains, however, too early
to predict outputs in 2016 and 2020 with any certainty.
25. In addition, the current economic situation
is also posing significant difficulties for those in the housebuilding
sector. Overall construction accounts for about 6% of the UK's
GDP and employs about 1.3 million people (within that housing
accounts for about 17% of construction output or about 170,000
jobs). We need to work with the sector to support output and employment
in a manner that creates property for which there is immediate
and sustainable demand. In the present climate this is essentially
for social and private rented housing.
26. In this context, it is therefore right
that the Government has focused on maximising the overall level
of housing supply in the short to medium-term. We have done this
by:
— introducing a new shared equity scheme
HomeBuy Direct to support first-time buyers into affordable homeownership
and provide a targeted boost to the housing market (more detail
on the scheme is set out in paragraph 49);
— bringing forward £400 million
from our 2010-11 affordable housing budget to be spent on new
social housing over the next 18 months to deliver 5,500 new social
homes; and
— bringing unsold units into the affordable
housing sector by allocating £200 million from the Housing
Corporation's Affordable Housing Programme for the purchase of
homes from private sector house builders. The Corporation has
so far allocated £90 million to provide 2,600 homes.
27. Over the longer term we are pursuing
a strategy focused on meeting the long-term housing needs of the
country by preparing for the upturn in the market. Without this,
we could see a sharp spike in prices, worsening affordability,
frustrating aspirations and potentially adding to instability.
Key to our strategy will be easing the development process and
preparing land for development; supporting development activity
where possible; continuing government-funded support for housing
supply initiatives; and supporting the delivery of housing supply
targets through local and regional plans.
28. The Government's concern is that as
housebuilders retrench and focus on generating cash, the long-term
strategic planning activity we need to support an upturn may be
delayed. We are therefore keen to ensure that the Government plays
as major role as possible in getting land through the planning
system.
29. In support of this objective we are:
— supporting and incentivising local
authorities to speed up delivery of housing and other planning
outcomes through the £510 million Housing and Planning Delivery
Grant (HPDG). The first tranche of funding will be allocated in
November;
— supporting development on surplus
public sector land through the establishment of local housing
companies and accelerating the rate at which land is being brought
to the market, or at least prepared for disposal on the open market.
In July, four local authorities announced their firm intention
to establish the first local housing companies. These have the
potential to deliver round 10,000 homes, with starts on site expected
in 2009. The HCA will work with a further 28 authorities which
have expressed an interest, and will continue to develop and adapt
the model to maximise its flexibility to respond to current market
conditions. Government departments have been asked to set out
their surplus public sector land contributions by the autumn of
2008; and
— working with English Partnerships
(and the HCA from December) to introduce new approaches for land
disposals, such as reducing the costs to private sector developers
of doing business with the public sector in return for long-term
commitments to deliver; and joint ventures with developers to
improve cash flow in return for commitments to progress development,
and with unsold homes converted to new affordable housing.
30. The establishment of the HCA is core
to being able to respond to the current market conditions effectively.
In particular, the benefits of creating the HCA come primarily
from its ability to get more out of the combined three-year investment
programme of approximately £17.3 billion than is currently
possible through their individual management. These benefits will
take the form of more housing and regeneration outputs for a given
investment, and investments that better fit the needs of local
places and their communities.
31. Since the beginning of 2008, the HCA
Set Up team has been working with the transferring organisations
and CLG to implement a number of such initiatives that are aimed
at sustaining the supply of new homes in the context of the downturn
in the housing market. The priorities are to:
— have a very close understanding of
what is happening on the ground now and what is likely to happen
in the near future. This allows the HCA to be proactive rather
than simply reacting to events;
— adopt a pro-active, flexible and
creative approach to ensure that as much activity as possible
can continue. This ensures that the programme maintains delivery
and that vital skills and jobs are not lost in the sector; and
— develop new approaches to broaden
the base of providers and access new sources of finance in order
to preparing for the upturn.
32. The HCA has a range of tools and mechanisms
at its disposal and it will look to use these in conjunction to
best meet the needs of different places, for example, through
combined land and funding support and more flexible and innovative
use of existing programmes.
