Housing and the Credit Crunch - Communities and Local Government Committee Contents

Supplementary memorandum by the Department for Communities and Local Government, the Homes and Communities Agency and Tenant Services Authority (CRED 60A)

  1.  This memorandum responds to the Committee's letter on Housing and Credit Crunch of 18 December 2008. The letter formally noted the points on which further evidence was requested at the oral evidence session on 16 December 2008. Below is the follow on information as requested.

A summary of all the different low cost housing programmes (eg HomeBuy Direct) that are available, setting out what their characteristics are. Statistics on take up would also be helpful. (Q58)[100]

  2.  There are three HomeBuy products based on equity sharing to offer people a choice in the type of home they can buy. See Annex A for details.

Statistics on the operation of the National Clearing House so far—how many unsold units have housing associations purchased through this scheme? What type of properties (flats, houses etc) are they? Which regions have seen the highest numbers of properties purchased in the way? To what extent do these properties meet the Code for Sustainable Homes requirements for social rented housing? (Q71)

  3.  As at 22 December, of the £200 million earmarked for the purchase of stock from developers, the Housing Corporation had allocated £160 million which will deliver almost 4,800 affordable homes. The table in Annex B shows the developer stock as at 22 December 2008, broken down by flats and houses (set out by local authority). A regional breakdown is also at the bottom of the table. Homes and Communities Agency (HCA) have confirmed that no local authorities (including ALMOs or SPVs) have bid to buy unsold developer stock with HCA funds.

Please can we see the modelling that has been done to show what would happen if a large Housing Association became insolvent? (Q77)

  4.  The regulatory approach that TSA would adopt in case of large Housing Associations (HA) becoming insolvent is set out in detail in Annex C.

Is it possible for the Committee to see the paper referred to here when it becomes available please? (Q80)

  5.  CLG officials are currently discussing the issue of lending to the RSL sector with Treasury and the lenders. Some of the content of these discussions will be commercially confidential; however we will be happy to share a summary of the paper with the Committee when it is completed.

Can you give us an update on the work being done to help people experiencing "income shock"? (Q83)

  6.  In December, as part of this wider package of real help for homeowners, the Homeowner Mortgage Support Scheme was announced which will enable ordinary hard working households that experience a redundancy or significant loss of income ("income shock") to reduce their monthly payments to a more manageable level, by deferring a proportion of the interest payments on their mortgage for up to two years.

  7.  The result will be more affordable monthly payments for homeowners needing a bridge through difficult times. The new scheme will help those families who are not eligible for the existing support for those on benefit, which we are separately extending next month to offer more help, more quickly.

  8.  This is a voluntary scheme but already the country's eight largest lenders, representing 70% of lending, have expressed interest in the scheme and have pledged to work with Government to develop it. The Government wants to see all the lenders join the scheme so that all customers have the option to stay in their home when they suffer a loss of income.

  9.  We are now working closely with the lenders to agree the details of how the scheme will work in practice and to put into place the necessary legislative, operational and financial frameworks necessary to get the scheme up and running as soon as possible. The Government is looking to implement the scheme in the New Year.

Can you give us an update on the work being done to close the loophole discussed here? (Q88)

  10.  The Justice Secretary has ordered officials to carry out an urgent review of the protections afforded by the law to homeowners in arrears on their mortgages, with particular reference to lenders' powers of sale and rights to possession. The review will assess the scale of the problem of lenders selling mortgaged properties without court orders and consider whether the law needs to be reformed. Officials will report to the Justice Secretary in mid-February 2009.

Please can you give us the numbers of RSLs who have purchased land at lower values? (Q89)

  11.  Government does not hold data on RSLs purchase of residential land. The best data on residential land value we have is the Valuation Office Agency (VOA) data reported in July 2008 that between January and July 2008 residential land values fell by about 15% in England and Wales. Subsequent evidence of widespread house price falls indicates that land values will have fallen further as the value of residential building land is largely derived from the values of homes. We would expect to see this reflected in the VOA data when January 2009 figures are published.[101]

  12.  RSLs can consider investing in purchasing land from housebuilders on a case by case basis, and they do make such purchases when the deal allows them to deliver affordable homes in the most cost effective way.

What measures are you taking to avoid the loss of skills and capacity in the construction industry?

  13.  A detailed response is set out in Annex D.

  A summary of the various housing market announcements over the past year is at Annex E for the Committee's information.

Annex A


  The HomeBuy scheme enables social tenants, key workers and first time buyers who cannot afford to purchase without assistance, to buy a share of a home and get a first step on the housing ladder.

