1 Introduction
1.1 As part of its regeneration activity the Council seeks to redevelop areas of housing which include both Council owned and privately owned properties. Home owners affected by redevelopment proposals may require assistance to relocate into alternative homes, and the provision of this assistance is key to facilitating the delivery of the redevelopment schemes.
1.2 The Scowerdons, Weaklands and Newstead (SWaN) Regeneration Scheme is one such redevelopment project. It involves the demolition of 809 Council-built properties of non-traditional construction (702 Vic Hallam and 107 5M properties), the design and layout of which are ill-suited to modern needs. Subject to completion of the legal agreements, they will be replaced with 1052 homes on mixed tenure estates, built by Home Housing. At the start of the project, 185 of these properties were privately owned, with the remainder in Council ownership. Since then 76 have been repurchased by agreement, leaving 109 to be acquired as further demolition and rehousing phases are declared.
1.3 For those current owner occupiers intending to return to the redeveloped estates, the market values of their current properties are insufficient to fund the purchase of a newly-built replacement, and so a shared equity option will be available to bridge this 'affordability gap'.
1.4 Owners who wish to relocate permanently away from SWaN and remain in owner-occupation face a similar affordability issue. In addition to the difficulties this poses for the households affected, it has the potential to cause significant and costly delays for the project as a whole, if suitable, affordable, replacement properties cannot be found. Identifying a solution to this problem was an early priority, and a package of Government-funded financial assistance called 'Homebuy' was made available to affected residents.
2 Homebuy
2.1 In 2004/06 Home Housing, the Registered Social Landlord at SWaN, used an allocation of Homebuy funding to help relocate 11 owner-occupiers away from SWaN.
2.2 At that time, the scheme involved the provision, by Home Housing, of 'Homebuy loans' with no repayments to make until the property was sold. Relocating owner-occupiers were eligible for a loan of up to 25% of the value of their chosen replacement property. When that property was sold, 25% of the property's sale value would be repaid to Home Housing. Alternatively, the loan could be repaid at any time.
2.3 As of April 2006, the Government has altered the Homebuy model (now called Open Market Homebuy), with the introduction of 50% private finance into the model. After 5 years, there will be charges payable on the private element of these loans. An Open Market Homebuy loan of £30,000 would eventually incur a charge of around £450 per year. Open Market Homebuy is designed to assist first time buyers, not existing owner-occupiers needing to relocate.
2.4 The additional outgoings make the new model less attractive to existing owner-occupiers, especially those who have paid off their mortgages, as many on SWaN have. Neither is it considered an equitable solution for residents in later rehousing phases, who did not have the opportunity to access the original Homebuy funding. For these reasons, the Council did not ask Home Housing to bid for further Open Market Homebuy funding in 2006/08, and have pursued an alternative solution.
3 Proposal: SWaN Relocation Loans
3.1 At its meeting on 14 September 2005, Cabinet approved amendments to the Private Sector Housing Policy introducing Relocation Loan Assistance available to owners affected by demolition in the Housing Market Renewal (HMR) areas. It is proposed that Relocation Loans are also offered to owner-occupiers outside the HMR area on similar conditions to those outlined in the previous report, but with different parameters.
3.2 HMR relocation loans are made by the Council from HMR funding. The loan amount is limited to 100% of the value of the owner-occupier's current property, or £70,000, whichever is the lower figure.
3.3 The SWaN Relocation Loans would be limited to 50% of the value of current property, or £40,000, whichever is the lower figure. SWaN is outside the HMR areas, and there is no Government funding to support this proposal. Therefore, the Council must fund the loans itself, and set the maximum loan amount at a level which reflects the more limited funding available.
3.4 In developing this proposal, officers have adhered to the principle that existing SWaN residents should neither be advantaged nor disadvantaged in comparison to those in earlier rehousing phases at SWaN. This proposed level of assistance would be similar to that which previous SWaN owner-occupiers have received under Homebuy, where most loans were in the range of £20,000 to £40,000.
3.5 Under the SWaN Relocation, the Council would take a legal charge on the replacement property, defined as an appropriate percentage of the value. When the property is sold, the Council would receive the same percentage of the proceeds from the sale. Alternatively, the loan could be repaid at any time, in full or in part, subject to a minimum payment of £5,000, and the Council's percentage share on resale would be appropriately reduced.
