Interim Review of the Home Owners Support Fund. The Scottish Government

Transcription

1 Interim Review of the Home Owners Support Fund The Scottish Government October 2009 ODS Consulting 2 Myrtle Park Glasgow G42 8UQ Tel: john.scott@odsconsulting.co.uk

2 Contents Executive Summary 1. Introduction... 1 Background... 1 Our Methodology The Home Owners Support Fund... 4 About the HOSF... 4 Progress of Applications... 7 Profile of Applicants... 9 Applications by Local Authority Areas Applications by Advice Agency Landlord Participation Key Themes arising from Consultations Introduction The Need for the HOSF Client Eligibility Advice Provision Maximum Property Values Surveys The Definition and Funding of Repairs Landlord Participation and Selection Subsidy Levels Administering the HOSF Key Findings & Recommendations The Role of the HOSF Advice Provision Maximum Eligible Property Values Landlord Participation Subsidy Levels Surveys Mortgage to Shared Equity Scheme Administrative Procedures and Ongoing Communication Appendices 1. Consultees 2. Advice providers by applicants local authority area List of Tables 2.1 HSOF applications received from 16 March to 31 August Reasons for applications not proceeding 2.3 Age distribution of head of household of applicants 2.4 Applicant s house size 2.5 Comparison of the HOSF applications by local authority area

3 Executive Summary Introduction In March 2009 the Scottish Government launched the Home Owners Support Fund comprising a revised Mortgage to Rent scheme and a Mortgage to Shared Equity scheme. The aim of the two schemes is to help home owners who are in financial difficulty and are in danger of losing their homes. The Mortgage to Rent scheme enables eligible applicants to sell their home to a local authority or RSL and become a tenant. The Mortgage to Shared Equity scheme involves the Scottish Government acquiring a proportion of the equity in an applicant s home, thus reducing the level of debt secured against it. The schemes involve the involvement and co-operation of different stakeholders advisers, landlords and lenders all of whom have potentially different objectives. Securing a successful outcome for an applicant can therefore be complex and time consuming. This interim review was commissioned by the Scottish Government to identify any areas where the schemes could be strengthened in the light of early experience. It covers the period from the launch of the Home Owners Support Fund to the end of August The review has involved an assessment of applications received and consultations with advisers, landlords, Scottish Government staff, applicants and other stakeholders. The Context The Scottish Government first launched a Mortgage to Rent scheme in February 2003, an evaluation of which was published in In response, the Scottish Government made a number of changes and introduced a Mortgage to Shared Equity scheme. The schemes are still in their early days. At the time of undertaking our fieldwork none had settled (although some were due to shortly conclude). Our findings are therefore based on emerging issues. And the context is which the schemes operate continues to change. Section 11 of the Homelessness etc. (Scotland) Act 2003 came into effect in April 2009 and places a duty on creditors to notify the relevant local authority when they raise legal proceedings for possession of a property. The Home Owner and Debtor Protection (Scotland) Bill has been introduced into the Scottish Parliament. This seeks to improve i

4 protection for home owners faced with repossession at each stage of the repossession process. Key Findings A total of 316 applications were registered for the (new) MTR and MTSE schemes to the end of August However, an additional 245 applications (46%) had to be returned as a result of not being submitted correctly. The proportion of applications returned has reduced from three-quarters in April to one quarter in August. Eight of the registered applications were eligible for the Mortgage to Shared Equity scheme. One was subsequently withdrawn; six switched to the Mortgage to Rent scheme and one was proceeding at the time of the evaluation. The need to release equity to repay unsecured debt was one reason for applicants choosing Mortgage to Rent in preference to Mortgage to Shared Equity. Of the 316 registered applications, 61 were not proceeding. In 47 cases this was because the property value exceeded the maximum permitted value under the scheme. Five did not proceed because the Scottish Government could not identify a landlord to acquire a property. However, this number may increase as it became apparent during the course of the review that an increasing number of landlords were declining properties. The reasons for this related to shortfalls in funding of repair costs and the total level of subsidy available to acquire a property. We found that six advice agencies had supported 30 per cent of registered applications. Whilst in theory there is national coverage of landlords participating in the scheme, experience shows this not to be the case. It is also apparent that some participating landlords are more willing to participate than others. Key issues to emerge during our consultations included: Advisers found the application process time consuming. Obtaining information from some lenders was easier than others. There were concerns over the capacity of the advice sector, the quality of advice sometimes available and the extent of training provided to date. Some expressed concern about the maximum property values used to determine eligibility for the schemes. ii