  There are three HomeBuy products based on equity sharing to offer people a choice in the type of home they can buy:

    1. Open Market HomeBuy enables people to buy a property on the open market with the help of an equity loan of up to 50%. Three shared equity options are available. Purchasers may buy a property of their choice selected on the open market and use one of the two equity loan products, announced on the 1 April 2008 (MyChoiceHomeBuy and Ownhome) or use the new HomeBuy Direct product, announced on 2 September 2008 to buy within specific schemes being brought forward by developers in early 2009. [The scheme is aimed at couples and those closer to being able to buy in the market].

    2. New Build HomeBuy enables people to buy a minimum 25% share in a new build property, whilst paying rent on the unowned share. This includes the new Rent to HomeBuy which enables prospective purchasers to rent a new build property on certain sites at below market rent for a pre-specified period, with the first option to buy the property on New Build HomeBuy terms at the end of this period. [This scheme is aimed primarily at single income households and those furthest from buying in the market.].

    3. Social HomeBuy enables tenants of participating local authorities and housing associations to buy a minimum 25% share in their current home at a discount and pay rent on the remainder.

  All first time buyers with a household income of £60,000 or less per year, unable to buy a home on the open market, are eligible to apply for assistance. The scheme may also help other households, for example, following partnership breakdown. Further details are set out below.

  Interested applicants for the New Build, Open Market HomeBuy, Rent to HomeBuy and HomeBuy Direct need to contact the HomeBuy Agent for the area where they live or if a Key Worker, in the area where they work.

  Applicants for Open Market HomeBuy, Ownhome option, may also contact the equity loan providers directly for further information.

  Tenants interested in the Social HomeBuy option are advised to contact their landlord direct.


  Between 1997-98 and 2007-8 the Government has helped 110,000 households into home ownership through shared ownership and shared equity.

  Take up for the three HomeBuy products between April 2008 and November 2008, based on completions in that period, was:

    —  New Build HomeBuy/shared ownership—6,101.

    —  Open Market HomeBuy—3,398.

    —  Social HomeBuy (demand led)—78 (a total of 283 since April 2006).

  The Government's aspiration is to help 75,000 households into home ownership through our shared ownership and shared equity schemes over the next three years, funded mainly by the Homes and Communities Agency. It remains too early given current market conditions to predict completed sales over this period with certainty.

  As announced on 15 December, 130 developers have agreed to offer the new HomeBuy Direct scheme to help up to 18,000 first time buyers to purchase a home at sites across England over the next two years aided by an equity loan funded in partnership with developers.

  The launch of HomeBuy Direct offers further choice to first time buyers and builds on the existing two equity loans offered under Open Market HomeBuy in partnership with registered social landlords.


  HomeBuy Agents (HBAs) are appointed housing associations who are providing a "one-stop-shop" and point of contact for affordable housing options in a given area in England. They also handle the entire application process for the Open Market and New Build HomeBuy products.

  A list of the HBAs and their contact details are available on our website.[102]


  Equity loan providers are housing associations who are providing equity loans under the Open Market HomeBuy product from 01 April 2008.

  For the Ownhome Open Market product, the provider (Places for People) can be contacted directly on 0845 607 0110.

  For the MyChoiceHomeBuy Open Market Product, the provider (Chase) can be contacted through your local HomeBuy Agents.


  Full details of the scheme are available from HomeBuy Agents but key aspects include:

Open Market HomeBuy

  There are three Open Market HomeBuy products—MyChoiceHomeBuy, Ownhome offered by appointed equity loan providers and HomeBuy Direct in partnership with house builders.

MyChoiceHomeBuy Product

    —  An equity loan of between 15 to 50% of the purchase price is provided by a partnership of 8 housing associations named CHASE, each one of which is an equity loan provider.

    —  This product can be used in conjunction with a conventional mortgage from any participating qualified lender regulated by the Financial Services Authority.

    —  Purchasers may be expected to raise finance to purchase between 50 and 85% of a home on the open market.

    —  There will be an annual fee of 1.75% on the equity loan in year one, payable on a monthly basis. The fee will increase annually by the Retail Price Index (RPI) plus 1%.

    —  Purchasers are free to re-mortgage at any time but will need the equity loan provider's consent if the loan is still in place.

    —  Owners will need to inform the equity loan provider when they wish to sell and the provider will then arrange the valuation.

Ownhome product

    —  An equity loan of between 20 to 40% is provided by Places for People, a Housing Association, in partnership with Co-operative Financial Services.

    —  This product must be used in conjunction with a conventional mortgage from the Co-operative Bank in the first instance.

    —  Purchasers may be expected to raise finance to purchase between 60% and 80% of a home on the open market.

    —  Applicants may also apply direct to the equity loan provider. If they do so, they will be required to complete a HomeBuy application form.

