The proposed ‘shared equity’ housing purchase scheme R.7/2008

1240/5(3702)

WRITTEN QUESTION TO THE MINISTER FOR PLANNING AND ENVIRONMENT BY DEPUTY G.P. SOUTHERN OF ST. HELIER

ANSWER TO BE TABLED ON TUESDAY 12th FEBRUARY 2008

Question

1. O n page 2 of the White Paper"JerseyHomebuy: a new form ofsharedequity' housing" (R.7/2008) it that "buyer would purchase 100% of the property for just 65% of the first time buyer value".As the buye only ever realise 65%ofanysubsequentsale price would the Minister state whether a buyerwill,in fact, ever "own" a 65% interest in the valueof the property?

Answer

Under the proposed scheme, the buyer will own 100% of the property, and will have all of the obligation property owner. Repayment of the outstanding 35% of the purchase price will be secured through a se charge on the property, and will be realised on its eventual resale. To that extent it is similar to any property purchases, where any outstanding charges on the property, such as a mortgage, are cleared from receipts of the sale.

The Jersey Homebuy proposal is a simple scheme which has deliberately designed, with the advice of the Officers, to fit Jersey's property laws as they stand.

Question

2. O n page 5 it states that shortof a fundamentalchangeofJerseyproperty law, sharedequityas in the U Kingdomcannothappenin Jersey. Would the Minister explain why this is so and whyhe has not chos make the "fundamentalchange" to the law?

Answer

Shared equity in the form commonly referred to in the UK is perhaps better described as Shared Owners Such schemes make available for sale only a percentage of the home and this arrangement exists in perpet The initial buyer does not purchase all of the property and in most cases is required to pay a rental o portion of the property which they do not purchase. Shared ownership is known in Jersey Law. The perc barriers to its implementation are in respect of the borrowing required by most purchasers. Although it beyond argument, it appears probable that as a matter of law a loan cannot be secured on a share in a prop Even if it is possible it is inconceivable that any lender would be prepared to lend, as all that the lender w get if the security had to be realised would be that share.

The law governing property is customary law which has evolved over the centuries, with occas modification by statute rather than statute law and is not capable of simple legislative change. Should the fundamentally change in due course, then it is possible that other forms of shared equity may become poss

3. W o uld the Minister inform memberswhy "Shared ownership is possible but, as a form of affordable ho provision in Jersey, is commercially unrealistic?"(Page 5).

Answer

Shared ownership is commercially unrealistic because it is inevitable that purchasers will only be able to b they can borrow to do so, and lenders will only lend if they can secure their loans. It is probable tha matter of law a loan cannot be secured on a share in a property. Even if it is possible, all that the lender w have as security would be the purchaser's percentage share. It is inconceivable that lenders would wish to on those terms. .

Question

4. W ill the Minister explain to members how the "Jersey Homebuy"scheme "helps to reduce the p requirement to provide and maintain social housing"?(Page 6)

Answer

M o s t recent developments of social rented homes have been acquired by the Housing Trusts with the bene

interest subsidies on their borrowing. If these social rented homes are not needed to meet current demand those homes can be released into the first time buyer sector. Adopting the Jersey Homebuy scheme prop enables those people who cannot afford to acquire first-time buyer homes at the market rate to purchase own home. In the absence of such a scheme, they will have to rent property in the local market which w include the social rented sector.

Question

5. W i ll the Minister explain what is meant by the phrase "Within the current 45% allocation for affor housing, it would allow for a split between social rented and Jersey Homebuy housing based on ava evidence of need and supply?(Page9)andinformmemberswhether this will mean that housing intende rental tothepoorestandthose in realsocial need will be diverted forthose just below first timebuyer inco

Answer

I w i ll liaise with the Minister for Housing and have regard to the latest housing needs survey when determin

• whether the current 45% affordable housing allocation is sufficient and

• what proportion of that 45% allocation should be allocated to Jersey Homebuy and what propo should be allocated to social rented housing.

A t t h e present time, I am advised by the Housing Minister that the development of social rented family ho

on the developed Island Plan H2 sites has significantly reduced the waiting list for such properties. T homes can then therefore be re-categorised for Jersey Homebuy without having a deleterious effect o availability of social rented homes.

6. W i ll the Minister set outformembers the proposed income boundaries betweenthosewho will fall int categories heisproposingthroughhis"gateway" of those –

1. u n a ble to buyat all, andeligiblefor social rental housing;
2. w h o do not qualify for the above, but are unable to buyonthe open first time buyermarket and qu for "JerseyHomebuy"; and
3. w h o are able to enter the first time buyermarket unaided;

for the following categories –

Single persons;

Married couples;

Married couples with children.

Answer

The Minister for Housing will operate the gateway. The gateway will assess applicants and will categ applicants as being eligible or not for Jersey Homebuy. Financial limits have not yet been set and the resu this consultation and the recent Housing Needs Survey are awaited in order that these maximum income l can be established.

Question

7. H  a s the Minister considered whether the proposed scheme will further exacerbate houseprice inflatio increasing the eligibility ofthose driving demand for housepurchasewhilstdoingnothing to increase su If he hasnotyet considered this matter will heundertake to do so inhisresponse?

Answer

T h e re is no evidence to suggest that the scheme would be inflationary. It is my view that rather than incre

the demand for first-time buyer homes, which clearly already exists, the effect of the proposed scheme w to increase the supply, given that 45% of the homes on these 3 sites will not now be restricted to social r use. The further provision for all types of homes will be met through the Island Plan Review process, a based on the results of the Housing Needs Survey, the results of which will be available in March.

Question

8. W h at consideration, if any, has the Minister giventothepossibility that the "Jersey Homebuy" scheme, w providing a short-term solution for a few potential first-time buyers, couldcause a blockage in the market longer term, in that thosewho enter the scheme(asmentioned in the White Paper) are unlikely to be ab moveon for some considerabletime, and mayremainfor life?

Answer

T h e g reat majority of homes purchased in the first-time buyer market on sites zoned for the purpose tend

occupied for the long term by their purchasers. I do accept that the capital growth of the 65% proportion o initial value paid by the purchaser is likely to make it more difficult for the purchasers to move upwards i housing market, however, such a situation must be preferable to a lifetime of renting.

Question

9. Will the Minister give further details to members of how the 35% equity in this scheme will be arranged administered by "not-for-profit" bodies referred to, and what part the States of Jersey will play in such a sch What monies, and from what sources, are to be allocated to the scheme in order to fund the 35% funding fo

initial scheme on the three H2 sites identified in the White Paper?

Answer

It is intended that the Homebuy homes be sold by the developer to a non-profit making body at 65% of the time buyer value, before a single first time buyer home can be sold. The non-profit making body will all the homes to persons approved through the Gateway. The non-profit making body will register a second c against the property which will be repaid at the next alienation of the property. That income will be paid non-profit making body and utilised for the future provision of affordable housing.

N o re sources public resources will need to be allocated to the scheme for these sites, other than at the Ho

Department which will manage the Gateway.