5 The use of Scheme 2 surveys to identify and cost disrepair was considered to be inappropriate by many landlords. Allied to this there were concerns about the level of subsidy available to fund repairs and eligibility. There was not always a clear rationale for landlords participating in the scheme. Conversely it was not clear why some local authorities were not participating. The process of identifying landlords to acquire properties was not always perceived as being transparent. A significant cause of concern raised by a number of landlords related to the revised subsidy levels introduced under the new arrangements. Although concerns remain about timescales to administer applications, the perception is that they are improving compared to the former Mortgage to Rent scheme. The need to improve communications between the various stakeholders involved in an application was a consistent theme. Recommendations The report makes a number of recommendations and suggested actions that could help to strengthen the Home Owners Support Fund: The Scottish Government should encourage local authorities to consider the role of the HOSF in preventing homelessness. This should include ensuring that quality advice is available to home owners in danger of losing their homes. The nature and frequency of training provided by Matrics should be reviewed with a view to adopting a more practical approach, involving advisers who have now gained experience in the field. This should include the operation of the Mortgage to Shared Equity scheme. Consideration should be given to the ongoing support available to advice agencies with queries about the Home Owners Support Fund. The geographical areas used to define house price eligibility should be kept under review in the light of ongoing demand for the Home Owners Support Fund. The Scottish Government should maintain a list of participating landlords and their area of operation on its website. The Scottish Government should encourage and support local authorities to work with RSLs with a view to creating an authority wide network of participating landlords experienced in the operation of the Mortgage to Rent scheme. Where possible, this work should build on existing networks. iii

6 The Scottish Government should keep the current subsidy arrangements for the Mortgage to Rent scheme under review. Consideration should be given to excluding properties from the MTR scheme where the estimated repair costs exceed a specified value. A number of areas currently not eligible for funding should be reconsidered. The basis on which surveys are commissioned should be reviewed and the Scottish Government should take a more active role in managing this service. A stakeholder reference group should be established involving representatives from advisers, lenders and landlords to assist in taking forward the recommendations proposed in this report and act as a sounding board for improving the schemes in the light of experience and changing external factors. The stakeholder group should consider a number of potential administrative improvements identified in this report iv

7 1. Introduction Background 1.1 The Home Owners Support Fund (HOSF) was launched on 16 March It comprises the two Scottish Government mortgage rescue schemes: the revised Mortgage to Rent (MTR) scheme; and the new Mortgage to Shared Equity (MTSE) scheme. 1.2 The HOSF schemes were developed and implemented in a tight timescale in response to the credit crunch. At the time of their launch the Scottish Government gave a commitment that a short review would be undertaken of the schemes after six months to identify any areas where they could be strengthened. 1.3 Since the launch of HOSF, the environment continues to change. Section 11 of the Homelessness etc. (Scotland) Act 2003 came into effect at the beginning of April This places a duty on creditors to notify the relevant local authority when they raise legal proceedings for possession of a property, so that advice and assistance can be made available to households facing homelessness. 1.4 In June 2009 the Repossessions Group established by the Scottish Government (as a sub-group of the Debt Action Forum) to consider the adequacy of current legal protection for home owners facing repossession, and any other actions that could be taken to reduce the risk of repossession, reported. Whilst commending the Scottish Government on the introduction of HOSF, the Group highlighted the need to keep funding and eligibility criteria under review. 1.5 Arising out of the recommendations of the Debt Action Forum and Repossessions Group, the Scottish Government has introduced the Home Owner and Debtor Protection (Scotland) Bill into the Scottish Parliament. The main proposals within the Bill include: improving protection for home owners faced with repossession at each stage of the repossession process, in particular by ensuring that all repossession cases are heard in court; 1

