Download June 2012 - West Somerset Council

DRAFT
AFFORDABLE HOME OWNERSHIP POLICY
(Incorporating the West Somerset Council
Discounted Purchase Scheme)
June 2012
‘Championing a balanced community and economy’
This document can be made available in large print, Braille,
tape format or in other languages upon request
CONTENTS
Introduction
3
Overall aims of the Policy
4
Registration
The application process
Eligibility criteria
Review
Change of circumstances
Ranking of applications
Selection Process
4
6
Discounted Sales
7
5
The West Somerset Council
Discounted Purchase Scheme
Keeping the homes affordable
The Discount
7
The Buying and Selling Process
Resale Price
Valuations
8
9
10
Monitoring and Review
10
Re-acting to Changing Conditions
11
2
1.0.
INTRODUCTION
The delivery of Affordable Homes, both to rent and purchase, remains a
Corporate Priority of the West Somerset Council. This Policy document
deals only with those homes provided for low cost purchase. The Policy
will only affect those homes in areas outside of the Exmoor National Park.
House prices in West Somerset are continuing to rise and yet income
levels remain below the National average. In some villages, an income
multiple of 25 or more is required to purchase a property. Smaller
properties, which would in the past have been considered ideal starter
homes, are now out of reach of many local people.
In recognition that traditional Shared Ownership housing has not always
proven to be popular in West Somerset the Council aims to maintain a
range of options for access to affordable housing.
The combination of rent and mortgage means that the Shared Ownership
model considered as a low cost way to access owner occupation is
unaffordable to many households.
Through the review of the Affordable Home Ownership Policy it is hoped
that an option for purchase can be maintained giving potential purchasers
choice in how they enter the housing market.
The West Somerset Council’s Discounted Purchase Scheme, Homebuy
products (traditional Shared Ownership), Discounted Sales offered directly
from Developers should all complement each other and assist in bridging
the gap between renting and ownership more effectively, and to achieve:
An increase in the number of homes that local people can afford to
buy.
An increase in the number of economically active residents in West
Somerset.
It is intended that this Policy should be a working document, which
provides useful information to Members, Council Officers, Developers and
prospective purchaser.
3
2.0.
OVERALL AIMS OF THE POLICY
To find ways of effectively bridging the gap between renting and owner
occupation.
To encourage a diverse range of Affordable Home Ownership options
within the District.
To enable purchasers to benefit from any uplift in the value of their
property and enable them to move up the housing ladder.
To ensure that the properties remain affordable for as long as
necessary by using –
o Covenants on sale
o Discounted sales
To be simple to understand and simple to administer.
To be flexible and responsive in order to ‘smooth’ property market and
average income fluctuations.
To be flexible enough to encompass mall low cost home ownership
options whether provided by RSL’s or Private Developers, on rural
exception sites or larger developments, whilst taking into account
relevant Planning Obligations/Conditions.
3.0.
REGISTRATION
People interested in purchasing a Low Cost Home will be encouraged to
register their details with South West Homes – the Government appointed
Zone Agent for the South West Peninsula, who will administer the
application process.
3.1.
The application process
Application forms are available from Council offices, other appropriate
local agencies e.g. CAB, registered social landlords etc, direct from South
West Homes and can also be downloaded from the South West Homes
Website, a link to which is available from the Council website.
The forms are designed to provide a ‘one-stop’ application point to enable
applicants to take advantage of all affordable home ownership initiatives.
4
3.2.
Eligibility criteria
The scheme is aimed at people who have a 5 year (or 3 of the last 5
years) local connection with the District and whose housing needs are not
able to be met on the open market.
Preference will be given to young people who are first time buyers and
who are working within the local economy, however, the following may
also be acceptable:-
o
Existing Housing Association tenants who fulfil the local connection
criteria.
o
Previous owners affected by, for example, relationship breakdown
will be prioritised on a case-by-case basis and must fulfil the local
connection criteria detailed above.
o
Those who have purchased through the Discounted Purchase
Scheme already, but whose housing needs are no longer being met
by their existing home.