The Importance of our Long-Term Supply Strategy
33. At the same time, we need to continue
our work to support the delivery of the 240,000 additional homes
per year target in the medium-term. Key elements of this continuing
work are:
— funding for growth areas and growth
points to support the delivery of new homes where they are needed.
The Growth Fund announced in December 2007, provides £732
million to support the delivery of infrastructure in the three
newer Growth Areas and first round of growth points for 2008-09
to 2010-11. Areas selected for the second round of New Growth
Points were announced in July with plans to deliver up to 75,000
additional homes with £100 million to support infrastructure
development;
— the eco-towns programme which will
deliver exemplar green developments of 5,000 to 20,000 homes.
On 4 November, Margaret Beckett launched the second stage consultation
on the potential locations and standards for eco-towns;
— funding for the housing market renewal
programme to support the revitalisation of housing markets in
12 areas in the North of England and the West Midlands. A further
£1 billion of funding was announced in February 2008 to supplement
the £1.2 billion provided since 2003. Housing Market Renewal
Partnerships continue to monitor changes in local housing markets
and, in the current climate, are refocusing efforts as appropriate,
in some cases away from plans for new build towards more refurbishment,
and land and property acquisition;
— a region-by-region approach to the
early review of Regional Spatial Strategies (RSSs), especially
in areas of high demand. We are on track to ensuring regional
strategies are in place that provide for 240,000 homes per year
from 2016; and
— securing a collective focus on local
priorities and delivery through Local Area Agreements (LAAs).
The first round of new LAAs was signed off in June 2008 and will
last until 2011. Housing supply targets were agreed in over two-thirds
of places (104 of 150 LAAs), as were affordable housing targets
(102)—both were among the top five most popular targets
nationally— reflecting the high local priority attached
to strong housing markets, the delivery of affordable housing,
and meeting the needs of individuals and communities.
FINANCIAL VIABILITY
AND ONGOING
BUSINESS OF
HOUSING ASSOCIATIONS
34. Social rented housing is vitally important
at this time—not only because of urgent unmet need, but
also because of the contribution to the economy made by Government-supported
construction. The current market conditions are impacting on social
housing providers in a number of ways. A reduction in developer
contributions (section 106 planning gain) and proceeds from low
cost home ownership sales (including "staircasing" from
existing shared ownership owners) is impacting on housing providers'
ability to deliver new affordable homes as well as to cross-subsidise
the funding of social rents. In addition, housing associations
are also experiencing less favourable access to lending, both
for themselves and first-time buyers, with significantly higher
margins.
35. The Government has responded to this
challenging situation for housing associations by:
— applying short term flexibility
for housing associations to meet efficiency targets
We have agreed with the Housing Corporation that
they will apply limited flexibility to the efficiency targets
that they are working within in order to achieve continued delivery
of new housing schemes. Scheme bidding will continue to be undertaken
within a competitive framework and we expect that this will continue
to be a strong driver of value for money, with those bids which
meet the Housing Corporation's assessment criteria and offer the
best value for money being prioritised for funding;
— allowing the Housing Corporation
to raise grant levels to housing associations
Previously grant funding from the Housing Corporation
to Registered Social Landlords (RSLs) was paid 50% at the start
of new affordable housing schemes and 50% on completion. We have
increased the proportion of grant paid at the start on site to
60%. This will support the cash-flow of RSLs as well as encouraging
them to undertake as much development activity as possible to
support the construction sector;
— allowing the Housing Corporation
to change the grant-bidding process for housing associations
Previously RSLs would bid for grant for new affordable
housing scheme through a quarterly bidding round. We have amended
this process so that the Housing Corporation can support new schemes
as soon as they come forward. Again, this will support the cash-flow
of RSLs and support new development.
Corporate Funding Markets
36. The housing association sector is dependent
on a small group of banks and building societies that are willing
to consider providing new funding. There has been an upward pressure
on loan margins and a substantial shift from margins of around
30 basis points (bps) available up until the early part of 2008,
to headline margins in the 125-200 bps range, with arrangement
fees and commitment fees around 75bps. There has been at least
one example of a margin of 300bps being offered to an association.