8 allowing lay representation to make it easier for homeowners to present a defence in court; and extending the protection currently offered for the family home in bankruptcy and trust deeds. 1.6 This review is not intended to be an evaluation of HOSF (which would be premature) but rather to identify specific issues that have arisen to date, and suggest ways in which these could be addressed. 1.7 The review covers the period from inception to end of August It was undertaken over a six week period during September and October Our Methodology 1.8 The study has involved a mix of quantitative and qualitative methods to gain an understanding of what has happened to date. Desktop review 1.9 We extracted data from the applicants database held by the Scottish Government to identify any early trends in terms of who has applied and the outcomes (so far). We reviewed coverage of the schemes in terms of access to advice and landlord participation. Administrative procedures 1.10 We interviewed a number of members of staff in the Scottish Government who were involved in the development of the HOSF, together with members of the team that now administer it. We wanted to gain their perception of the operation of the schemes to date, and the administrative procedures in particular. Information and advice provision 1.11 We consulted with representatives of Citizens Advice Scotland (CAS) and Money Advice Scotland (MAS). CAS consulted its members and produced a paper based on 15 responses from CABx across Scotland. MAS issued an survey to all members, resulting in individual telephone or responses from five CABx and three local authority money advice workers. We also held a focus group which was attended by three money advisers and one CAB adviser. 2

9 Applicants Interim Review of the Home Owners Support Fund 1.12 During the course of the study, the Scottish Government indicated that it would be helpful to hear the views of applicants particularly ones eligible for the Mortgage to Shared Equity Scheme. We received contact details for four applicants, and successfully conducted telephone interviews with three. One was participating in the Mortgage to Shared Equity Scheme, and was likely to be the first case in Scotland to be completed. Two were participating in the Mortgage to Rent Scheme. Landlords 1.13 We organised a workshop (with the assistance of the SFHA) involving eight Registered Social Landlords (RSLs) participating in the MTR scheme. We conducted telephone interviews with a further seven as a result of publicity over the review circulated by the SFHA We ed all 16 local authorities that had agreed to participate in the MTR scheme and received responses from 10. We contacted the Convention of Scottish Local Authorities (COSLA) and the Association of Local Authority Chief Housing Officers (ALACHO), neither of whom had any substantive comments to make. Lenders 1.15 We invited the Council of Mortgage Lenders (CML) to give their views on the operation of HOSF to date A list of those consulted is attached as Appendix 1. 3

10 2. The Home Owners Support Fund Interim Review of the Home Owners Support Fund About the HOSF 2.1 The aim of the MTR and MTSE schemes is to help home owners who are in financial difficulty and are in danger of losing their homes. The MTR scheme enables eligible applicants to sell their home to a local authority or RSL and become a tenant. The MTSE scheme involves the Scottish Government acquiring a proportion of the equity in an applicant s home, thus reducing the level of debt secured against it. 2.2 The Scottish Government previously operated a MTR scheme which was launched in February An evaluation of the scheme was published in Key Evaluation Findings There was support for MTR as a last resort mechanism aimed at preventing homelessness. Questions related to the timing of intervention and value limits placed on properties. MTR helped around 140 households per year to remain in their homes, reducing repossessions in Scotland by an estimated eight per cent. MTR applications tended to involve older households living in cheaper dwellings, often former Right to Buy homes. Multiple, secondary debts affected a majority of cases. Only around half of applicants were successful. The main reasons for the remainder not proceeding included an inability to find a landlord, lenders unwilling to co-operate, and applications being too late. Applicants and stakeholders were generally complementary of the way the central MTR team operated. The main issues centred on delay. Proposals were made to tackle this by introducing framework agreements with landlords and a single property survey. The average subsidy cost per case was relatively high, comparable to the cost of new low cost home ownership units. The report suggested considering other models including shared equity and intermediate rent models. 1 Bramley G. Evaluation of the National Mortgage to Rent Scheme. Scottish Government Social Research

11 2.3 In response to the evaluation the Scottish Government made a number of changes to the MTR scheme. These included: allowing applicants to apply at an earlier stage when experiencing financial difficulties; streamlining procedures and establishing shorter targets for different stages of the process; introducing a single property survey; changing the basis on which the value of properties eligible for the scheme are calculated; and reducing the level of subsidy available to acquiring landlords to bring it in line with Housing Association Grant (HAG) subsidy for other development. 2.4 In addition, an MTSE scheme was introduced for the first time. 2.5 To be eligible for either scheme, applicants must meet a number of criteria, including: owning a property that does not exceed a maximum value for a particular location and size (except in the case of a member of the household having particular housing need as a result of a disability) ; obtaining independent money advice about their situation from a Citizens Advice Bureau, Money Advice outlet, local authority money advice centre or other approved agency; being ineligible for other forms of support from UK support schemes or being able to demonstrate that they will not lift the threat of repossession; and having been unable to make full payment on a loan secured against their property for at least three months, having cumulative arrears of at least one month, and been unable to reach agreement with their lender on how to manage their arrears. 2.6 Applicants for the MTR scheme generally must have less than 25 per cent equity in their home, and applicants for the MTSE scheme more than 25 per cent equity. 2.7 Both schemes are administered and funded by the Scottish Government. The annual budget is 20 million in 2009/10. The programme is demand led and, if the uptake is greater than budgeted, additional resources would have to be found or some form of prioritisation introduced. 5

