Jersey Homebuy Housing: amendment to Island Plan Policy H1

STATES OF JERSEY

JERSEY HOMEBUY HOUSING: AMENDMENT TO ISLAND PLAN POLICY H1

Lodged au Greffe on 21st May 2008

by the Minister for Planning and Environment

STATES GREFFE

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to r e fer to their Act dated 11th July 2002 in which they approved the Island Plan 2002 and, inter alia,

Policy  H1 and to amend that policy to include provision for "Jersey Homebuy housing" within the definition of Category  A housing for the remaining H2 housing sites, and to agree to –

O n P age 8.3 of the Jersey Island Plan 2002

(a ) in s ert, after paragraph 8.18, the following new paragraph –

" 8 .1 8 a

T h e r e i s a l so a need for housing which addresses the need of those with incomes too great to be

eligible for social rented housing, but who are unable to afford to buy the cheapest first time buyer home even with the assistance of a loan. In order to meet this need a category of housing will be introduced which will enable first time buyers who fall within this range to buy first time buyer  properties  without  paying  the  full  first  time  buyer  price.  There  will  be  appropriate arrangements for the repayment in due course to the vendor of the balance of the purchase price"; and

O n P age 8.4 of the Jersey Island Plan 2002

(b ) in s ert, after the bullet point "States, Parish and Housing Trust Rental Housing (including sheltered

housing)" a new bullet point as follows – "Jersey Homebuy Housing";

O n P age 8.13 of the Jersey Island Plan 2002

( c) I n the third paragraph of "Policy H1 – Provision of Homes" after the words "first time buyer

homes" delete the word "and"; and after the words "social rented homes" insert the words "and/or Jersey Homebuy housing, in such proportions as the Minister shall determine, having regard to the most recent available evidence on housing need and housing supply,".

MINISTER FOR PLANNING AND ENVIRONMENT

REPORT

Introduction

1. F o l lowing a sustained periodofeconomicgrowthin the lastfewyears,house prices have risen sharply.As a consequence, it has become increasingly difficult for households to access home ownership. The average annualgrowthrate in house prices inJerseysince1990of 6.8% are greater than that ofearnings (5.3%).More recently (2008), average house prices have risen dramatically byasmuch as 28% over the previous year.As the gapbetweenhouse prices and average income widens, the issueof affordability becomes a major concern for a growingnumberof Jersey residents. Consequently,formany young Jersey people, the prospect of gaining a foothold on theproperty ladder hasbecomeremote.The latest Housing NeedsSurvey(2007) confirms that housing affordability is a major problem in Jersey and that it is not confined to the lowest incomesbut affects many people on average and above average salaries. These are people with incomes too high tobe eligible for social rented accommodationbut unable to afford, even with a loan, the cheapest first time buyerhome. They are stuckinthemiddle in an"intermediatehousing market". The surveyindicates that of the 1655 households intendingto leave the Island over the next five years, 40% identifytheir inability to afford tobuy a property as the reason for wishing to leave. (See further analysisoftheHousingNeedsSurvey 2007 in Appendix 1.)
2. A g ainst this backdrop, the States Strategic Plan 2006 – 2011 setsthe objective of a goodstandard of affordable accommodationforall' and increased levels of homeownershipinJersey.For this to be achieved thereis an urgent need to provide a suitablemechanism to deliver a widerrangeof affordable housing solutions. This reportproposestheintroductionof a new form of affordable housing,which will provide additional opportunities for thosewhocannot currently afford a home in the open market. In the local context we are calling this "JerseyHomebuyhousing".

Jersey Homebuy housing

3. J e rs eyHomebuyhousingcanbe defined as follows –

Je r s e y Homebuy is housing where the purchaser buys the whole property, but initially pays only such part

of the first  time buyer housing value as may be determined by the Minister for Planning and Environment. The legal arrangements regulating the unpaid balance of the full value must be approved by the Minister for Housing and the property must remain in the first  time buyer market in perpetuity.