    —  There is no interest charged on the equity loan for the first five years but there will be a charge of 1.75% from year 6 and 3.75% from year 11 onwards.

    —  Purchasers may re-mortgage with a lender other than the Co-operative Bank provided they comply with the terms of their initial mortgage agreement.

    —  Owners will need to inform the equity loan provider when they wish to sell and the provider will then arrange the valuation.

HomeBuy Direct

    —  An equity loan of up to 30% of the market value to buy a new build property within specific schemes brought forward by developers.

    —  The equity loan will be co-funded by Government and by the scheme developers on equal terms (ie 15% from the developer and 15% from Government where a 30% loan is offered).

    —  Purchasers will be expected to raise the remaining finance from a mortgage or savings.

    —  The product can be used in conjunction with a mortgage from any lender regulated by the Financial Services Authority.

    —  There will be no fee charged for the loan for the first five years, but a fee will be charged from year 6 onwards.

All three products

    —  The equity loan can be used in conjunction with any deposit the purchaser may have.

    —  The loan must be repaid when the property is sold but can also be paid back earlier, as and when the owner can do so. The loan can be redeemed earlier in instalments if the purchaser wishes. Purchasers will also have to share any increase in the property's value with the equity loan provider or the Government/Developer. The amount which is repaid will be based on the market value of the home at the date of repayment or sale.

    —  Applicants should apply to HomeBuy Agents, who will advise if applicants are eligible and recommend an Independent Financial Advisor for advice on which product best suits their circumstances.

  There is flexibility within the HomeBuy framework for providers to offer schemes that meet the needs of people with long term disabilities. This includes the option for people to purchase a suitable home on the open market, on a shared ownership basis. Interested applicants need to contact the HomeBuy Agent for the area where they live or if a Key Worker, the area where they work, for further information.

New Build HomeBuy

    —  Purchasers buy a minimum initial share of 25% of a newly-built home. A housing provider holds the remainder of the equity. The provider may charge rent of up to 3.0% on their equity. A lower target average for the rent has been set at 2.75%. There is also a maximum limit on the annual increase of rent charges of Retail Price Index (RPI) plus 0.5%.

    —  Purchasers may buy further shares in their home, in minimum 10% installments, when they can afford to do so—a process known as "staircasing".

Rent to HomeBuy

    —  Rent to HomeBuy is a pilot scheme. The Housing Corporation is inviting bids from providers wishing to participate in the scheme during the remainder of 2008-09.

    —  The scheme aims to help households who find that they are unable to buy a share of a property through the HomeBuy scheme at the present time because of current market conditions (for example because they cannot obtain an affordable mortgage without a deposit).

    —  Rent to HomeBuy enables prospective purchasers to rent a new build property on certain sites at an intermediate rent (defined as 80% of market rent or less) for a pre-specified period, with the first option to buy the property on New Build HomeBuy terms at the end of (or during) this period.

    —  Eligibility for the scheme is the same as for the HomeBuy scheme—that is households earning less than £60,000 who could not afford to buy a suitable property on the open market without assistance.

    —  Properties will be let on Assured Shorthold Tenancies for approximately two to three years.

    —  When this period ends, the tenant will undergo a further assessment by the HomeBuy Agent to determine the size of share that they are able to afford and sustain under New Build HomeBuy.

    —  Tenants, who are assessed as not in position to buy at the end of the period due to a change in circumstances, will have their position reviewed by their landlord but there is not guarantee that the tenancy will be renewed.

    —  The first units were available in autumn 2008.

Social HomeBuy

    —  This scheme provides new opportunities for tenants who do not have the Right to Buy or Right to Acquire, and those who do, but cannot afford outright purchase under the statutory schemes, to buy a share in their rented home, at a discount.

    —  Tenants of participating landlords may purchase a minimum initial share of 25% of a home. The remainder of the equity is retained by their landlord with rent charged at maximum of 3% with a lower target of 2.75%. There is also a maximum limit on the annual increase of rent charges of RPI plus 0.5%.

    —  Buyers receive a discount on the initial share purchased. This is equivalent to the Right to Acquire discount (generally between £9,000 and £16,000—depending upon the local authority area in which the property is located), pro-rata to the share purchased. Eg If your home is valued at £200,000 and you live in a local authority area where the maximum Right to Acquire discount is £16,000 and you buy 50%, you will pay £92,000 (ie £100,000 less the discount of £8,000).

    —  Purchasers are entitled to a further discount on any additional shares they buy, pro-rota to the share purchased. Eg From the above example, if you subsequently buy a further 25% share (taking your total share to 75%), you will receive a further £4,000 discount (25% of £16,000).