12 Stages in the Application and Assessment Process Interim Review of the Home Owners Support Fund The applicant approaches an approved money advice agency which assesses whether the MTR or MTSE are appropriate to their needs and whether they meet the eligibility criteria. The approved money advice agency submits an application to the Scottish Government on behalf of the applicant with the required supporting documentation. The Scottish Government administrative team undertakes an initial assessment of the application based on the information provided by the owner, a search against the property and a desk based valuation of the property. If the application is eligible the Scottish Government instructs a Scheme 2 valuation (including an open market valuation and a schedule of costed repairs to bring the property to the SHQS). They also obtain redemption statements from all lenders with loans secured against the property. If the open market valuation meets the eligibility criterion, the Scottish Government calculates the level of equity the owner has in the property and whether they will be considered for the MTR or MTSE Scheme. Mortgage to Rent Schemes Mortgage to Shared Equity Schemes If there is a funding shortfall the Scottish Government advises the owner and asks them to work with their money adviser to reach agreement with their secured lenders to the scheme proceeding. On receipt of agreement from the lenders (if appropriate) the Scottish Government seeks to identify a social landlord operating in the area that participates in the scheme. The applicant and their money adviser undertake a detailed assessment of the applicant s income and outgoings to assess the minimum level of equity the Scottish Government requires to take in the property. This is subsequently verified by the Scottish Government. The landlord receives a copy of the Scheme 2 survey and undertakes an inspection of the property to satisfy themselves of the repairs required and carries out gas and electrical safety checks. If the value of the total repairs to the property exceeds 6,000, the sale cannot proceed unless the balance is met by the owner, their secured lenders, trustee or the acquiring landlord. 6

13 2.8 The Government is currently improving the software and database that support the HOSF. They anticipate this will be implemented early in the New Year. In the meantime the HOSF administrative team has to undertake a number of tasks manually. This, coupled with staff turnover, and the level of resources generally available has placed the team under considerable pressure. Progress of Applications 2.9 A total of 316 applications were received and registered for the (new) MTR and MTSE schemes to the end of August Applications continued to be received and processed under the old arrangements during a changeover period. Table 2.1: HOSF applications received from 16 March to 31 August 2009 Total Applications Applications % Returned Applications Registered Returned March April % May % June % July % August % % 2.10 A significant issue has been the number of applications that are not able to be registered and are returned. The proportion has fallen from around three-quarter to one quarter. But this is still relatively high. It adds to the time that it takes to process an application and creates additional work for the HOSF administrative team The main reasons for applications being returned are: submitted on an old application form; incomplete supporting information (particularly proof of arrears); and not received from an approved adviser Of the 316 registered applications at the end of August 2009: sixty-one were not proceeding; twenty-six were at initial assessment stage; one hundred and nine were at Scheme 2 survey stage; ninety-five were at landlord assessment stage; fifteen had had offer letters sent out; and 7

14 ten were at conveyancing stage Eight applicants were eligible for the MTSE scheme. One was amongst those withdrawn and six subsequently switched to the MTR scheme. One application is continuing and it is anticipated will settle shortly In the vast majority of cases that were not proceeding, it was as a result of the property value exceeding the maximum permitted value. The areas with the greatest number of these applications were from North Lanarkshire (10), South Lanarkshire (7) and Glasgow (5). In all but six cases the property value was identified as exceeding the limit prior to a Scheme 2 survey being commissioned. Table 2.2: Reasons for applications not proceeding Reason No. Property value exceeded maximum threshold 47 Withdrawn 7 No landlord to acquire property 5 Eviction 1 Reached agreement with lender 1 Total Five applications eligible for the MTR scheme were not proceeding as a result of the Scottish Government being unable to identify a landlord to acquire the property. In each case, all of the landlords who had expressed an interest in properties in that geographical area had been approached and declined. The key factors influencing landlord decisions were: location - three were in remote rural areas and potential landlords were unwilling to take on a single property and/ or had concerns about long term letting prospects; property condition three of the properties were seen as being in very poor condition, and one required significant common repairs; and financial risk a number of landlords felt that these properties (and potentially other MTR properties) would put them at serious financial risk During our fieldwork it became apparent that an increasing number of landlords were declining properties as a result of the funding of repair costs and the total level of subsidy available. We anticipate that the proportion of applications not proceeding for this reason will increase. 8

