Guidance issued on making affordable home ownership schemes attractive to lenders
The Homes and Communities Agency and the Chartered Institute of Housing have issued a good practice note outlining the legal and planning steps that councils could take to make affordable home ownership schemes more attractive to mortgage lenders.
The two organisations said the number of families getting a foot on the ladder could significantly increase if the recommendations of their note – Promoting mortgage access to affordable housing – are implemented by local authorities.
The HCA and the CIH said lenders had generally become more cautious and, when it comes to affordable home ownership schemes, had particular difficulty in relation to:
- certain restrictions which limit the occupancy of homes
- using valuation methods other than market value, and
- complex legal clauses.
The two organisations called for standard legal clauses to be adopted, property values to be linked to market rates and a time limit put on occupancy restrictions. “These are just some of the ‘quick win’ ways that home ownership can be made simpler and levels boosted,” they argued.
Other suggestions include varying existing planning obligations where the restrictions on a scheme have made the properties subject to them unmortgageable, and specifying tenures that are clear and simple.
The guidance also encourages – where there is a need to place restrictions on the future occupancy of affordable homes – the use of a clear and time-limited ‘cascade’ of typically three months.
A cascade initially restricts the marketing of a property to qualifying purchasers within a very small local market and gradually widens the net. At the end of the relevant period, if an appropriate offer has not been made, the property could be sold to any purchaser on the open market or the local authority or provider could agreed to buy the property back.
The guidance note suggests that issues are more effectively addressed by local authorities which consider the mortgage market throughout the planning process and address the issues holistically.
It says that there are four key points in time when consideration of the mortgage market in planning for affordable housing will be “particularly beneficial”: formulation of planning policy; pre-application discussion; determination of a planning application; and drafting of the s.106/planning conditions.
Jamie Ratcliff, head of intermediate markets at the HCA said: “Lenders are reluctant to mortgage some low cost homes subject to certain legal and planning conditions put in place to help create and maintain mixed communities.
“These conditions can often make properties more difficult to buy and sell, but, as our note details, many of these barriers can be overcome, without impacting on the social mix of neighbourhoods.”
The CIH’s head of policy, Abigail Davies, said: “This is an important issue for housing and planning professionals involved in the delivery of affordable housing. Our note is intended to raise awareness of these issues and provides the tools for local authorities to successfully overcome them.”
The HCA has also set up a pilot partnership with Cornwall Council to help the authority increase affordable home ownership across the county.
Cllr Mark Kaczmarek, Cornwall’s cabinet member for housing and planning, said: “From a Cornish perspective we strongly welcome this good practice note which will enable us to deliver more homes that are attractive to lenders, providing greater opportunities for local people to get a foot on the property ladder. This is the first pilot in the country and one which I hope will lay the foundations to improve mortgage availability across Cornwall.”
The guidance note can be downloaded here.