Loan terms have also tightened including use of a more conservative
basis of valuation, higher financial covenant levels being required
and the repricing of existing loan facilities.
37. Associations have raised a relatively
small proportion of their funding through the capital markets
but with availability in the banking market constrained, this
may change. Affinity Sutton (a large general needs association
based in London and the South East) issued a bond in September
which raised £250 million with an all in price of just under
6%. Circle Anglia (again a large London based general needs association)
issued a bond in early November raising £275 million at a
price of c7%. Other associations are also known to be considering
a bond issue in coming months. It appears there is investor appetite
for housing association paper but as in other corporate sectors,
the strength of the corporate credit is all important and pricing
would currently be c7%.
38. Associations with variable rate debt
will be affected by high LIBOR rates as this is the traditional
reference rate used when variable rate facilities are drawn or
rolled-over. The spread between the Bank of England base rate
and three month LIBOR, the common reference rate used, is currently
131bps (12 November) and it had increased following the reduction
in base rate to 3% on the 6 November. In normal market conditions
the spread is around 10bps. Therefore reductions in base rate
will not necessarily be fully reflected in reduced interest costs
on associations' variable rate debt. Of total drawn loan facilities
(£30.9bn at 31 March 2007) about 50% are on a variable rate.
Some associations do hedge a proportion of their exposure to interest
rate risk and long term fixed rates (25 years) are currently 4.30%.
Information from Housing Associations Business
Plans
39. The most comprehensive set of information
about the impact of the current climate comes from the business
plans received from all associations with more than 1,000 units
(which accounts for over 95% of the sector by units, turnover,
debt etc). These were received in June 2008 and showed the sector's
plans at the start of the 2008-09 financial year. The position
at this point can be summarised as follows:
— The 2008 dataset has begun to show
the effects of changes in the economic climate. Development assumptions
have been reduced and costs are rising. Lower forecast grant rates
and reducing sales are pushing up debt. It appears, for those
associations still planning significant development, they are
exposed to a greater level of risk.
— Traditional associations are forecasting
lower operating margins through rising costs. In turn this affects
their ability to meet interest costs from operating surpluses
without some degree of reliance on sales income, from low cost
home ownership and, for some, open market sales. This is adversely
affecting interest cover (the ratio of surpluses to interest costs)
and increasing debt. Pressure on interest cover levels is particularly
relevant in London, where most associations have some degree of
sales dependency and a minority of London associations do not
forecast positive interest cover including sales proceeds.
— Stock transfer associations show
a wide distribution of performance, with the older transfers often
showing better performance than many traditional associations.
Right To Buy (RTB) sales appear to be slowing considerably, while
transfer associations are increasingly moving into shared ownership,
exposing them to some degree of market risk.
40. Since then the external economic environment
has deteriorated with further falls in house prices, lack of availability
of residential mortgages and continued turmoil in global financial
markets. The scale and impact of the changes has meant that a
significant number of housing association boards have adopted
a more cautious approach and have begun to remodel their businesses
to reflect this, including:
— reviewing all uncommitted development
and in particular scaling back on shared ownership assumptions;
— reviewing their operating cost base;
— looking at sales dependence and how
the exposure can be mitigated;
— ensuring treasury management strategies
are appropriate for the current situation; and
— talking to key stakeholders including
funders and regulators.
41. Whilst the sector currently has substantial
undrawn committed loan facilities, it is evident that the availability
of credit is likely to be constrained for some time and it may
be difficult to achieve the levels of anticipated asset sales
in the current environment. In addition, there is an inescapable
geographic dimension to the risks facing the sector with London
based associations (largely because of their significant shared
ownership activity) being more exposed than those elsewhere.