15 2.17 Of the 71 applications for which estimated repair costs were available on the Scottish Government s database, the value of works ranged from 221 to 26,660. Nineteen (27%) exceeded the 6,000 repairs subsidy threshold available under the MTR scheme. However, these do not include applications that had only reached Scheme 2 stage and the Scottish Government was seeking to identify a landlord Staff responsible for administering the schemes estimate that there is a shortfall in funding in between 50 and 70 per cent of applications. This means that the value of a property is less than the loans secured against it. Profile of Applicants 2.19 The application form is intended to be as concise as possible and asks for little information about household characteristics. However, we are able to identify that the majority of applicants (60%) are in the and age bands. Table 2.3: Age distribution of head of household of applicants Age band No. % > plus 5 2 Unknown More than half of the properties (55%) involved are two and three apartment in size. Table 2.4: Applicant s house size Apartment size No. % 1 apt apt apt apt apt or more apt 6 2 unknown

16 2.21 Just over one fifth (67) of applicants indicated that someone in the household had a disability. Of these, nine owned properties above the maximum permitted value. Three of these progressed due to the applicant demonstrating that they had a particular housing need requiring them to remain in their existing home. Applications by Local Authority Area 2.22 We wanted to gain an understanding of the trends and factors that might influence the proportion of applications received from different parts of the country. We reviewed the number of registered applications received from applicants living in each local authority area. The greatest number, excluding those rejected for exceeding the property value threshold, has come from home owners living in: South Lanarkshire West Lothian Glasgow Fife North Ayrshire 2.23 Comparing current uptake with that recorded in the 2008 MTR evaluation, (Table 2.5) there are a number of significant differences. The proportion of applications has reduced : from 12.7 per cent to 4.8 per cent in North Lanarkshire although this is the area where the highest proportion of applications have been rejected due to the property value; and from 4.2 per cent to 1.5 per cent in Aberdeen. They increased: from 5.2 per cent to 10 per cent in West Lothian; from 2.1 per cent to 5.2 per cent in Falkirk; and from 1.6 per cent to 5.6 per cent in West Dunbartonshire We wanted to identify whether any areas were under-represented. It is currently not possible to track the number of home owner repossessions by local authority area. However, we can identify homeless applications to local authorities from households owing property. We therefore compared the number of HOSF applications received 10

17 with the proportion of homeless applications from households owning property received by each local authority in 2008/09. Table 2.5: Comparison of HOSF applications by local authority area MTR applications * HOFS applications to March - August 2009** % of homeless applications owning property in 2008/09 Difference % No. % % % North Lanarkshire Glasgow City South Lanarkshire Fife North Ayrshire Edinburgh City West Lothian Aberdeen City Midlothian Dumfries & Galloway East Lothian Aberdeenshire Renfrewshire Perth & Kinross Highland Dundee City East Ayrshire South Ayrshire Falkirk East Dunbartonshire West Dunbartonshire East Renfrewshire Inverclyde Stirling Argyll & Bute Angus Scottish Borders Western Isles Moray Clackmannanshire Orkney Shetland Islands *Based on the MTR Evaluation **Discounting applications rejected for exceeding property value threshold 2.25 The comparison must be treated with some caution for a number of reasons. In particular the timescales are different, potential applicants in some areas could be excluded as a result of the value of their property, and the overall numbers are small. 11