    —  Participation in the scheme is voluntary for landlords but the Government is encouraging all landlords to offer it.

    —  Receipts generated by Social HomeBuy sales will generally be used to provide more social lettings. A small proportion may be spent on other housing related projects.

    —  Tenants may buy 100% equity in their home at discount if they can afford to do so.

    —  Your landlord will carry out a financial assessment to help decide what share you can afford to buy and sustain, taking into account the available discount.

    —  Some, but not all, properties which do not qualify for the Right to Buy/Right to Acquire schemes may be offered for sale under Social HomeBuy. There are some exemptions, including properties in designated rural areas and groups of properties for people with long term disabilities or special needs, which are exempt from the Right to Acquire scheme and which landlords will not be able to sell under Social HomeBuy.

Annex B



Local Authority Total GrantNo of
No of
Total Grant No of
No of
EBedford£0 00£125,000 50
EBraintree£865,000 253£0 00
EBreckland£2,762,203 1230£0 15
EBroadland£316,500 06£116,500 04
EChelmsford£0 00£0 90
EColchester£748,000 010£104,993 160
EEast Cambridgeshire£180,000 35£0 13
EEpping Forest£0 00£87,500 50
EFenland£279,000 07£0 02
EForest Heath£600,000 1229£40,000 014
EHuntingdon£36,000 02£0 00
EKings Lynn and West Norfolk £195,00004 £000
ELuton£0 00£225,000 09
EMaldon£294,000 33£143,500 36
EMid Bedfordshire£610,000 017£530,400 1317
ENorth Norfolk£0 00£76,000 05
E Norwich£908,769 014£0 02
ESouth Cambridgeshire £000 £009
ESouth Norfolk£2,012,420 1246£311,316 022
ESouthend-on-Sea£344,000 80£308,000 140
ETendring£75,000 30£0 00
EThurrock£175,000 70£0 00
EUttlesford£525,000 96£0 00
EWaveney£0 00£126,000 07
EMAshfield£1,065,000 1254£0 79
EMBlaby£259,000 33£84,000 31
EMBolsover£885,000 614£44,000 02
EMBroxtowe£264,000 80£0 00
EMCharnwood£1,175,000 1010£0 00
EMCorby£0 75£670,000 233
EMDaventry£1,044,000 012£0 00
EMDerby£0 69£0 60
EMEast Lindsey£984,000 018£282,000 38
EMErewash£1,997,880 474£0 00
EMGedling£845,000 013£0 00
EMHarborough£294,000 60£0 00
EMHigh Peak£480,295 012£0 00
EMHinckley and Bosworth £0105 £001
EMKettering£2,037,500 124£0 00
EMLeicester£1,168,175 818£116,000 3320
EMMansfield£96,250 02£0 00
EMMelton£259,000 04£0 02
EMNewark£808,000 128£0 00
EMNorth Kesteven£387,000 011£80,000 08
EMNorth West Leicestershire £602,000212 £000
EMNorthampton£1,158,386 310£0 00
EMSouth Derbyshire£657,000 810£0 00
EMSouth Kesteven£2,638,905 3019£258,320 85
EMSouth Northamptonshire £329,00007 £000
EMWest Lindsey£238,000 152£0 09
EMBassetlaw£160,000 80£0 00
LBarking and Dagenham £000 £455,000350
LBasildon£697,000 017£0 00
LBexley£689,465 91£0 00
LBrent£9,653,125 4731£0 00
LCroydon£1,961,675 105£0 00
LIslington£0 43£0 00
LLewisham£0 03£0 00
LMerton£0 00£816,000 160
LSouthwark£500,000 40£0 00
LWaltham Forest£319,750 18697£0 00
LWandsworth£440,000 61£0 00
NEDerwentside£675,000 012£0 00
NEDurham£220,000 04£0 00
NEGateshead£0 00£208,000 26
NEHartlepool£0 00£503,000 156
NEMiddlesbrough£30,000 30£0 00
NENorth Tyneside£717,600 013£0 00
NESouth Tyneside£260,000 05£0 00
NEStockton-on-Tees£1,009,500 316£0 00
NWAllerdale£0 03£0 00
NWBolton£69,000 07£0 00
NWBurnley£0 010£0 00
NWCarlisle£770,000 022£0 00
NWChester£0 240£1,232,000 1046
NWChorley£0 00£0 016
NWCopeland£0 01£0 00
NWCrewe and Nantwich£1,478,000 370£0 00
NWHalton£700,000 014£120,000 05
NWHyndburn£0 05£0 00
NWLancaster£108,000 97£0 00
