For some time now first-time buyers (FTBs) and key workers in property hotspots have been increasingly priced out of the property market. A recent Government report highlighted that due to rising incomes, an increase in single occupancy households and people generally living longer, the demand for housing has dramatically outstripped supply. In some key areas, most notably in London and the South East, demand for housing has pushed prices up to the extent that homeownership has been put beyond the reach of many. This problem has been exacerbated by the fact that we are now building some 150,000 fewer new homes a year than we were 30 years ago.
In a bid to combat this, John Prescott recently outlined dramatic plans to tackle the problem of housing supply by focusing on a number of initiatives involving key workers and FTBs. He has highlighted that previous governments have continually failed to adjust to geographic changes in economic activity and been unable to tackle the problems of abandonment and dereliction. He also admitted that despite securing significant additional funding for the NHS, the current Government has also failed to deal with the problem of housing key workers in some of the most expensive areas.
Many critics of the Government’s attitude in dealing with this problem have assumed that it would try to deal with the shortage by concreting over greenbelt areas, but Prescott’s initiative outlined plans for sustainable communities making the best use of available brownfield sites and has plans for protecting and enhancing the greenbelt.
Target areas
The Government has identified four key areas for targeted growth in the South East: Thames Gateway, Ashford, Milton Keynes, and the London-Stansted-Cambridge corridor. It is estimating that at least 200,000 new homes could be built in these areas. The plan’s targets include building 60% of new homes on brownfield sites, improving the design of housing for efficiency and increasing property density in key areas. Coupled to this, the Deputy Prime Minister stated that he would intervene where planning applications were being sought for housing density of less than 30 dwellings per hectare. Prescott’s stance has been quite firm and he has stated that local authorities which fail to meet their targets can expect him to intervene. What form this intervention would take has not been made clear, but it has raised concerns that it could lead to hasty ‘knee jerk’ decisions being taken by local authorities in order to avoid a public reprimand.
The Government has proposed to put some serious money into the scheme and the overall program has earmarked £22bn over the next three years, with £1.2bn alone being targeted for the creation of 20,000 affordable new homes each year.
However, whether this scheme will actually come to fruition in its present form is now under threat as a House of Commons Select Committee has just ruled that the benefits may not outweigh the costs. The Housing, Planning, Local Government and the Regions Committee has reported that: ‘Building more homes is not a panacea and the impact of such a housing programme on the environment could be unsustainable.’
One of its key concerns was that: ‘¦ the importance of promoting employment might get overlooked in the rush to build a large number of homes. London is the major employment centre for many of the growth areas and the current unsustainable commuting patterns will continue unless jobs are created locally and people discouraged from commuting long distances.’
However, it did not write off the plan altogether and suggested that a more workable approach may be to distribute housing demand more evenly across a wider area encompassing some parts of the Midlands and the North which are also suffering at the hands of low housing demand.
Keys to the door
But what are the current initiatives for key workers? These broadly fit into three key areas; homebuy, equity loan schemes and shared ownership. Essentially, homebuy provides up to 25% of the value of the property available for purchase on a shared ownership/shared appreciation basis. The one important difference is that it is interest free and only available to current tenants of social landlords or local authorities. Potential candidates must be able to secure a mortgage for the balance and provide funding for expenses such as survey fees and solicitors’ fees plus the cost of stamp duty.
Then there is the equity loan scheme. This is available to those key workers who can almost afford their own home. An interest free loan of £10,000 is made available which is repaid on sale to help with the purchase of a property. The target areas are those which have a high demand for key workers and must be a reasonable distance form the place of work. However, each local authority has an allocation which in some cases is quite small. For example, Basingstoke & Deane has an allocation of only 10 grants (£100,000) and overall there is only a total of 2,000 grants available, so saturation is likely to be slow. It seems inevitable that demand will exceed supply for this scheme.
Finally, there is shared ownership for key workers. These schemes are neither new nor widely available, although the Government is looking to broaden the availability through the private sector, in the hope that more lenders will offer the facility. Typically, a borrower pays part-mortgage and part-rent on their property, initially owning up to 75% of the property with the remainder owned by the scheme manager which historically would be a developer, but in the future could include local authorities. The purchaser can then buy further shares as and when they can afford it. However, if the purchaser can afford to purchase 75% of the property, then the homebuy option is probably the best, if they qualify ‘ although the Government has restricted the number of people that local authorities can help ‘ and in total across the three schemes there is a cap of 8,000 key workers who will be able to benefit.
One of the other areas the Government has looked at in its attempt to help solve the housing crisis for key workers, especially in London, with the backing of Mayor Ken Livingstone, is the ‘live-in quarters’ initiative. Live-in quarters is a company that specialises in modular building, these are essentially flat pack homes designed for single occupancy, which can be slotted into disused car-parks or playing fields and could be used as part of a possible solution to London’s shortage of affordable housing for key workers. The timber or steel-framed apartments, the first 180 of which are expected to go on sale in the docklands later this year, will cost between £65,000 and £89,000, bringing them within the reach of teachers, nurses and police officers who have been priced off the property ladder.
The fully furnished properties will be sold beneath their market value on a ‘shared ownership’ basis, but unlike other such schemes the buyers will not have to pay rent on top of their mortgage for the first five years.
The aim is to build thousands of these flats across London, and other housing hot-spots across the country, with talks under way in locations including Camden, Enfield and Palmers Green. Flats will also be made available for rent, from £65 a week, and priority for both purchase and rent will be given to people earning less than £30,000 a year. The rents will be controlled and landlords will not be allowed to buy to rent.
Shared expectations
Demand is expected to be massive. Last year 131,000 Londoners needing housing contacted London’s housing associations about shared ownership opportunities. They were only able to help just over 1,000. The flats will be cheap because they are pre-fabricated, and can be stacked up by cranes in four months ‘ a third of the typical building time for apartments ‘ which will slash labour costs. The flats can be dismantled and rebuilt elsewhere, so they can go up in places where permanent housing cannot, such as land to be cleared for roads.
The problem of the cost of land in the capital will be overcome by seeking out landowners such as the NHS or LEAs that own underused spaces like car parks where a block of flats could have been built. These landowners would be asked to donate their land so that their workers could be housed. The project has received a £4.5m grant from the London development agency under the ‘Keep London Working’ initiative to retain key workers in London.
Overall, the current plans are ambitious, but it is unlikely that these plans alone will solve the problems of the acute housing shortage facing the nation, but it is a start. It is a shame that the most radical and focused objectives, and those aimed directly at key workers, will not get as large a slice of the budget as is needed to seriously tackle the key worker shortage.