42. It is too early to be certain of the
impact of these changes. However, RSLs have a strong record of
delivery and the sector has been adapting its business model to
the changing economic environment. CLG and the Housing Corporation
(the current regulator) are actively monitoring the situation
through a combination of liaison at a sector level with relevant
stakeholders as well as with individual associations. This will
continue under the TSA and includes:
— regular liaison with the Council
of Mortgage Lenders and individual banks and building societies
on availability of credit;
— a quarterly market survey of developing
associations;
— the annual round of Business Plan
receipts and review;
— review of annual accounts information;
— ongoing engagement at a field level
with individual associations; and
— for associations particularly at
risk, weekly and monthly cashflow reporting.
MEASURES TO
HELP EXISTING
AND PROSPECTIVE
HOMEOWNERS
Existing Homeowners
43. Although the numbers of homeowners facing
repossession are relatively small, the Government recognises that
for those affected, this is a very difficult time and can have
serious consequences on well-being, particularly for vulnerable
households.
44. To date our response has rightly focused
upon prevention of actual homelessness amongst vulnerable households
and those who lose their employment. We have also strengthened
debt advice and legal support for all households.
45. We have:
— announced a £200 million mortgage
rescue scheme to allow eligible homeowners to be supported in
maintaining their home through shared equity (for those who need
some help in paying their mortgage), or Government Mortgage to
Rent (to help the most vulnerable on low incomes with little chance
of sustaining a mortgage). The scheme will help up to 6,000 of
the most vulnerable households facing repossession over the next
two years. We are working urgently with our delivery partners
to ensure that the scheme is operational as early as possible.
The HCA will work with local authorities to identify and assess
applicants, with funding flowing through the Housing Corporation's
existing Investment Partners;
— improved benefit support to homeowners
who lose their jobs through reforms to the Income Support for
Mortgage Interest (ISMI) system. As a temporary measure, from
April 2009 the waiting period will be cut from 39 to 13 weeks
for all new working age claims. In addition, as a temporary measure,
also from April 2009, the capital limit on loans upon which ISMI
is based will be increased from £100,000 to £175,000
for new working age claims;
— expanded debt advice by strengthening
the capacity and expertise of the National Housing Advice Service,
and providing more specialist training for Citizen Advice Bureau
staff and local authorities; and
— funded a further 74 court desks so
that just under 90% of county courts in England now have access
to free legal advice and representation. Such advice means that,
in 85% of cases where people attend court, immediate repossession
is avoided to allow other options to be explored.
46. While a number of the new measures are
available to all homeowners, for example, the ISMI scheme and
court desks, others are more targeted on vulnerable households,
such as the mortgage rescue scheme. Given the growth in concern
over the impact of the current economic conditions on homeowners,
we are continuing to review what other action may be appropriate.
Prospective Homeowners
47. The Government is committed to supporting
sustainable home ownership, as we believe that it delivers considerable
benefits to both the individual and to society. That is why our
low cost home ownership schemes are designed to assist those who
would not otherwise be able to purchase a suitable property on
the open market.
48. However, first-time buyers are one of
the groups that have been hit hardest by the credit crunch. A
combination of the higher cost of borrowing and bigger deposit
requirements has made it harder for first time buyers to get onto
the housing ladder. According to figures released by the Council
of Mortgage Lenders, the number of first time buyers in June was
46% lower than a year earlier.
49. We have responded to these challenges
by providing more help to first time buyers who are struggling
to get onto the housing ladder. We have announced:
— a new £300 million shared equity
scheme called HomeBuy Direct that will make more affordable homes
available to up to 10,000 first time buyers who are currently
priced out of the market, and will also help to maintain the capacity
of the house building industry to respond with increased housing
supply when market conditions improve. The equity loans provided
to first time buyers through the scheme will be co-funded by government
and by the participating house builders. The competition to select
suitable schemes and properties closed on 7 November with a high
level of interest. We expect that the first HomeBuy Direct homes
will be available to purchasers early in 2009. As with our other
HomeBuy schemes, the application process for HomeBuy Direct involves
a rigorous financial affordability check and advice designed to
determine whether applicants are able to afford and sustain home
ownership in the long-term;
— a new pilot scheme (Rent to HomeBuy)
to support first time buyers into affordable home ownership by
renting first and buying later. At the end of September, £6
million had been allocated to rent to Rent to Homebuy schemes;
and
— a £100 million expansion of
the Open Market HomeBuy scheme in 2008-09. This scheme is now
available on both new build homes and second hand homes. Approximately
75% of this additional £100 million has been allocated so
far.