18 2.26 However, they do suggest that Orkney, Highland and Stirling might be underrepresented and it could be worth considering the promotion of the scheme in these areas. Applications by Advice Agency 2.27 We analysed the advice agencies supporting applications to HOSF since the introduction of the new scheme. This highlighted that 40 per cent were supported by a local authority advice team and 60 per cent were supported by a CAB or money advice agency. The balance between local authority and other advisers varies significantly between local authority areas There were a number of particularly active advisers in relation to HOSF a small number of local authority and CAB advisers had supported more than 10 applications, and two local authorities had supported more than 20. We found that six advice agencies had supported 30 per cent of registered applications 2.29 In some cases, advice agencies were supporting applications from people outwith their immediate area of operation. For example, one CAB in central Glasgow supported a number of applicants in Renfrewshire. In one case, an application appears to have been accepted from a private solicitor (not on the approved list of advisers). A list of the advice agencies supporting applications is included as Appendix Two. Landlord Participation 2.30 Prior to the launch of the updated MTR scheme, the Scottish Government wrote to all local authorities and RSLs asking them to indicate whether they wished to participate in principle as acquiring landlords A total of 118 landlords indicated that they were interested. Of these, 16 are local authorities (one is signposting only) and 102 are RSLs. An exercise subsequently undertaken by the Scottish Government maps geographical coverage. This suggests that there are landlords willing to acquire properties across the whole country. However, a (small) number of RSLs have indicated that they would be prepared to acquire stock outwith their areas of operation. Subsequent experience has been that they are not always prepared to do so. 12

19 2.32 In some areas there are a number of landlords that are prepared to consider acquiring stock. Some, however, restrict their consideration to very small geographical areas Ten local authorities with housing stock are not participating. Of the six local authorities without housing stock, Large Scale Voluntary Transfer (LSVT) RSLs indicated that they would participate in all but one area Although no acquisitions had settled at the time of undertaking our fieldwork, it is clear that some landlords are more likely to participate in the scheme than others. 13

20 3. Key Themes arising from Consultations Interim Review of the Home Owners Support Fund Introduction 3.1 In this section we discuss the views gathered on the operation of the schemes to date from representatives of the advice sector, landlords, the Scottish Government and the limited number of applicants we have spoken with. 3.2 We have structured the feedback around a number of common themes to emerge. These are: The need for the HOSF Client eligibility Advice provision Maximum property values Surveys The definition and funding of repairs Landlord participation and selection Subsidy levels Administering the HOSF. The Need for the HOSF 3.3 Advisers strongly felt that there was a need for a scheme to help home owners to remain in their own homes, particularly at a time of economic downturn. HOSF was seen as a lifeline for people who managed to receive support, and provided some reassurance to clients who may need this support in the future. The schemes were seen as essentially very good. 3.4 The advisers felt that the MTR scheme was far more commonly appropriate to their clients needs than the MTSE. Although most advisers responding to this review had supported clients who were eligible for the MTR scheme, only one had supported a client eligible for the MTSE Scheme. 3.5 Advisers felt that the schemes were necessary for clients in a wide range of situations. Often, clients had bought their home a number of years ago, and secured multiple debts against it. 14

21 3.6 The applicants consulted as part of this review were very positive about the principles behind the MTR and MTSE Schemes, believing them to be extremely valuable to home owners. Client Eligibility 3.7 Generally, advisers recognised the need to demonstrate that other options had been considered before applying to the HOSF. But some found that it took some time to gather the evidence needed to demonstrate that clients had not reached agreement with their lender, and was not eligible for participation in a UK wide support scheme. One adviser suggested that it should be sufficient for the adviser to confirm this in writing, and the HOSF team could subsequently confirm this verbally with the lender. 3.8 One adviser felt that it was unfair that clients were required to be in arrears on their mortgage before they could access the scheme. But others including CAS - felt that the new scheme allowed for earlier intervention than the previous MTR scheme. A minority suggested that the scheme should be used to help home owners to release equity to reduce non secured debts. Advice Provision Adviser Role 3.9 Generally, advisers were surprised by the amount of time required to submit and manage an application to the HOSF. CABx felt that they undertook most of the administration surrounding an application. MAS agreed that the process put most of the onus on the advice agency. But advisers agreed that it was essential that individuals obtain proper advice before applying to the scheme. CAS felt that the application process was very straightforward, but the adviser role could be time consuming In particular, CABx felt that considerable time had to be invested in liaising with lenders. While some lenders were seen as patient and co-operative, others had created barriers to clients accessing the scheme. In some cases, advisers believed that some lenders did not want to participate because they did not fully understand the scheme. Even where lenders were willing, advisers often found it difficult to get written confirmation from the lender that they have failed to reach an agreement on arrears with the client. This can slow the application process down considerably and result in significant additional work for the adviser. 15