4. I n theUK, similar schemes have been available for sometime and have thecommon theme ofbeing cheaper than open market housing, but achieve this through a variety ofmechanisms.Thetwocommon elements are that: the purchaser pays less than 100%ofthemarket price of the property; and there is a form of gateway' to ensure that those eligible are unable to purchasehousingin the unrestricted open market. Terms vary in relation to arrangementsfor repairs and maintenance and provisions for what happens whenthepurchaser sells theproperty.
5. I t i s important to define the policy aims of Jersey Homebuy in broad terms, asnewmodelsmaybecome available during the lifetime of the revised Island Plan.An acceptable approach has been producedby the Housing Department. Appendix  2 setsout a proposed frameworkfor the operation of the model.
6. U  n der the proposed Jersey Homebuyscheme,thepurchaserbuys the property outright but only pays a percentage  of the total  first  time buyer market price at the time of purchase. What happens to  the remaining (deferred) percentage will be regulated byarrangements approved by the Minister for Planning and Environment and Minister for Housingas explained below.In reality, it is anticipated that most ownersof Jersey Homebuy properties will retain the property for a long period, given that theirpersonal circumstances would need to change substantially to enable them to move to a propertyat full market price.
7. W  h ere a site is zonedfor Category  A housing, 55% of the units will be sold to first  time buyers at th market rate. Of the 45% of units originally intended as social-rentedhomes, the Minister for Planning and

Environment will determine the division between social rented housing and Jersey Homebuy housing, based on

an assessment of needs at the time (which is to be set out by the Minister in Supplementary Planning Guidance). He will also give direction as to the level of discount to be provided for the Jersey Homebuy housing. Initially, the discount is to be set at 35% of the first  time buyer price.

8. E n s uring that Jersey Homebuy housing is only made available to thosewhoneed it and not those with the means to buy in the first timebuyermarket will be fundamental to the success ofthescheme. This will require means-testing.TheHousingDepartmentoperatesan existing means-testingsystemforaccess to States rental accommodation and inproviding nominations to the HousingTrustsand it is considered feasible for this existing process tobeextended to provide a complete Gateway' to affordable housing including social rentedaccommodation and Jersey Homebuy housing.
9. T o qualify as eligible for Jersey Homebuy housing, purchasers will need to satisfy the Minister for Housing that they genuinelycannotcompete to purchasein the open' first time buyer market. Some bar in termsofmaximumincomeis required; otherwise Jersey Homebuyhomes might in practice be nomore affordable than ordinary first time buyer housing. Theproposedmodelsetout in Appendix 3 explain how such a gateway will work.In selling the Jersey Homebuy homes on a site, the not-for- profit body will berequired to ensure that those units areonly sold to those applicants who can demonstrate that they have beenapproved as eligible bythe Minister for Housing.

An example of how Jersey Homebuy could operate in practice (for a three bed home):

Applicant  T has an income of£900  p.w. (£46,800  p.a.) and having been means-tested through the Gateway is approved as being eligible for Jersey Homebuy housing.

The home he wishes to buy is valued at £400,000 and being a unit categorized for Jersey Homebuy housing is subject to a 35% discount on the first  time buyer value, bringing the purchase price down to£260,000.

T buys the property outright, but only pays 65% of the first  time buyer value at this stage. Over 25  years, T's monthly mortgage repayments on a loan of £260,000 will be (at current rates) £1,675 per month, which reduces significantly after allowing for mortgage interest tax relief.

If, after 10  years, T decides to sell the property, T receives 65% of the proceeds from the sale, minus the outstanding mortgage principal and fees; the not-for-profit body holding the second charge receives the other 35% of the sale proceeds.