NWLiverpool£1,790,500 029£180,000 06
NWMacclesfield£877,500 270£0 00
NWOldham£0 010£0 03
NWRochdale£290,000 05£0 00
NWRossendale£374,000 06£0 00
NWSouth Ribble£905,000 019£0 00
NWTameside£1,188,600 129£0 00
NWWarrington£1,212,000 240£0 00
NWWigan£1,379,006 1216£67,500 03
NWWirral£280,000 80£0 00
SEAshford£927,000 612£0 00
SEAylesbury Vale£4,370,000 3933£0 00
SEBasingstoke and Deane £615,00007 £000
SEBournemouth£2,168,000 360£0 00
SECanterbury£0 00£200,000 80
SEDartford£0 00£0 47
SEEastleigh£540,000 06£0 00
SEFareham£686,000 140£90,000 50
SEGuildford£425,000 05£0 00
SEHavant£216,000 03£54,000 03
SELewes£0 00£198,000 09
SEMaidstone£1,490,000 320£586,000 2613
SEMid Sussex£0 00£0 03
SEMilton Keynes£2,348,226 450£0 170
SENew Forest£330,000 15£0 00
SEPortsmouth£934,000 010£0 00
SEReigate and Banstead £180,00030 £000
SERunnymede£0 00£700,000 226
SERushmoor£710,000 63£0 00
SESouthampton£525,000 348£80,000 84
SETandridge£340,000 04£0 00
SEThe Medway Towns£0 00£255,000 017
SEVale of White Horse £385,00007 £108,000445
SEWest Berkshire£868,010 222£324,875 170
SEWest Oxfordshire£1,488,000 200£0 00
SEWindsor and Maidenhead £0010 £1,300,000520
SEWoking£1,140,000 150£0 00
SEWorthing£0 00£0 90
SWBath and North East Somerset £041 £000
SWBristol£11,356,906 14053£428,700 48
SWCaradon£1,470,000 615£168,000 80
SWCarrick£499,500 29£0 02
SWChristchurch£450,000 06£0 00
SWEast Dorset£0 03£350,000 140
SWExeter£540,000 90£0 00
SWGloucester£761,000 98£36,000 03
SWKennet£976,500 155£0 00
SWKerrier£587,000 65£100,000 09
SWMendip£233,500 346£0 22
SWMid Devon£622,532 55£0 46
SWNorth Cornwall£0 00£0 04
SWNorth Devon£0 1017£0 011
SWNorth Somerset£1,842,000 412£0 212
SWNorth Wiltshire£650,000 103£0 00
SWPlymouth£2,812,000 3810£52,000 70
SWRestormel£348,000 921£0 445
SWSalisbury£210,000 60£0 00
SWSedgemoor£129,339 182£0 00
SWSouth Gloucestershire £884,000250 £060
SWSouth Hams£0 20£0 00
SWSouth Somerset£350,000 25£0 00
SWStroud£258,000 60£0 00
SWSwindon£4,765,350 2348£0 00
SWTaunton Deane£200,000 50£0 00
SWTeignbridge£666,000 150£0 00
SWTewkesbury£0 00£297,500 010
SWTorbay£816,000 014£0 00
SWTorridge£2,694,848 340£296,000 66
SWWest Devon£1,574,000 1021£115,000 05
SWWest Dorset£95,000 02£0 00
SWWest Somerset£40,000 02£0 00
SWWest Wiltshire£0 1736£0 022
SWWeymouth and Portland £000 £100,000140
WMBirmingham£5,190,254 9610£1,796,990 1065
WMBridgnorth£282,600 90£0 00
WMBromsgrove£1,020,000 240£765,000 400
WMCoventry£539,000 110£0 00
WMDudley£1,635,000 1424£0 05
WMHerefordshire£0 00£20,000 01
WMLichfield£490,000 100£0 00
WMMalvern Hills District £000 £225,000250
WMNewcastle under Lyme £1,776,750493 £27,000312
WMNorth Shropshire£750,308 030£90,000 06
WMNuneaton and Bedworth £1,607,500324 £000
WMSandwell£991,000 911£266,000 86
WMShrewsbury and Atcham £450,380284 £000
WMSolihull£0 00£0 14
WMSouth Staffordshire £000 £170,456438
WMStafford£104,517 04£0 00
WMStaffordshire Moorland £000 £20,00001
WMStoke-on-Trent£0 00£60,000 04
WMThe Wrekin£721,366 616£110,000 04
WMWalsall£1,537,000 298£0 260
WMWarwick£0 110£0 290
WMWolverhampton£1,476,000 255£20,000 01
WMWorcester City£343,000 70£0 00
WMWychavon£802,500 2016£0 85
Y&HBarnsley£1,627,500 1718£0 00
Y&HBradford£0 53£0 00
Y&HCalderdale£319,501 58£0 00
Y&HCraven£133,000 40£0 00
Y&HHarrogate£72,500 50£0 00
Y&HKirklees£1,040,000 543£0 04
Y&HLeeds£930,000 178£80,000 04
Y&HNorth Lincolnshire £008 £000
Y&HRichmondshire£180,000 03£0 00
Y&HSheffield£0 00£60,000 20
Y&HWakefield£0 010£0 05
Grand Total£139,889,391 1,9101,539£16,859,550 781581
Social Rent LCHO