50. These measures are in addition to the
Chancellor's announcement on stamp duty land tax (referred to
in paragraph 17).
51. Demand for shared equity products remains
strong and we are working with lenders to encourage the continued
availability of mortgages for shared ownership products. Our new
HomeBuy Direct product offers greater protection for first time
buyers against negative equity since, if the value of the property
goes down, Government and the developer will only share the sale
proceeds that are left over once the mortgage has been repaid.
This also provides greater security to lenders.
CONCLUSIONS
52. The pace and scale of change in the
global credit and housing markets since revelations of losses
in the US sub-prime market is unprecedented. The Government has
responded quickly to the changing situation. It has introduced
a number of co-ordinated actions to help the wholesale credit
market function smoothly again and to cushion the impact on, and
provide support for, borrowers who may be facing difficulty. These
measures have been broadly welcomed across all sectors.
53. On housing, we have acted rapidly and
decisively to bring forward over £1 billion of our budget
for immediate use, supporting those facing repossession and valuable
construction jobs. We continue to actively monitor the situation
and focus on what more can be done to address the challenges going
forward.
54. We do this whilst remaining committed
to addressing the long-terms problems of affordability and inadequate
housing supply. Our goal remains not only to deliver better outcomes
now, but also ensuring an industry and housing market that is
capable of supporting our future needs.
Annex A
DELIVERY—THE ROLE OF THE HOMES AND
COMMUNITIES AGENCY
INTRODUCTION
1. The Homes and Communities Agency (HCA)
is the new, national agency leading the delivery of homes and
regeneration in England. It will by CLG's main delivery agency
for housing and regeneration and will be responsible for delivering
a number of the initiatives which have been outlined above as
well as working with CLG and other partners to develop further
proposals. The HCA is a new organisation but it inherits the responsibilities
and resources of English Partnerships, the investment functions
of the Housing Corporation, and a number of delivery activities
from Communities and Local Government (CLG). The HCA will also
take on management of the Academy for Sustainable Communities.
2. The new agency presents a unique opportunity
to achieve a step-change in the delivery of homes and regeneration
in England. It is:
— A national organisation, accountable
to Government and with a strong regional presence, which is focussed
on the ambitions of local communities.
— Oriented towards the market—working
with and through partners from the private and third sectors—in
order to deliver for communities.
— A skilled organisation with access
to significant resources and a range of tools.
3. To deliver for people and places the
HCA will engage in a range of activities:
— investing resources made available
by Government;
— levering additional resources from
the private and public sectors.
— providing (and remediating where
necessary) land for development, including through surplus public
sector land;
— supporting delivery of infrastructure;
— enabling partners to lead delivery
by developing skills and capacity and providing expertise and
advice; and
— innovating with new activities to
achieve HCA's and partners' objectives.
4. Effective delivery means working with
partners drawn from a variety of sectors: community and voluntary
organisations; RSLs; developers and finance providers; and Government
at the local, regional and national levels. In particular HCA
wants to offer its local partners something previously unavailable:
a Single Conversation about their range of ambitions for an area,
across housing and renewal taking into account issues of growth,
affordability and sustainable development.
VISION AND
OBJECTIVES
5. HCA's vision is to:
— To create opportunities for people
and places:
— For People, a home they can afford
and a place they want to live in.
— For Places, fulfilling local needs,
aspirations and ambitions.
