Glasgow City Council Housing Development Committee Report By
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Glasgow City Council Housing Development Committee Report by Director of Development and Regeneration Services Contact: Jennifer Sheddan Ext: 78449 Operation of the Homestake Scheme in Glasgow Purpose of Report: The purpose of this report is to seek approval for priority groups for housing developments through the new Homestake scheme, and for other aspects of operation of the scheme. Recommendations: Committee is requested to: - (a) approve the priority groups for housing developments through the new Homestake scheme; (b) approve that in general, the Council’s attitude to whether the RSL should take a ‘golden share’ in Homestake properties is flexible, with the exception of Homestake development in ‘hotspot’ areas where the Housing Association, in most circumstances, will retain a ‘golden share’; (c) approve that applications for Homestake properties should normally be open to all eligible households, with preference given to existing RSL tenants to free up other existing affordable housing options; (d) approve that net capital receipts to RSLs through the sale of Homestake properties will be returned to the Council as grant provider to be recycled in further affordable housing developments. Ward No(s): Citywide: Local member(s) advised: Yes No Consulted: Yes No PLEASE NOTE THE FOLLOWING: Any Ordnance Survey mapping included within this Report is provided by Glasgow City Council under licence from the Ordnance Survey in order to fulfil its public function to make available Council-held public domain information. Persons viewing this mapping should contact Ordnance Survey Copyright for advice where they wish to licence Ordnance Survey mapping/map data for their own use. The OS web site can be found at <http://www.ordnancesurvey.co.uk> . If accessing this Report via the Internet, please note that any mapping is for illustrative purposes only and is not true to any marked scale L:\Cmtserv\HOUSING\PARENT\Meetings\2006\190106\Item 04.doc 1. INTRODUCTION 1.1 The Housing Development Committee on 10 November 2005 considered a report on the new Homestake scheme and approved arrangements for its introduction in Glasgow. The report noted that further discussions were required to agree priorities in respect of locations and client groups to be targeted. 1.2 The purpose of this report is to seek approval for priority groups for housing developments through the new Homestake scheme, and for other aspects of operation of the scheme. 2. CONSULTATION 2.1 The Homestake Guidance issued by Communities Scotland requires local authorities to consult with partners on priorities for implementation of the scheme and to relate priorities to the Local Housing Strategy. The citywide Housing Investment Forum which includes representation from the Glasgow and West of Scotland Forum of Housing Associations and Communities Scotland considered initial draft proposals at its meeting on 16 November 2005. Detailed feedback is awaited from the Forum. Representations regarding Homestake have been made by Glasgow Council for Inclusive Living and Ownership Options, and by Link Group. The proposals made here reflect all these discussions. 3. ELEMENTS OF THE HOMESTAKE SCHEME 3.1 The Homestake scheme is being introduced to assist households on low incomes who cannot afford to purchase a suitable property in the local housing market. Homestake is another mechanism with which RSLs can develop or purchase properties for householders who cannot afford the full price of the property. This shared equity scheme allows the householder to purchase a stake in the property and the RSL to retain the remaining stake in the property. Distinguishing the scheme from shared ownership, there is no rent to be paid to the RSL for the stake in the property held by the RSL. A key advantage of the scheme, in comparison to low cost home ownership schemes, is that when the property is sold, the RSL stake in the property can be recycled and used in further Homestake schemes. 3.2 There are no fixed income eligibility figures, but applicants would have to demonstrate that they cannot afford to buy suitable housing on the open market, after allowing for retention of £5,000 savings. In the first instance, the expectation is that most households will purchase a stake of between 60% and 80% of the property with the RSL purchasing the remaining stake with Homestake grant from the development funding budget, which will formally be HAG. The minimum percentage stake that a householder can take in the property is 51% and the maximum percentage at the time of initial purchase is 80%. The householder can increase their stake to 100% unless the RSL takes a 20% ‘golden share’. 