Total Grant No of homesTotal Grant No of homes
East£10,925,892 276£2,194,209172
EM£19,832,391 506£1,534,320160
L£14,261,015 424£1,271,00051
NE£2,912,100 56£711,00029
NW£11,421,606 316£1,599,50089
SE£20,685,236 388£3,895,875279
SW£35,831,475 809£1,943,200216
WM£19,717,175 515£3,570,446351
Y&H£4,302,501 159£140,00015
TOTAL£139,889,391 3,449£16,859,550 1,362

Annex C


  This note sets out the Regulatory approach that the TSA would adopt to a large HA becoming insolvent. This note is intended for guidance only and does not represent the formal policy position of the TSA. There has only been one case to date where the Regulator's statutory Moratorium powers have been triggered and in that case it resulted in the secure transfer of homes within the HA sector. It is not possible to say with absolute certainty the exact outcome if a rescue could not be agreed.

  Large HAs usually have a number of business streams (both social and non-social housing activities) each of which may be attractive to a number of other HAs if they offer a strategic fit with their existing business. If a very large HA was not viable as a stand alone entity then the TSA would assess the appropriate strategic and economic solution. This would include considering whether the business as a whole could be transferred to another HA and identifying who possible recipient HAs might be ie those that have the financial and management capacity to absorb another large HA whilst maintaining their own business strength and quality of service delivery to tenants. If a whole transfer of the business was not feasible, the TSA would seek transfer partners/buyers for individual parts of the business.

  For social housing tenants a transfer to another HA would ensure that they continue with a landlord registered with the TSA, rents would remain subject to the current restructuring framework and quality of service delivery would be monitored through the regulatory and inspection regime.

  The TSA monitors the performance of all HAs and details of our quarterly monitoring outcomes are summarised on our website. If regulatory oversight and supervision was unable to prevent an HA defaulting on its financial obligations then the HA would be at risk of insolvency. At the point of default, before a HA formally becomes insolvent, a Moratorium will have been triggered and the TSA will then have a period of time to seek the agreement of creditors to its proposals (eg transfer to another HA, break up etc). During the Moratorium creditors are unable to commence recovery or receivership processes. There are several changes to the Moratorium under the 2008 Act which should aid the TSA in implementing its proposals:

    —  there is an additional step which would trigger a moratorium; this would arise where the directors of a registered provider took a decision to present a petition for winding up a registered company or an I&P Society;

    —  the duration of the moratorium has been extended to 28 working days (previously 28 days);

    —  the TSA may appoint an interim manager at any time during a moratorium and may determine the terms and conditions of such an appointment (new power);

    —  a small amendment has been made to the requirement to secure the approval of secured creditors to proposals made by the regulator. This was previously 100% of secured creditors but is now limited to such of the secured creditors as the TSA is able to locate after making reasonable enquiries; and

    —  where a manager is appointed to implement agreed proposals in respect of a registered provider that is an I&P Society that person now has an additional power to effect an amalgamation of that Society with another I&P Society.

  These additional provisions will not apply until the 2008 Act is `turned on' later this year. In the meantime the 1996 Act provisions continue to apply including the 28 day Moratorium, the requirement for the TSA to consult all secured creditors and, where practical, tenants.

  In the event that the TSA was unable to secure the agreement of secured creditors to its proposals, then the insolvency process would take over and an insolvency practitioner (probably a Liquidator) would be appointed by the Insolvency Service. A secured lender(s) would enforce their security and exercise their rights to appoint a Receiver (a Receiver may be appointed to act on behalf of several lenders). Following this there are two broad routes of action that they could follow:

    A. The lender(s) may manage the properties itself or appoint a manager (which could be a HA or any other body including a for profit management agent) to carry out day to day management. Existing tenancies (both assured and assured shorthold) would continue in force but the rent restructuring framework and other social housing objectives eg Decent Homes would not apply to the lender. Rents could only be increased in accordance with the terms of the tenancy agreement. It is our view that over time they would be likely to increase to housing benefit limits. The lender would also, in all likelihood, dispose of void properties in order to reduce outstanding debt. Alternatively, the lender could dispose of the property portfolio to repay outstanding debt with any excess proceeds being paid to the Liquidator.