22 3.11 There was also some concern that the HOSF team asked advisers again for information that had already been provided or asked them to provide it in a slightly different format. Advisers suggested that it would be useful to have standard forms and letters to ensure that the team received information in the format it required There were some concerns from policy staff about advisers having to calculate the level of equity an applicant could afford to retain under the MTSE scheme. But this view was not reflected in consultation with four specialist CAB advisers A minority of advisers were keen to have more of a role in the application process for example by liaising with landlords. It was felt that this would simplify and streamline the process. Capacity 3.14 A number of consultees highlighted issues around capacity in the advice sector. Generally, advisers felt that applications to HOSF should be supported by money advisers rather than general advisers. Some felt that if more training was provided, generalist advisers would be able to support people through more of the application process MAS reported concerns that demand for money advice was exceeding supply. If MAS receives direct enquiries from the public, it signposts individuals to local money advice sources. In some cases individuals have been told that the local agency does not have capacity to take their case on. MAS is concerned that there isn t enough evidence about how advice agencies prioritise the most urgent cases. Quality 3.16 Some advisers felt that the quality of advice and support offered to clients varies across the country. There was some concern that organisations were approved to provide advice on the HOSF, rather than individuals. A number of advisers believed that it would be beneficial to have advisers who specialised in HOSF, and would build up knowledge and skills through everyday practice CABx suggested that it may be useful to introduce regional specialists, who would hold drop-in sessions at local CABx. MAS felt that this model would be valuable 16

23 but that it would require central co-ordination. It suggested a network of regional specialists reporting to a central organisation like MAS. This would mean that local advice agencies could refer people through a central point, and MAS could coordinate and balance workloads. It could also facilitate contact between advisers to share experience, and build up links with other organisations like Scottish Housing Aid Centres who could be referring people to the scheme Advisers consistently believed that advice about HOSF needed to be done on a face to face basis. Clients are in complex, vulnerable and emotional situations and could potentially lose their home. This requires face to face, specialist advice with skills in both money and housing advice. A number of advisers felt that telephone support could be counter-productive, putting people off applying for the scheme because it would appear complex Consultation with advice agencies did identify varying levels of understanding of the scheme. For example, CAS reported that one CAB did not make applications for HOSF because it believed that there was no participating landlord in its area One advice agency had concerns about the quality of advice and signposting provided by the local authority homelessness team, which was not always informing clients that HOSF was available All three of the applicants consulted were very positive about the quality of advice received, including exploration of all options, assistance with making an application, and subsequent advice and support. Training 3.22 MAS and CAS have worked together to provide training on the HOSF. A one day information session was held to provide information on the UK wide and Scotland schemes to support home owners MAS and CAS also held five road shows across Scotland. All MAS and CAS members were invited to attend these road shows. The road shows were again mainly about information provision and awareness raising. They did not provide practical information about the application and assessment process. 17

24 3.24 Information about the HOSF is also available through Wiser Adviser. This is a programme of training and support for money advisers, run by the Money Advice Trust. Both MAS and CAS are partners in Wiser Adviser. Training on the HOSF is provided online through Advisernet and as part of the Housing Debt Course Generally, advisers and their representative bodies agree that there has not been enough training on the HOSF. There are three main concerns: agencies are on the approved list for the HOSF, but may not have received any (or adequate) training; training has not been practical lacking clear guidance on how to support clients through the HOSF application and assessment process; and advisers are having to build up their own knowledge through experience, but this is not shared well across advice organisations Overall, this means that there are many advice organisations and individuals learning about the HOSF application and assessment process at the same time. Most had simply downloaded the guidance on the scheme, and built up knowledge through experience. Although some are building up expertise and understanding of the scheme, this is not shared between advisers. Clients will therefore be receiving inconsistent levels of advice and support throughout the process. It also makes it difficult to report back on any issues arising in provision of advice, as so many different people are involved. Maximum Property Values 3.27 All advisers and a number of local authorities we consulted had concerns about the maximum property values used to determine eligibility for the schemes. There were two key issues. The first related to the geographical boundaries used to determine property values; the second to the overall proportion of properties now eligible. 18