6. This vision is supported by four strategic
objectives which reflect CLG's policy objectives and priorities
and are aligned to the Government's high level priority outcomes
articulated by the framework of PSA targets:
— Growth—to contribute
to the delivery of housing growth to meet the needs of an ageing
and growing population, and increasing number of households and
to address existing shortfalls in accommodation;
— Affordable housing—to
secure the delivery of new affordable housing (for social rent
and as affordable home ownership) and to ensure that existing
social rented stock is made decent;
— Renewal—to support and
accelerate the regeneration of under-performing areas and the
renewal of deteriorating estates; and
— Sustainability—to maintain
and extend high standards of design in buildings, public spaces
and places and to embed sustainability—economic, social
and environmental—across the HCA's programme and the broader
housebuilding and development industries, leaving a legacy of
skills and capacity.
7. Many of HCA's interventions will be across
all these objectives, reflecting the complex needs of places which
often incorporate both growth and renewal.
SINGLE CONVERSATION
8. The single conversation will be the HCA's
most important business process which will in effect be the way
in which it agrees and secures delivery at the local level, in
pursuit, where relevant, of national ambitions and targets. It
is a dynamic process which will cover the totality of housing,
regeneration and renewal issues relevant to the place to develop
a shared vision based on local ambition and HCA expectations,
achieved through negotiation.
9. The single conversation will draw on
the priorities for a local area set out in its Sustainable Communities
Plan, LAA and Local Development Framework and supporting documents
(Strategic Housing Needs Assessment, Strategic Land Assessment,
housing trajectories and infrastructure plans to support the Core
Strategy, etc). Broadly speaking, over time, a single conversation
would be expected to cover the following issues:
— Strategy: Coming to a shared
position on an area's ambitions and objectives for housing growth
and renewal, and ensuring that these were consistent with and
contributed to objectives set out in the regional strategy, and
the HCA's national targets and outcomes.
— Capacity: Discussing with
local authorities their ability (and the ability of their partners)
to manage and oversee large programmes of investment. This might
result in agreement for the HCA to provide project delivery capacity
in the short term and support to develop the longer-term capacity
of the local authorities. It might also go into more detail about
the precise level of support that local authorities needed on
particular programmes or projects.
— Investment: Based on the agreed
objectives for an area, coming to agreement about the broad level
of investment (as set out in regional investment plans) that the
HCA would provide for that area, where it would be targeted, and
agreement on the outcomes expected from that investment. Also
discussing what the LA will bring (assets, Community Infrastructure
levy, etc) and how other public funding could be used alongside
HCA investment to provide improved outcomes (eg local funding
such as Working Neighbourhoods Fund, RDA investment or funding
from other national agencies such as the Highways Agency).
— Delivery: Agreeing the precise
nature of the strategic projects and programmes that HCA investment
will support, how they will be delivered (that is, which combination
of the HCA's investment tools should be used), which other partners
need to be involved (particularly from the private sector), and
the nature of HCA involvement (eg direct project management or
more light-touch programme monitoring).
10. The key outcome of the single conversation
will be the Local Investment Plan (LIP) or Local Investment Agreement
(LIA) which will bring together land supply, housing, commercial
& retail (as necessary) and infrastructure in a costed, timed
plan which sets delivery responsibilities, potential funding contributions
and key risks and barriers to delivery.
11. The delivery mechanisms which will support
the LIA should be identified and developed around what best fits
the local needs and what works locally. This will also form a
key part of the single conversation when discussing investment/delivery.
Annex B
THE ROLE OF THE TENANT SERVICES AUTHORITY
INTRODUCTION
1. The Tenant Services Authority (TSA) is
the new regulator charged with promoting the interests of tenants
in affordable housing. The TSA will be an independent social housing
regulator that is responsible for the regulation of all social
housing whether it is provided by local authorities, non profit
housing associations or for-profit private companies. The role
of the TSA is to:
— champion what tenants, leaseholders
and residents want from their housing;
— promote choice for tenants and providers
of affordable accommodation; and
— challenge providers of affordable
accommodation to meet or exceed the highest standard of organisation
effectiveness and delivery.
2. The statutory objectives of the TSA include:
— to encourage and support a supply
of well-managed social housing, of appropriate quality, sufficient
to meet reasonable demands;
— to ensure that registered providers
of social housing perform their functions efficiently, effectively
and economically; and
— to ensure that registered providers
of social housing are financially viable and properly managed.
November 2008
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