Low Cost Home Ownership in Pressured Housing Markets

1
Low Cost Home Ownership in Pressured Housing
Markets

• The role and experience of key worker housing

2
Overview of presentation

• Looking at key worker housing initiatives
• Context of owner occupation as a
  main/(preferred?) tenure
• Affordability becoming a problem. Briefly
  international situation and different types of
  response
• UK comments on supply, affordability
• Range of approaches to affordability in UK
• Increasing emphasis on KW housing in pressured
  areas
• Important features of KW initiatives - if they
  are to work they must influence longer term
  behaviour.

3
Owner occupation internationally

• Mixed experience in 1990s and since 2000
• booms UK, Ireland and Netherlands
• flat in Germany and falling ownership in Finland
• In summary decreasing affordability for first
  time buyers

4
Assistance into owner occupation

• Germany - funding targeted to reduce borrowing
  costs for FTBs especially for families not well
  targeted, inefficient use of subsidy. Decreasing
  funding for programmes in a flat housing market.
• Ireland - use of the planning system under
  booming housing market conditions.
• Finland state mortgage guarantee which in effect
  increased LTV ratios and increased participation
  of FTB households. However, gains were limited
  since this fed into increased housing costs
  rather than supply.
• Austrialia/USA - developments in private sector
  investment in shared equity and shared
  appreciation mortgages to reduce initial payments
  from borrowers in the early years

5
UK Experience

• Amongst the largest increases in owner occupation
  in Europe.
• RTB over 2.3 million homes sold
• LCHO schemes mainly CSO, DIYSO, Homebuy over
  160,000 properties in England and Wales (0.7 of
  stock). Varies regionally e.g. over 5 in Milton
  Keynes.
• Affordability and concern that current levels of
  home ownership may be unsustainable. The Barker
  Report (2004) - real house prices in the UK had
  risen at 2.4 per annum over the last 30 years,
  (EU average of 1.1 ). Highlighted need for
  increased supply.
• Only 37 of new households could afford to buy in
  2002 compared with 46 in the late 1980s.

6
LCHO in Context Approaches to affordable housing
in the UK

• Direct subsidy for Intermediate Housing(LCHO and
  Renting) and social rented.
• Use of the Planning System
• Private Sector Products and Mixed Funded Shared
  Equity Schemes
• Investment UK-REIT

7
Intermediate Housing Demand and Supply
8
Value For Money

• Shared ownership requires approximately half the
  subsidy of social rent but its value for money
  depends on targeting, dead weight and the amount
  of social housing life which the scheme buys.
• Based on straight forward cost comparison
• Social renting Shared ownership
• Devt cost 100,000 100,000
• Customer pays 30,000 65,000
• Subsidy 70,000 35,000
• Targeting can be very good in areas of high
  housing pressure e.g. 99 for CSO in London
  compared with 47 in East Midlands (Bramley et al
  2002)
• Recycling of receipts adds to social housing life
  in LCHO HB dependency reduces it for social
  renting.

9
Key Worker Housing in Pressured Markets

• Concern that housing costs could be harming
  recruitment and retention in key public sector
  occupations especially in London and SE.
  Questions also arise generally about the balance
  of key worker and other needs.
• SHI 2001 -04 around 10,000 key workers helped
  with shared ownership and equity loans.
• KWL 2004 -07 over 16,500 key workers and a wider
  range of products.
• Interest in a range of schemes, some employer run
  in SE including relocation assistance, equity
  loans and savings schemes.

10
SHI - Operation of a Key Worker Housing in
Pressured Markets

• Government linked subsidy to employment in SHI
  2001 housing approximately 10,000 public sector
  workers by 2004
• 45 in health related fields,
• 36 in education,
• 15 police
• 4 other public sector workers including prisons,
  fire service and social work

11
Lessons from SHI. Are key worker initiatives
successful?

• Are the right groups targeted?
• The evaluation of the SHI found broad agreement
  to targeting.
• Widened a little in KWL but still public
  services.
• Studies of employers have used the wider
  definition of essential and key worker Douglas
  Birt (2004) study in West Kent
• Support for local authorities defining key
  workers more widely in the South East Regional
  Housing Strategy (South East Regional Planning
  Board 2005).

12
Targeting to individuals

• Reasonably small amounts of deadweight
  targeting good.
• Some concerns over unaffordability possibly a
  range of products would be better.

13
Reasons for seeking assistance

• Mainly housing related
• Over a third couldnt have stayed in job without
  assistance
• 46 of nurses and 42 of all groups in London
  could not have stayed in job.

14
Did SHI keep people in their profession

• 80 expected to be in their profession in 5 years
  but housing only one aspect of this.
• Amongst all groups virtually 50 had been
  encouraged to stay in their profession.
• Overall 50 of teachers and 46 of nurses had
  been encouraged to stay in their profession.

15
Influences on long term plans

• There was some evidence from focus groups that
  recognition of key worker status was good for
  morale but didnt overcome negative aspects of
  jobs.
• Getting onto the ownership ladder cut down on
  perceived mobility.
• A key factor influencing the next move was
  starting a family falling off the ladder
  because of limited equity growth or need for
  larger accommodation.

16
Where will next move be?
17
Conclusions

• LCHO schemes are only one strand of a variety of
  approaches to affordability overall market
  factors influencing supply are also important.
• Key worker schemes are an increasing focus of
  LCHO activity but it has been demonstrated that
  their needs extend to other tenures and schemes
  have developed to accommodate this.
• Questions can be raised about which key workers
  to help and whether other groups possibly on
  lower income should be a priority.
• Key worker schemes must influence behaviour to be
  successful.
• Analysis of the SHI gives ground for optimism but
  in the longer term housing subsidy is only one of
  a number of impacts on locational and employment
  choice.