West Somerset Council reserves the right to amend the eligibility criteria.
3.3.
Review
Applicants to South West Homes will be invited to renew their application
on an annual basis. This will not require a new application but applicants
will be sent details submitted to South West Homes and will be asked to
confirm that they are still relevant.
3.4.
Change of circumstances
Applicants must notify South West Homes of any material change in their
circumstances, e.g. changes in employment and income, change in
household size, new address etc. Changes in circumstances are also
identified routinely via the review process described above.
3.5.
Ranking of applications
No priority is awarded when applications are made; they are either
accepted or rejected.
5
3.6.
Selection of applicants
The process for the selection of applicants will be agreed with the
Developer or the organisation selling the Low Cost Homes in advance.
All potentially eligible applicants will be sent the following information, in
writing, relating to the available property/ies:
The Development Details
The type and size and number of units available
The sale price of the property
The terms under which it is being sold
Details of how to register their interest
Applicants will be prioritised in accordance with the Planning Agreement
governing the development, however, generally speaking, such
agreements will be negotiated along the following cascade principals: Firstly, priority will be given to people who have a local connection
(residency, employment or family) in the parish in which properties are
situated.
If there are no applicants who fulfil these criteria or there is no interest
in the properties from those applicants who do, priority will be given to
those applicants who have a local connection (residency, employment
or family) with the parishes surrounding the original parish.
If there are no applicants who fulfil these criteria or there is no interest
in the properties from those applicants who do, priority will be given to
all applicants who are eligible for the scheme.
Within the cascades, applications will be taken on a first-come first-served
basis based on the time and date of the registered interest. Any specific
requirements for individual schemes will be sent to the applicants along
with the property details (this could include a form to complete rather than
sending in a letter to register an interest) but, generally speaking: •
•
•
Interest will have to be registered in writing, in the prescribed form
as notified in the letter to applicants
If interest is registered, but not in the prescribed form, it will not be
counted and the applicants contacted to provide an opportunity to
register adequately
If notification is received by fax or e-mail outside of normal office
hours (9am – 5pm Monday to Friday), it will be deemed to have
been received at 9am on the following working day.
6
If a situation arises where there are two or more applicants with an
identical date and time of registration, priority will be assessed based on
the date they applied to South West Homes, in the unlikely event that this
too is the same, the length of local connection will be used to offer priority.
Should there be the situation when all details are exactly the same and no
difference can be found on date of interest registered, date of South West
Homes application or length of local connection, a draw will be made from
the applicants concerned to establish priority.
4.0.
DISCOUNT SALES
Using information relating to average incomes within West Somerset, the
Council envisages that affordable housing within the district is sold at the
following levels:
One bedroom homes
Two bedroom homes
Three Bedroom homes
Four Bedroom homes
Up to £75,000
Up to £95,000
Up to £105,000
Up to £120,000
These figures will be reviewed in April annually.
5.0.
WEST SOMERSET COUNCIL DISCOUNTED PURCHASE SCHEME
The key to this scheme is that the Council has Powers to sell property at a
discount. All properties to be sold under the scheme will, therefore, have
to be owned by the Council.
Properties may be developed by the Council on land it owns or it may
agree to purchase properties from private developers or housing
associations for resale under the scheme. It will also be able to buy-back
properties previously sold under the scheme.
At present, the scheme only relates to 11 homes at Clanville Grange in
Minehead.
5.1.
Keeping the homes affordable
A key aim of the Discounted Purchase Scheme is to ensure that properties
are affordable both at the initial sale and on subsequent resale. This will
be achieved by the Council having the option to buy back the property
upon resale in order that it can be sold on again, at a discount, to an
eligible purchaser.
7
All sales contracts will contain a Covenant requiring the property to be
offered back to the Council.
The process for initial sale and resale is described below.
5.2.