3.6 In line with the Government's Decent Home Standard initiative, reflected in Sheffield's Private Sector Housing Policy, it is proposed to ensure that displaced owner-occupiers move to adequate, sustainable properties. Therefore, properties purchased with the assistance of a loan would be required to meet the Decency Standard under the policy.
3.7 The owner-occupier would be obliged to contribute the full amount paid by the Council for their home to the purchase of the replacement property (not including Disturbance and Homeloss payments).
3.8 The proposed amendments to the Council's Private Sector Housing Policy introducing Relocation Loan Assistance initially for the area affected by the SWaN redevelopment scheme, but potentially for other locations in the future, is set out in Appendix 1.
4 Delivery Arrangements
4.1 The Council's Private Sector Housing team, responsible for managing loan assistance already available under the Private Sector Housing Policy, would deliver the SWaN Relocation Loans.
5 Financial implications
5.1 Resources have been identified in the 2006/07 Capital Programme to support relocation assistance at SWaN, including Relocation Loans at the anticipated level. However, given the timescales involved in the development and approval of the new loan model, it is likely that the majority of this allocation will need to be carried forward to 2007/08 as it is funded through general resources. SWaN Relocation Loans will be offered subject to the availability of Council funds at the time.
5.2 In future years, the Council could continue to support relocation loans through the investment programme. Officers are also considering the potential for a Loan Fund to be created, using commuted sums secured through Section 106 Planning agreements for Affordable Housing, from private developers. Such a fund may be able to fund both SWaN Relocation Loans and other loans supporting access to affordable home ownership for first time buyers. Officers will assess the viability of this model and bring a further report to Cabinet if appropriate.
5.3 In the longer term, the Council would receive the benefit of its investment as replacement properties are sold on, and the proceeds would then be available to support the investment programme at that time.
6 Risk Management
6.1 A detailed risk assessment is in place for the SWaN Regeneration scheme, encompassing all aspects of the demolition and redevelopment project. The possibility of Homebuy funding not being available to Home Housing beyond 2005/6 was identified as a risk, as its absence would mean (a) the same package of support would not be available to future owner occupiers affected by the scheme and (b) this would have an impact on the speed of rehousing and demolition. Exploring the potential for the Council to provide Relocation Loans was identified as a mitigating action.
6.2 A separate risk assessment has been carried out specifically for the delivery of SWaN Relocation Loans (Appendix 2). As with the HMR Relocation Loan model, it is accepted that the Council shares an element of risk with the resident; if, upon sale, the value of the home goes up, the Council shares in the benefit and if the value of the home decreases, the Council shares in the loss, although the long term upward trend in house prices and the steps taken to ensure sustainability of replacement properties makes the latter scenario unlikely.
7 Equality implications
7.1 A full Equalities Impact Assessment has been carried out. No significant negative implications were found. All the existing properties in the SWaN regeneration area are 2 or 3 bed houses, and the layout and design of the current estates means that access to properties is limited. The loans may assist disabled, older and / or BME residents to access housing that is more appropriate for their needs, such as ground floor accommodation or larger housing.
8 Legal implications
The power to provide assistance of this kind can be found in the Regulatory Reform (Housing Assistance) (England and Wales Order) 2002 made under the Regulatory Reform Act 2001. The exercise of the power is subject to a number of conditions, in particular those in Regulation 4 of the Order which provides that assistance may not be given unless:
1 The authority has adopted a policy under Regulation 3 of the Order
2 It has given public notice of the adoption of the policy, and
3 It has secured that;
(i) A document in which the policy is set out in full is available for inspection free of charge at their principal office at all reasonable times and
(ii) Copies of a document containing summaries of the policy may be obtained by post (on payment, where a reasonable charge is made) of the amount of the charge and
4 The power is exercised in accordance with the policy
The Council has already established such a policy in its Private Sector Housing Policy.
9 Conclusion
9.1 The SWaN Regeneration Scheme is a complex, long term, transformational project, attracting substantial private and public sector funding, which directly affects several hundred households, and has significant implications for the wider community in South East Sheffield.
9.2 An effective, transparent and equitable rehousing and relocation process is fundamental to maintaining the confidence of local residents, and to the ultimate successful and timely delivery of the project. The current lack of a suitable, Government-funded, model to assist with the relocation of owner-occupiers from SWaN is a problem that the Council must swiftly address, or risk losing the momentum that has built behind the regeneration process. The SWaN Relocation Loan model represents an affordable solution from the Council's perspective, which ensures owner-occupiers in later phases are not disadvantaged, and maintains the progress of the overall scheme.
