14/07/2008 4:56 pm
The housing minister has admitted the government is considering a scheme were cash-strapped home owners can become council tenants to avoid repossessions.
Councils, or other landlords, would buy the home at risk of repossession, and then lease it back to the previous owners. It sounds better than losing your home, but it does raise a few questions, not least who would buy the homes, and how would they be funded to do so?
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23/07/2008 12:23 pm
As long as it is done from RSL's or similar bodies I have no problem with it at all. However if it is to encourage many of those already operating in this market and are trying to get "accreditation" in some way from the OFT or similar, absolutely not.
They're little better than door knocking loan companies like Provident and their ilk, portraying the image of helping people get by whilst saddling them with horrendous APR's.
It's also a queston of those in trouble to realise the value of getting an RSL tenancy and the security that brings with it as often if they receive an offer of say 30% below market value they refuse and by the time the dust settles they're maybe £5-10k better off but then can't get credit for a mortgage and can't get near the local RSL's list and so go on a cycle of private lets rather than stay in their home that was near the kids schools, friends, family etc - was 30% less such a bad deal??
23/07/2008 12:38 pm
a year ago i reckon housing associations would have been very interested in this - but the credit crunch and timid banks has limited the amount of credit available to housing associations - i think there was a report in InsideHousing recently stating that the number of banks willing to lend to housing associations had shrunk
24/07/2008 2:43 pm
What I would say Marty is that as well as spending the £200m pledged by the housing corp to allow schemes to be converted from Open market to shared ownership or similar, the govt would be as well advised to lok at funding these type of schemes, to avoid the breakdown of family units and the associated issues caused when a family is faced with repossession. Kids can suffer at school, that can cause worsening education standards that can cause behavioral problems, offending, ASB etc, etc.
27/07/2008 4:50 pm
I've been working in Scotland with the Nordic Enterprise Trust - a Scottish Charity part funded by the Norwegian Government - to develop new partnership-based solutions using the UK Limited Liability Partnership ("LLP") as a framework.
The "Community Land Partnership" we have developed would essentially transfers "distressed" property ownership to a "Custodian" (similarly to a Community Land Trust) but instead of then granting a lease the "Occupiers" and long term financier "Investors" enter into a "Co-ownership" partnership, with the possibility also of a "Developer/Manager" within the framework.
The outcome is a new asset class of proportional "Units" in the stream of affordable (but index-linked) rentals paid by Occupiers.
Firstly, the rentals are shared proportionally between Investors and Developer/Managers - thereby aligning their interests.
Secondly, anything Occupiers pay in excess of their "Capital Rental" allows them to acquire "Units" and hence quasi "Equity" in their homes.
Thirdly, a CLP creates a new class of "Unit" (similar to a "Real Estate Investment Trust" ) based upon co-ownership of property and carrying a reasonable index-linked return.
Because the resulting rental is affordable, it is more certain, and therefore a lower rate of return is justified.
The affordability of the finance arises out of the fact that:
(a) no capital is being repaid - albeit a maintenance payment is necessary in respect of the value of the buildings;
(b) the rate of return on capital - because index-linked - will be below bank interest rates.
A CLP is simple, but radical.
A very similar "Capital Partnership" has already been implemented in a > £1 bn hotel transaction, while City of Glasgow has 3 "municipal" LLP's with more to come, albeit these are conventionally financed.
Just don't expect simple solutions like the CLP to be supported by professionals paid by the hour, rather than the outcome!
Inside Housing staff post
30/07/2008 9:17 am
This sounds really interesting. How long has it been running, and have you got any indication yet of how successful it is?
30/07/2008 10:06 am
We (there's just the two of us) "launched" the concept at last year at Anderson Strathern's (our lawyers) offices in Edinburgh, but our Norwegian funding ran out that point and it's been slow going since.
We are looking for pilot schemes, and had a failed "Community Land Partnership" bid recently for a 300 home development, for instance. We have a couple of good rural prospects.
Essentially we are looking for professional and commercial/ social enterprise partners to work with to develop and implement the concept widely - we are getting a lot of interest up here, particularly post Credit Crunch.
We think that the biggest opportunity lies not so much in developing new properties - which takes a lot of time - but in refinancing existing portfolios of housing debt.
This would free up literally billions.
It creates what is essentially a new form of "Equity" but within an LLP framework, rather than the sort of Plc "Equity" that makes the "Private" sector "Private".
I see these proportional "Units" in rental revenues as a major new asset class - a new form of "REIT" to all intents and purposes - and interestingly enough, one that is Islamically sound at a deep level.
Fighting talk.....but from a background in financial services and product development - I used to be a Director of the International Petroleum Exchange for what that's worth.
31/07/2008 0:58 am
If all the RSLs and limited number of Councils, stopped or phased out their 'New-Build Development Programmes', then they could begin using that money to buy up such properties and increase their portfolios at the same time. The Housing Corporation has a multi billion pound development fund each year for building affordable homes, I can't see a better place to start spending public money than here at the Housing Corporation, or the HCA as it will come to be known in conjunction with 'English Partnerships'.