3.3 Separate criteria apply to households who own property which is scheduled to be demolished for regeneration purposes. There is no minimum percentage stake in the property required to be purchased by these households. However, the householder is required to invest the full sum returned from the demolition/ clearance property in the Homestake property. L:\Cmtserv\HOUSING\PARENT\Meetings\2006\190106\Item 04.doc 3.4 The property must be newly built for the specific purpose of the Homestake scheme, or bought new from a housing developer. Currently, a pilot Homestake scheme is operating in the Edinburgh housing market under which Homestake applicants can pursue and buy property on the open market and so are not restricted to developments with RSLs. This will not be available in Glasgow, at least for the time being. 4. STRATEGIC CONTEXT 4.1 The assessment of the LHS Update (May 2005) was that Glasgow does not have a general problem of affordability, but that there are serious hotspots, particularly in the West End and inner South Side. It stated that the Council would use Homestake to meet priority needs for affordable housing, and continue to fund Low Cost Home Ownership (on a full and shared equity and shared ownership basis) by RSLs through HAG on the basis of locally justified demand. The full statement relating to affordability of owner occupation is in Appendix 1. 4.2 House price analysis updated to 2004/05 indicates that the affordability position in Glasgow has grown more difficult. There has been a ripple effect whereby many of the less popular areas have now had substantial price increases, and the proportion of homes which are affordable on a three times income basis has fallen. In 2003, 43.3% of second hand sales were ‘affordable’ on the basis of three times workplace Glasgow average income; in 2004/05, this fell to 30.7%. Nevertheless the contrast between the West End and inner South Side on the one hand, and the rest of the city on the other, remains strong. In 2004/05, over 40% of homes were affordable on the three times median resident income basis in 30 postcode sectors, while the median second hand price was £70,000 or less in 36 postcode sectors. Fuller details of house price changes in Glasgow are in Appendix 2. Further work on affordability in Glasgow is ongoing, including an update of the Glen Bramley work commissioned for all of Scotland by Communities Scotland. 4.3 Homestake can support a range of Glasgow’s Local Housing Strategy (LHS) Objectives, particularly in relation to: • LHS Aim A: To promote the regeneration of the city: to retain and attract population, particularly families, by ensuring that a full range of house types, sizes and tenure options is provided within the city • LHS Aim B: To raise the city’s housing in all tenures to satisfactory standards, with affordable costs: to ensure affordability of housing in all tenures • LHS Aim C: To meet people’s changing housing needs: to improve access to suitable housing for people with particular needs. 4.4 The recycling of resources will support the LHS Objective of maximizing available resources by all possible means whilst allocating housing investment based on housing need. 5. RESOURCES 5.1 The Scottish Executive is not making any additional funding available to Glasgow for Homestake. Homestake will be a component of the existing development funding programme, competing with existing streams. 5.2 Recent spend on low cost home ownership schemes may be used as indicative of possible future spend on Homestake. Spend averaged £1.26m in 2002-2003 to 2004- 2005. The average spend on GRO over these three years was an additional £2.01m and some of this might be regarded as available. L:\Cmtserv\HOUSING\PARENT\Meetings\2006\190106\Item 04.doc 5.3 In addition, the Financial Services Committee on 30 November decided to reduce the Council Tax discount on second homes from 50% to 10%. The projected revenue is £0.22m per year, and is required to be used to finance affordable housing provision by RSLs. The first funds under this provision will become available by June 2007. 5.4 All of these sources together would put an overall ceiling on low cost home ownership programmes in Glasgow of £3.62m per year. On the (very rough) assumption that the average unit cost for Homestake would be of the order of £30,000-40,000, this suggests that the initial Homestake programme would be quite small. It could eventually build up as resale proceeds become available for recycling. 6. SUGGESTED PRIORITY GROUPS 6.1 Taking the above into account, the following groups are proposed as priorities for Homestake funding. (i) Affordable housing for families In recognition of the LHS priority to increase family housing options and increase the population within Glasgow, the Homestake scheme should be targeted at family households who cannot afford to purchase in their local area or alternative neighbouring areas. The rationale for this would be that while the city still has plenty of affordable housing if size of house is disregarded, many families with children are likely to have considerable difficulty in finding an adequately sized affordable house.