9.3 It may be necessary to employ this scheme in any future regeneration schemes, outside the HMR area. Any such schemes would be identified by the Council as defined areas or types of housing which require re-development due to either the condition or obsolescence of the properties, or which had been identified as part of regeneration master planning. The Council would have the option to offer a relocation assistance scheme, but would consider the resources available to it and the appropriateness of offering this assistance on a scheme by scheme basis.
10 Recommendations
R1 That the Private Sector Housing Policy be amended by the addition of the Relocation Loan Policy set out in Appendix 1 to this report.
R2 The Director of Housing exercise the discretions referred to in the Policy set out in Appendix 1.
R3 The Executive Director of Neighbourhoods and Community Care, in consultation with the Assistant Chief Executive Legal and Governance in consultation with the Cabinet member for Safer Neighbourhoods be authorised to vary both the general restriction on the amount of a loan set out in paragraph 1.6 of the Policy and the geographical area in which the Policy is applied.
Appendix 1
Private Sector Policy - Amendments
1. SWaN Relocation Loan Assistance
1.1 The purpose of this assistance is to enable applicants who reside on the Scowerdons, Newstead and Weakland estates (SWaN) to purchase another home where their current home is purchased by the Council under the SWaN Regeneration Scheme.
1.2 Where an applicant applies for a SWaN Relocation Loan for the purpose detailed in 1.1 above, the Council will assess the applicant's eligibility under its own criteria and make a decision on whether to pay the applicant a SWaN Relocation Loan.
1.3 The amount of the SWaN Relocation Loan will vary according to:
- The value of the applicant's current property
- The applicant's housing need
- The value of current charges or outstanding mortgage on the property
- The value of the property to be purchased
- The amount of available Council funds set aside for this type of assistance at the time of the application and the projected amount of SWaN Relocation Loan applications in respect of which the available Council funds will be applied
1.4 The SWaN Relocation Loan will be secured by means of a legal charge as a percentage of the market value of the property.
1.5 The maximum loan will not normally exceed 50% of the value of the applicant's current property.
1.6 The loan provision will not normally exceed £40,000.
1.7 Where the Council is satisfied that the loan restrictions detailed in point 1.5 and 1.6 above may result in an applicant moving to a property that cannot accommodate the applicants household without the accommodation falling within the definition of overcrowded within this policy then these limits may not apply. The Director of Housing will make this decision.
1.8 The maximum loan to value for all secured borrowing, including the SWaN Relocation Loan, will not normally exceed 90% of the value of the property to be purchased.
2. Circumstances and Eligibility
2.1 The Council will not approve an application unless it is satisfied:
- There are sufficient Council funds available for the provision of the SWaN Relocation Loan
- The purchased dwelling will become the only or main residence of the applicant
- The purchased dwelling is located in the United Kingdom
- The purchased dwelling meets the Government's Decent Homes Standard (as identified by a Homebuyers Survey, financed by the Council)
- The applicant will have an owner's interest in the purchased property
- The applicant has owned and been living in the property purchased by the Council under the SWaN Regeneration Scheme for at least the 12 months prior to the Loan application
- The applicant's property either lies within a declared demolition Phase or has been identified as an 'Early Buy Back'*.
* Early Buy Backs are non-Council owned properties in Phases that are yet to be declared for demolition, which are acquired by the Council, at the owner's request, to create a decant pool of properties in which to temporarily rehouse residents from earlier Phases who wish to return to a new build property on the SWaN estates. Owners participating in the Early Buy Back scheme are not eligible for compensation payments, there are no rehousing responsibilities to the Council and the properties must be located within Phases designated for use for temporary moves (Scowerdons Phases 4, 5 and 6, Weakland Phases 4 and 5, and Newstead Phases 3 and 4). Approval to carry out Early Buy Backs was obtained from Cabinet on 26 January 2005.
- The applicant is able to sustain any new or existing mortgage, where applicable
- The property is of an adequate size to meet clients' housing needs, according to the Private Sector Housing's Bedroom Standard
2.2 Where the applicant meets the eligibility criteria for Loan Assistance the Council will decide whether to make a loan having regard to available resources and the applicant's individual circumstances.
2.3 It is a condition of SWaN Relocation Loan Assistance that the applicant contribute to the purchase of the property the full amount of any compensation (not including Disturbance and Homeloss payments) paid by the Council for the acquisition of the home under the SWaN Regeneration Scheme.