    B. The lender(s) may choose to dispose of the stock in whole or in part to an existing social landlord. They would have the opportunity prior to the sale to raise funds by selling all non housing assets on the open market and all untenanted properties on the open market (at their full for sale value).

  The route taken by the lender(s) will depend on the individual circumstances and market conditions at the time.

Annex D


  Short term measures include:

    —  High profile reductions in employment within the home building sector and potential reductions in the numbers of apprentices in the sector. Future apprenticeship recruitment is already under great pressure; and

    —  CITB-ConstructionSkills downgraded the recruitment targets to 5000 traditional apprenticeships and 1000 programme led apprenticeships.

  Medium to long term measures include:

    —  The challenging home building targets taken with the probable reversal of the flow of migrant labour will potentially lead to marked skill shortages in the medium to long term when market conditions change; and

    —  The forecast significant reduction in recruitment together with reduced training volumes is now beginning to raise strong concern among CITB Board members as when people leave during times of reduced activity they tend not to return when the market improves.

  This position leads to a number of related issues that need to be tackled to meet objectives:

    —  maintaining employment during the downturn, which will also help retain skills in the house building sector;

    —  maintaining entries into the sector, in order to refresh the pool of fully qualified people ready for the recovery phase—at both craft and professional level; and

    —  continuing work to enhance the capability of the existing workforce, particularly to respond to the need to meet zero-carbon aspirations.

  We are responding to the short-term market conditions by introducing measures to provide extra help for first time buyers, homeowners facing difficulties, and keeping housing supply, especially affordable housing supply, as high as possible. At the same time our other immediate priority is to maintain capacity while creating the right conditions for recovery and longer term growth.

  The key to retaining skills in industry is to keep employment levels up, and minimise redundancies, by keeping overall building levels as high as possible and maintaining confidence.

  CLG's biggest lever in this respect is to maintain investment in and delivery of its own programmes for regeneration, new social housing and decent homes. We aim to strike a balance by responding to immediate challenges while continuing to work towards our longer term goals.

  Government has already taken steps this year to tackle the downturn in the housing market through measures announced last year, and through PBR in November 2008. As an example, some 21% of construction output is accounted for by housing repair and maintenance, so action to support this part of the sector is important.

  CLG's Decent Homes Programme shows that renovation of existing properties provides widespread and continuing local employment and can help maintain stability in a downturn. In the PBR we have brought forward capital spend of £130 million in 2008-09 and £120 million in 2009-10 for Decent Homes. This will maintain the planned Decent Homes programme in 2008-09 and bring forward some planned improvements in 2009-10. Overall some 25,000 homes will benefit from improvements with some now able to have work completed a year earlier than planned. This could help to secure around 1,500 jobs in the construction industry.

  Similarly, bringing forward £175m for major repairs to council housing will provide benefits to tenants by allowing councils to bring forward planned replacement work on council homes. In some cases this will avoid councils having to do piecemeal repairs where they can now start on major replacement programmes. This could help to secure around 1,000 jobs in the construction industry.

  The delivery of new social housing is vitally important—not only to meet need, but because of the contribution made by Government-supported construction to the wider economy. But current market conditions are making it hard to maintain delivery of these new homes, due to reducing developer contributions (through Section 106s) and falling proceeds from low cost home ownership sales (including staircasing receipts from sales in previous years). The Government believes that social housing money should be spent now to meet these immediate economic and social needs, rather than waiting up to three years for new social homes to be delivered. We have therefore brought forward provision for around 2,000 new homes for social rent with a further £150 million support for social housing in 2009-10, bolstering the £400 million (for around 5,500 new homes) brought forward as part of September Housing Package.

  In May this year we set up a new national clearing house where house builders can approach the Housing Corporation with robust proposals to sell their unsold stock for affordable housing. As at December, the Housing Corporation has allocated £160 million of the £200 million earmarked. This will deliver almost 4,800 affordable homes.

  We are also concerned to maintain momentum across the sector, supporting social, environmental and economic objectives. But our focus goes wider than homes. The commercial, office and property sectors are crucial partners in shaping our future towns and cities.

To this end, the PBR announced bringing forward some £200 million to support regeneration programmes and growth projects which are currently facing difficulties or might otherwise not go ahead in the current market. The regional development agencies and the HCA will be looking at priorities for this over the coming weeks and month. This will underpin large numbers of jobs.

  Finally, the new HCA will be combining the skills and resources of English Partnership and the Housing Corporation in order to have a "single conversation" with key partners in the delivery of our housing and wider regeneration objectives.