Thereafter, all future sales are at the full first  time buyer market value. The Development of Sites for the Jersey Homebuy model

10. O  n  completion  of the scheme, the  affordable  housing elements  are  delivered  through  one of two mechanisms (or a combination of the two):
11. T h e developersellsthesocial rent property to an affordable housing provider (in practicetheStatesor a Housing  Trust)  who will  provide  rented  housing  to qualifying  persons' (i.e.  those qualifying  for affordable housing),or
12. T h e developer transfers the propertytoan appropriate non-profit organisation to administer theirsale undertheJerseyHomebuyschemeto persons qualifying for Jersey Homebuy housing in accordance with the modeloutlined in Appendix 3.
13. T h e Minister would place a restriction on the occupation of the Jersey Homebuydwellingsuntil the developer transfers the designated Jersey Homebuyunits to a recognised provider of affordable housing. This could, for example,be a public body, a Parish, a HousingTrustorother approved organisation. Therewouldbe a requirement that this be a not-for-profit body, with eventual profits from receipts of deferred paymentstobe reinvested inthe provision of new affordable housing. This couldbeJersey Homebuy housing or social rented housing,dependingon the housingneedat the time the deferred payments accrue. The likelihood is that the not-for-profitbody will accumulate the capital itreceivesto be spentonnew affordable housingdevelopments.

Available Housing Sites

14. T h ere are currently three remainingH2 sites which will berequiredto include JerseyHomebuyhousing in the shortterm –

(a  ) S it e H2  (1) Fields 848, 853 and 854, Bel Royal, St.  Lawrence–  development permission has

been granted for 102  dwellings and planning obligations drafted to deliver 56  first  time buyer an 46  social  rent dwellings. The first phase of the development is currently under construction.

( b ) S i te  H2  (8)  Fields  190,  191  and  192,  La  Rue  de  la  Sergente,  St.  Brelad e– a  planning

application is currently being considered for 16  first  time buyer and 13 social rent dwellings.

(c ) S it e H2  (10) Field  873, St. Lawrenc –e a planning brief was approved in 2003 for 8 first  time

buyer and 6 social rented family dwellings, in accordance with the 2002 Island Plan and a planning application has yet to be submitted.

Conclusion and Recommendations

15. T h isreportand proposition proposesto make minorchangesto the policies of the 2002 Island Plan 2002, to include JerseyHomebuy housing within the definition of Category  A housing. Accordingly,Policy H1

of the 2002 Island Plan is proposed to be amended, thus allowing the Minister to make provision for Jersey

Homebuy housing on the remaining H2 housing sites.

16. C u rrently, Jersey Homebuyhousing is not defined as a component of Category  A housing.Accordingly, this report and proposition seekstomakean interim amendment to the IslandPlan,whichbringsJersey Homebuyhousingwithin the definition of Category  A.Within the current45% allocation for affordable housing, itwould allow for a split between social rented and Jersey Homebuyhousingbasedon available evidenceofneedand supply, which would be secured through the use of planning obligation agreements.

Financial and manpower implications

17. T h ere will benominal financial andmanpowerimplications for theHousingDepartmentin respect of administering the gateway and monitoringthefunds accrued by the Non-ProfitOrganisation.

Further Analysis from Jersey's Housing Assessment 2008 – 2012 Report on the Housing Needs Survey

A1.1 T he Recent Housing Needs survey found that there are marked differences between income levels of

potential first time buyers, with concealed households (generally children leaving home for the first time) tending to have lower household income than established households. For concealed households, the income distribution peaks at £20,000 – £29,999, with more than a third (36%) of such households within this income band. The income distribution for existing households peaks at £50,000 – £69,999, with more than a quarter (28%) of existing households falling within this income band.

A1.2  T he survey also examined the price ranges for properties that first  time buyers would like to purchase and

found that around half (47%) of first time buyers were looking to purchase a property priced under £250,000. The value of property that households are able to buy is closely linked to income levels, and the price ranges for property differ for existing and concealed households. The majority of concealed households favour lower-priced properties with two-thirds (68%) looking to purchase properties below £250,000. The distribution for existing households is more evenly spread and there is a slight shift away from the lowest price bracket. About half (53%) of existing households are looking to purchase properties between £200,000 and £350,000.