2.4 If more than one person owns the property, all are eligible for a SWaN Relocation Loan, but the total amount of Loan available to them combined will be no greater than a SWaN Relocation Loan to a single owner.
2.5.1 The applicant will be required to take out index linked Building Insurance in respect of their new home for the re-instatement amount quoted in the valuation report. The applicant will be required to have building insurance in place for the duration of the loan.
3. Payment of the loan funds
3.1 Payment of the loan will be made direct to the applicant's solicitor.
3.2 Where the applicant decides not to proceed with the loan application or if a loan application is cancelled:
- after the Council has instructed a solicitor to carry out legal work connected to the loan, the solicitor's fee is recoverable from the applicant at cost.
4. Discretion within the Policy
4.1 Where the Director of Housing is satisfied on consideration of the applicants individual circumstances that a loan paid in accordance with the loan restrictions under points 1.5, 1.6, and 1.8 may result in the applicant having to purchase a property that does not meet the welfare needs of the applicants household he may approve a loan not constrained by those restrictions.
4.2 The Director of Housing in exercising this discretion may have regard to the following circumstances:
- The applicant has specific housing needs impacting on the value of the property required to meet those needs
- The applicant is unable to transfer their existing mortgage to put towards the purchase of the new property
4.3 The above circumstances do not constitute an exhaustive list of matters to be considered, and each decision will be made on its own merits.
5. Loan Redemption
5.1 The SWaN Relocation Loan will be redeemed at the point of resale as a percentage of the market value of the property.
5.2 Applicants wishing to repay the loan prior to resale may do so, in full or in part, subject to a minimum payment of £5,000, provided that the applicant covers all valuation fees.
5.3 Where the Council is satisfied that the value of the property has been increased by home improvements made by the applicant and has determined a figure which it considers reflects the increased value it shall reduce the amount of loan to be redeemed by this figure.
6. Transfer of loans to beneficiary
6.1 Where during the life of the loan the applicant dies and under the administration of the deceased's estate title is transferred to a beneficiary the loan may be transferred to the beneficiary where the Council is satisfied:
· The beneficiary occupies as their only or main residence the purchase property and has lived in the property for a minimum period of 12 months prior to the death of the original applicant
· The beneficiary will continue to occupy the property as their only or main residence
· The beneficiary will complete a new loan application agreeing to the terms and conditions of the SWaN Relocation Loan
· That during the life of the loan the loan has not previously been transferred in this way. The provisions under this paragraph may only be used once during the lifetime of the loan.
6.2 In exceptional circumstances, at the discretion of the Director of Housing, requests to transfer a loan to a beneficiary's acquiring title to the property under the administration of the deceased's estate may be approved where the above conditions in 6.1 have not been satisfied.
6.3 The beneficiary will pay any legal and administrative costs arising from the transfer.
Appendix 2
SWaN Relocation Loans Risk Assessment
| No. | Risk | Likelihood | Mitigating Action |
| 1. | More residents decide to make use of the Relocation Loan than expected | Medium | Estimates have been made based on previous take up of Homebuy scheme. Initially, scheme will only be marketed to residents who have already expressed an interest. Wider publicity will then be undertaken if appropriate; all marketing material will clearly state that availability of the loan is subject to funding. |
| 2. | Less residents decide to make use of the Relocation Loan than expected | Medium | Homebuy scheme was successful, and South Sheffield Regeneration Team are currently holding a waiting list of interested residents. Assess impact on rehousing / demolition programme and consider alternative methods of publicity. |
| 3. | House prices rise significantly and the £40k / 50% 'cap' no longer bridges the equity gap | Medium | Monitor response and loan take up initially. Assume value of SWaN properties will also rise proportionately (thereby maintaining the same gap). Consider changing the parameters of the loans to reflect market changes. |
| 4. | Once Relocation Loans are secured against properties (as a legal charge), house prices decrease, with a consequent reduction in the repayment amount upon sale (thereby reducing the amount of funding available for recycling into the scheme) | Low | Accept risk, but Private Sector Loans team to ensure that the home being purchased is sustainable. Housing market conditions show long term trend towards increase in value. |
| 5. | Insufficient resources in SCC General Fund to sustain the project in the short-term | Low | Secure initial funding from investment programme Fund up to March 2007. |
| 6. | Insufficient resources in Loan Fund to sustain the project in the longer-term | Medium | Develop robust model which utilises commuted sums. |