The HH presented a report on the impact of
change to Reside’s affordability
threshold, in line with the Housing Allocations Policy. He outlined
the different tenures that Reside were providing, which were set at
a range of rent levels to meet different types of housing need in
the Borough. It was explained that the rationale behind the changes
made to the Housing Allocations Policy were due to Reside’s future expansion and to ensure that
the Reside intermediate tenure would be more affordable, meaning
that residents could use their in-work benefits as part of their
affordability assessments. If residents could demonstrate that they
had been paying their rent in their previous home, Reside would also use this as evidence that they
could afford their property. The Managing Director for Reside (MD)
stated that by the end of 2022, Reside
would have increased its housing stock by 50% and would have over
3,000 homes at a range of tenures by the end of March 2025.
In response to questions from Members, the HH
and MD stated that:
- The Council had approached the
Greater London Authority (GLA) about the risk of those in shared
ownership becoming stuck, as there could be a point where tenants
started to staircase and buy more of the shares for their home,
only to struggle when they looked to sell, as they were dependent
on finding someone else who would buy their shares. The Council had
suggested that the GLA create a Pan-London scheme, matching people
across parts of London who wished to buy and sell, to facilitate
this process.
- The Council needed to develop a
local response through Reside to help those stuck in shared
ownership, such as through guidance and the potential for the
Council to buy back shares from tenants and resell these. As lots
of shared ownership tenures were through Reside, the Council and
Reside had more levers to help people around this and these needed
to be explored.
- Many of Reside’s shared ownership customers were
first-time buyers.
- Reside ensured that all purchasers
were able to view the property that they were buying. It also
worked with Savills as its sales agent, who had a reputable panel
of solicitors who had a wide knowledge of the shared ownership
model; however, purchasers also had the option to use a different
sales agent if they wished.
- Reside worked with the
Council’s Legal team to ensure that it could share as much
information as possible with the panel of solicitors around what
people were buying, the terms and conditions, service charges and
to provide accurate estimates. The MD reviewed every memorandum of
sale that came through, and he had regular meetings with Savills to
ensure that customers that were being put forward had evidence of
deposits and an income. Savills would approach the MD if any
customer was on the cusp of
affordability and together, they could look at each case in more
detail.
- Shared ownership was often less an
affordability issue, and more of customers not understanding what
they were buying. Reside put time in to help purchasers understand
this, including creating videos for clients around how to service
elements within their flats rather than paying someone to do this
for them. However, it was acknowledged that more could be done to
help clients understand their responsibilities.
- Reside had not seen arrears on
shared ownership properties during the pandemic. They had also not
been approached by any mortgage providers in relation to issues and
had only been approached by tenants for general support during the
lockdown. Reside had noted a decrease in the percentage of shares
that tenants were buying, with more buying shares for 30% and
entering shared ownership at a lower level. This could present an
increased risk if these tenants were affected by a change in their
circumstances, but Reside were willing
to work with tenants should issues arise.
- The Government had recently changed
the rules around shared ownership, meaning that buyers could now
purchase a minimum property share of 10%. There were also reforms
to reduce the amount that tenants could staircase by, to 1%. Reside
did not yet know if there would be any local discretion as to this
and would monitor closely.
- With shared ownership, there was a
rental element on unsold equity and then increases to this each
year, based around the rise in Consumer Price Inflation (CPI),
which would increase over time. As Reside had a ‘young’
shared ownership portfolio, it did not have the experience of being
able to see the effects of these increases over time. Reside needed
to monitor the effects of compounding on rent increases and
regularly review the data to ensure that tenants were not
struggling.
- With prices being variable in the
Borough, Reside had noted some
reluctancy from lenders and were discussing how it could increase
the lender pool.
- Reside would need to consider the
Government’s proposals around shared ownership in more detail
in relation to new builds and grant funding. It would also work
with commissioners to ascertain how it could provide best value
around resident service charges, to avoid heightened costs.
- Reside did not apply a service
charge on top of its rents. Tenants would receive one charge,
regardless of their type of tenure. However, for shared ownership
properties, the tenant would pay a service charge on top of the
rent for the proportion that they did not own.
- Affordability assessments were
undertaken at the point of letting. Reside ensured that it got the
most up-to-date information to undertake these assessments and
ensured that two-way conversations were had with those working in
Reside and potential tenants.
As a result of the presentation, the
Committee:
- Emphasised the need to think through
the Shared Ownership scheme and any potential implications for
residents, such as not correctly understanding the terms and
conditions when buying into the scheme.
- Requested some information on
staircasing and sales, to gain a wider understanding of the
scheme.
- Requested that a Member Briefing
session be provided for all Councillors, to enable them to gain a
better understanding of affordable housing, due to the vast number
of questions that the Committee had in relation to this.
- Recommended that communication be
improved with potential tenants, to better understand what they
were looking for and could afford.
- Recommended that any questions
around sustainability were emailed to the Chair or the clerk, to be
passed onto the relevant officer.