A1.3 A bout three-fifths (62%) of first time buyers plan to purchase a property valued at up to 6 times thei

household income. Over three-quarters (77%) of existing households, and two-fifths (40%) of concealed households are looking to purchase property up to 6 times their household income. Two-thirds of concealed households intend to purchase property valued at 7 times their annual household income or more. This raises the question of affordability – whether people wishing to purchase property for the first time will actually be able to do so.

A1.4 W hen asked for the preferred method of purchasing a property, 9 out of 10 (89%) first time buyers would

choose a standard mortgage and less than one in 10 (8%) would choose shared equity. If it were not possible to get a standard mortgage, two-thirds (67%) said they would consider shared equity.

Interim provision of Jersey Homebuy on remaining H2 sites: Requirements for proposed schemes

A2.1  T he Minister for Planning and Environment will require developers and/or affordable housing providers

involved with the remaining Island Plan H2 sites to enter into a planning obligation to deliver a mix of first time buyer dwellings and social rented or Jersey Homebuy dwellings. In the case of Jersey Homebuy dwellings, the Minister for Planning and Environment will require the developer to transfer the units to a suitable not-for-profit body who will administer their sale under an appropriate Jersey Homebuy scheme, which is required to include the necessary legal safeguards for the purchasers.

A2.2  T he detailed specification of the Jersey Homebuy scheme, including the requirements to be incorporated

in the planning obligation agreement with the developer, will be set out by the Minister for Planning and Environment, in conjunction with the Minister for Housing, in Supplementary Planning Guidance. This policy statement will be updated on a regular basis in the light of the results of the latest Housing Needs Survey.

A2.3  F irst  time buyer properties will be either unclassified first  time buyer properties, for which there will b

no discount, or Jersey Homebuy properties, for which the discount will initially be 35%. There will be appropriate arrangements for the repayment in due course to the administering not-for-profit body of the balance of the purchase price for Jersey Homebuy properties.

A2.4 The Minister for Housing will maintain a register of Jersey Homebuy prospective purchasers. Any

first  time buyer will be entitled to apply to the Minister for Housing to be entered on the register. Acceptance for the Jersey Homebuy scheme will be determined by the Minister for Housing having regard to the applicant's financial resources.

A2.5  T he Minister for Planning and Environment will determine in respect of any of the sites to which this

policy refers what proportion of the dwellings to be constructed on the site shall be –

(a ) U n classified first time buyer accommodation. Such accommodation will be able to be sold at full

first  time buyer price to any first  time buyer, whether on the register or not;

(b ) In t ermediate first  time buyer accommodation, which will initially be available at 35% discount to

a qualifying Jersey Homebuy purchaser; and

(c ) S o cial rented housing.

The Jersey Homebuy Model

It is proposed that the Gateway will function thus –

• Applicant will apply to the Housing Department to be eligible for Homebuy.

• There will be an application form which will focus in detail on household income.

• Once all the information has been supplied, a means test will be carried out using the declared income to confirm whether the applicant falls between the financial parameters set (evidence from the HNS suggests

that this should initially be £40,000 to £60,000 for the remaining H2 sites).

• Those means-tested as qualifying will be provided with a certificate of qualification which will be valid for 12  months. This certificate will have a caveat; in that, if during the period that the certificate is extant

the applicant's income increases beyond the £60,000 upper limit they must reapply and be reassessed.

• After 12 months, certificates will not be valid and applicants will have to reapply and be reassessed.

• Applicants who hold a valid certificate will be eligible to purchase a Jersey Homebuy home and they will apply to do so direct to the not-for-profit organisation on a site-by-site basis. The not-for-profit

organisation will have sole responsibility for allocating the Jersey Homebuy homes.