20 October, 2020
Last week members of the Housing Property Team had the pleasure of attending the National Housing Federation's first virtual Affordable Home Ownership Conference. A different format but non the less informative with valuable insight into the upcoming changes in the industry and the impact Covid-19 has had and continues to have on the housing market.
It was clear that the housing industry has remained resilient and continues to see growth in the market with continued demand and house prices still increasing, a first for a recession. Sales are higher than this time last year and 86% of people still wish to buy rather than own. That said, it is not time to be complacent as there is still so much uncertainty surrounding us and we see the end of the Government's Furlough Scheme at the end of this month along with the reduced rates for SDLT ending on 31 March 2021. This increase in the sales has been attributed to a one-off shift of those equity rich taking advantage of the reduced rates to move to their dream home, along with those that have increased savings due to working from home and cutting out commuting expenses. It's uncertain whether we will see the same level of sales and demand over the next 12 to 18 months unless the Government introduce new incentives, and it also very much dependent on the ongoing Covid-19 restrictions, risks of a second lockdown and higher rates of unemployment.
The Government has extended the current Affordable Homes Programme to 2023 due to the delays caused by Covid-19 and has recently pledged £11.5bn in their new Affordable Homes Programme 2021 - 2026. The AHP 2021 - 2026 is a significantly bigger programme delivering more homes across all tenures and will go a long way in tackling the current housing crisis, as demand currently far outweighs supply. Shared Ownership is an increasingly popular product, and Newbury Building Society noted a 30% increase in Shared Ownership properties from last year. It is anticipated that Shared Ownership will continue to be attractive, particularly with the adjustments to lending policies and reduced access to finance. However, there was clear concern shown throughout the virtual event about the proposed changes to the Shared Ownership model which will be introduced next year.
The new model form lease will place obligation on Landlords to fund the first 10 years of repairs and maintenance and this was discussed at length during the event. This obligation, details of which are unknown at present as a consultation is to take place later in the year, will be a cost factor when Registered Providers appraise new developments. The new cost implications, along with uncertainty over continued volume of sales, may result in the difficulty to persuade board members to commit to new large-scale developments as overall costs are unknown. However, Registered Providers may be offered more lucrative deals from developers to use their cash grants in helping the developers with their cash flow if they see a sudden downturn in their outright sales. It is a delicate situation and Registered Providers will need to weigh the risks even more carefully as they move forward, and this could potentially lead to a delay in the provision of new housing whilst they consider the market. There were discussions about the need for greater flexibility and the ability to switch between tenures, so those properties earmarked for outright / shared ownership sale can be changed to affordable / social rent should the market slow down significantly.
Agents have seen shift in what buyers want, with trends of people moving to more rural towns and villages rather than city centre locations due to the increased of home working. Houses also remain very popular and developers will be considering the specifications when providing new homes with space for office working and gardens. Registered Providers will need to review the type, design and specifications of the developments being provided against current demand.
There were brief talks about the uptake of the lower starting percentage of 10% and 1% staircasing which will be introduced in the new Shared Ownership model next year. Whilst it is foreseen that there will not be a large-scale uptake across the country, it does offer more flexibility and access onto the housing ladder for those living in high value areas, such as the London Boroughs. In some cases, a 10% premium for a property in London can be equivalent to the full value of a property in the North of England.
An interesting event with lots of food for thought. We are living through unprecedented times and Registered Providers are expected to provide more and do more as there is still clearly a housing crisis. Only time will tell, and, in the meantime, we must continue to assess the market, weigh up the risks and continue to do what we all do best.
For more information contact Shauna Helyer in our Housing & Regeneration department via email or phone on 01254 222 395. Alternatively send any question through to Forbes Solicitors via our online Contact Form.