The Discount
Council Policy will be to retrieve the discount upon future resale of the
property. In addition, the Council will look to retrieving a related
percentage of the uplift or sharing a percentage of loss, dependent on the
market conditions and valuation.
When a discount is applied to the sale of a property, a cash equivalent will
be agreed between the Council and the purchaser at the time of purchase
and will be based on the Open Market Value of the property. This cash
price will be the amount deducted from the market value by the Council
when it is repurchased. Should the percentage discount amount to, for
example, 30% of the open market value of the property at the time of sale,
the Council will look to retrieving 30% of the uplift leaving the additional
70% in order that the purchaser will hopefully, be able to use to money to
move up the property ladder either by purchasing another Discounted
Home or by purchasing a property on the Open Market.
In a falling property market the Council will bear, for example, 30% of the
loss.
6.0.
THE BUYING AND SELLING PROCESS
The following flowchart sets out the process for selling an affordable
property, both initially and in future.
STAGE 1
Open market valuation agreed
(vendor to obtain and fund)
8
STAGE 2
Council buys back the property at a price to be agreed (open market, minus
original discount and adjusted to take account of uplift or loss)
STAGE 3
Council agrees the new discount to be applied to the property on resale
and a Discount Value is agreed
STAGE 4
Details of the property are circulated to eligible applicants
STAGE 5
Successful applicant makes an offer to purchase, secures a mortgage and
instructs a Solicitor
STAGE 6
Final purchase agreement agreed between the Council and the buyer.
Appropriate covenants applied.
6.1.
Resale price
This will be based on the current open market value but calculated using a
discount value to bring it within affordable limits.
Examples
Property valued at £120,000 (Open Market Value)
Property is discounted by 30%
Cash Value of Discount £36,000
9
Property is sold for £84,000
5 years later
Property valued at £150,000 (Open Market Value)
Owner has benefited from a £30,000 uplift in the value of the property
30% of £30,000 = £9,000 (Uplift retained by the Council)
70% of £30,000 = £21,000 (Uplift to be retained by the Owner)
Council offers to re-purchase the property for £105,000
(Open Market Value, less 30% of uplift, less £36,000 original discount)
Example based on a falling market
Property valued at £120,000 (Open Market Value)
Property is discounted by 30%
Cash Value of Discount £36,000
Property is sold for £84,000
5 years later
Property valued at £105,000
Owner has suffered a loss of £15,000 in the value of the property
30% of £15,000 = £4,500 (loss borne by the Council)
70% of £15,000 = £10,500 (loss borne by the owner)
Council offers to re-purchase the property for £73,500
(Open Market Value, less £36,000 original discount plus £4,500 being the
loss borne by the Council)
6.2.
Valuations
The vendor will be expected to meet the cost of the valuation
6.3.
Monitoring and Review
The Council will keep a record of the number of properties made available
through the Discounted Purchase Scheme, the types of applicant assisted
and their incomes.
10
The scheme may be suspended if it is no longer affordable or fails to meet
its objectives.
7.0.
RE-ACTING TO CHANGING CONDITIONS
The principals behind the Affordable Home Ownership Policy are to
maintain the homes as affordable in perpetuity and to ensure that
purchasers are not caught within the low cost home ownership market but
have the ability to move up the housing ladder.
Whilst the Scheme is not intended to protect owners from the losses and
costs experienced by all other home owners, it is also important that
owners are not in a more detrimental situation as a result of purchasing a
low cost home
In order to ensure that homes for sale under the Policy remain attractive to
Mortgage Lenders it has become necessary for a Mortgagee in
Possession Clause to be included. This means that, if the property is repossessed by a Lender, it can be sold free of restriction. If such a clause
in not inserted, Lenders will not currently entertain offering mortgages.
West Somerset Council will continue to monitor the housing and mortgage
markets and will keep the Policy as flexible as possible, whilst ensuring
that the principals of the Scheme remain, on order to best adapt to a
continually changing market.
June 2012
11