  In addition to maintaining employment in the sector the Government is also seeking to preserve and enhance skills for construction through:

    —  the "apprentice matching service" in conjunction with ConstructionSkills, DIUS and the LSC, to help retain apprentices with employers or place them with new ones if redundancy is being considered. This went from concept to a live service in September;

    —  the establishment of a "taskforce" by DIUS to consider what can be done to increase apprenticeship numbers;

    —  the development of "National Skills Academies for Construction" on larger building sites to ensure appropriate training;

    —  the use of shared arrangements for apprenticeships by employers or local councils to help minimise the economic risk whilst maximising training opportunities; and

    —  making Train to Gain more flexible for Small and Medium sized businesses and targeting £350 million to help them get through the tougher economic climate by building the skills and expertise of their workers. Although not aimed specifically at the construction and housebuilding industry, the new train to gain package will help the construction industry due to the large number of small businesses in the sector.

Annex E


  Government has already taken steps to tackle the downturn in the housing market through measures announced this year.

  In May we agreed that £200 million from the Housing Corporation's budget could be used to purchase unsold stock for affordable housing, and increased bidding and funding flexibility for delivering affordable housing. It also included a £10 million package of measures, including additional advice, to support home owners who may be facing difficulties with their mortgage.

  In July we announced the set up of the new national clearing house where house builders can approach the Housing Corporation direct to negotiate the purchase of their unsold stock and removing the £200 million limit on the funds made available to support the purchase of new build homes for affordable housing, new proposals for housing growth points, allocation of a £510 million funding pot (Housing and Planning Delivery Grant) to reward councils who are planning and identifying land for future development, and new consumer information for families at risk from repossession.

  Our September package of measures provided more support for vulnerable householders to meet their mortgage payments and free legal advice for those at risk of repossession. New schemes to help first time buyers get their foot on the ladder, and a stamp duty holiday. And we have looked again at our investment in social housing and regeneration programmes—to support those projects which may be at risk. We have brought forward £400 million to invest in new social housing over the next two years.

  The Government also announced an additional £500 billion bank rescue package in October to help restore confidence and trust in the markets. This was followed by interest rates cuts in November resulting in the gradually falling of Libor. All major lenders (except Barclays and Alliance and Leicester) have passed on the benefits of rate cut to their existing borrowers.

  As part of Pre-Budget Report in November £775 million of housing and regeneration investment is being brought forward to help support the construction industry over the next two years and preserve jobs and skills in the sector for the upturn including:

    —  £250 million on Decent Homes programmes to fund improvements and improve energy efficiency in 25,000 council homes.

    —  £150 million on social rented housing to bring forward delivery of up to 2,000 social rented homes and reduce the number of households in temporary accommodation.

    —  £175 million for major repairs to council housing stock.

    —  £100 million to support key regeneration and housing infrastructure projects.

  In addition Government is working with the RDAs and regional partners to consider the scope for bringing forward up to £100 million nationally to provide value for money in supporting regionally and nationally important sustainable regeneration programmes. We are also extending the Mortgage Rescue scheme to include cover for second charge lending and the Support for Mortgage Interest scheme for homeowners who lose their jobs.

  On 3 December the Government announced the new Homeowner Mortgage Support Scheme to help people who suffer a temporary loss of income stay in their home. The scheme will enable households that experience a significant and temporary loss of income as a result of the economic downturn to defer a proportion of the interest payments on their mortgage for up to two years. The scheme will be rolled out in the New Year.

  In addition Government has announced the following support and interventions:

    —  we are also extending the Mortgage Rescue scheme to include cover for second charge lending and the Support for Mortgage Interest scheme for homeowners who lose their jobs;

    —  we have paid the year one allocations of the Housing and Planning Delivery Grant at the beginning of November, totalling over £100 million. This grant rewards local authorities for improved delivery of housing and other planning outcomes;

    —  we have announced on 10 December the 163 local authorities with Growth Point or Growth Area status who will receive £605 million of Growth Funding for 2009/10 and 2010/11. The funding will allow the local authorities to provide infrastructure to deliver 1.6 million new homes by 2016; and

    —  we have announced on 15 December an additional £100 million for the HomeBuy Direct scheme, bringing the total investment to £400 million in order to help up to 18,000 first-time buyers. More than 130 developers have agreed to offer the HomeBuy Direct scheme.

100   Et passim: question numbers relate to the uncorrected transcript for the evidence session. Back

101   http://www.voa.gov.uk/publications/property_market_report/pmr-Jul-08/residential.htm Back

102   http://www.communities.gov.uk/housing/buyingselling/ownershipschemes/homebuy/contactyourlocal Back

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