25 Under the old arrangements, 2003 median property values within 56 housing market areas were used to determine maximum eligible property prices. The new procedures apply the same methodology used for LIFT schemes and restrict values to the top of the bottom quartile of 2007 house sale value (with some minor adjustments) for the 28 housing market areas. Unlike the previous arrangements, they split values by house size A number of consultees highlighted problems where single values have been set across more than one local authority area. The example of East Renfrewshire and East Dunbartonshire being included with Glasgow was commonly raised. Average house prices in East Renfrewshire and East Dunbartonshire were perceived as considerably higher than those in Glasgow. These consultees felt that having a single value created barriers to access for clients in East Renfrewshire and East Dunbartonshire Related to this, some consultees suggested that having single maximum values across a whole local authority created anomalies. For instance, average house prices in East Kilbride were cited as being greater than in some other parts of South Lanarkshire, effectively excluding home owners living there from the schemes A number of consultees felt that the maximum property values were simply too low. The move to restrict maximum values from median to the top of the bottom quartile of house prices in an area was seen as a retrograde step. There was a perception that fewer clients were now eligible for the new scheme, compared with the old scheme due to the maximum property values One adviser we consulted suggested that the use of maximum property values as the primary way of determining access to the scheme was unfair. They suggested that the assessment process should be more needs based like a housing allocation policy. It was felt that this would be a fairer way of rationing the resources available. 19

26 Surveys Interim Review of the Home Owners Support Fund 3.32 The requirement to accept Scheme 2 reports and quality of the information received was raised by a number of consultees. A considerable proportion of landlords felt that valuation surveys were an inappropriate way to assess repair liabilities in a property In particular they felt that valuations surveyors had an inadequate understanding of what is involved in meeting the SHQS and treated properties as if they were new build, giving insufficient consideration to their long term maintenance liabilities A number of cases of incorrect information being provided were highlighted. In some cases, these related to basic information such as the construction type. More generally they concerned discrepancies between the Scheme 2 report and the acquiring landlords inspection. Many commented that the level of detail was insufficient. Under the old MTR scheme the Scottish Government instructed a Scheme 2 report following an initial assessment that an application was eligible. The survey identified the work required to bring the property to the Scottish Housing Quality standard (SHQS). The landlord selected to acquire the property was then provided with the opportunity to undertake an inspection and obtain quotes for the works identified. The MTR evaluation identified this was a cause of delay and there were concerns over inconsistencies in practice. The revised procedures require the acquiring landlord to accept the findings of the Scheme 2 report. The landlord commissions its own gas and electrical safety checks which are added to the total cost of repairs. Under the old and new scheme, the repairs subsidy is restricted to 6,000. Any costs above this figure must be funded by the applicant, their lender or the acquiring landlord for the scheme to progress Landlords generally wanted the old system to be reintroduced. However, a number of specific suggestions were made to improve the current working arrangements including: better briefing for surveyors in the SHQS; surveys being issued in draft for comment; and 20

27 acknowledgement that it could take longer than 12 months to implement common repairs Landlords also felt it would be helpful to be advised at the outset whether any funds were available from other sources to meet the cost of repairs in excess of 6, One landlord highlighted that the Scottish Government had formerly funded asbestos surveys where required but was not doing so under the new system Members of the HOSF team also raised a number of weaknesses they had identified in Scheme 2 reports. These included: the report not always indicating the number of bedrooms in a property; different interpretations between surveyors of the SHQS; and reference to gas inspections where there is no gas supply to a property Under the current arrangements landlords can only query Scheme 2 reports through the HOSF team. They in turn have to contact the relevant surveyor. This creates an extra layer of administration which the team can add no value to. Members of the team suggested that it would be more appropriate for there to be a direct of line of communication between landlord and surveyor when queries arise During our review of files we found several cases where there were substantial delays in surveyors responding to queries from the HOSF team about Scheme 2 reports. The Definition and Funding of Repairs 3.41 A significant number of landlords highlighted that the 6,000 repairs allowance was inadequate and had not been increased for some time. There was a perception that, as the focus was now on lower value properties, landlords were being asked to acquire properties in a poor state of repair Members of the HOSF team highlighted that identifying a landlord where repair costs exceeded the current limit could be problematic. But they also drew attention to the fact that simply increasing the repairs allowance could have unintended consequences by adversely impacting on applicants in negative equity. If an 21

28 applicant s lender, trustee, or landlord were unable or unwilling to fund the shortfall, it would result in a greater number of applications not proceeding The team were also aware that there were a number of areas such as smoke detectors and mechanical ventilation which were not covered by the SHQS but landlords were seeking to be funded One member of the team suggested that, to simplify administration, the Scottish Government pay an acquiring landlord up to 6,000 towards the cost of repairs they have estimated irrespective of the value of repairs identified in the Scheme 2 report. Landlord Participation and Selection Following receipt of a Scheme 2 report, the HOSF administrative staff seek to identify a social landlord that is willing to acquire the property of an eligible applicant under the MTR scheme. The Scottish Government maintains a database of the geographical areas participating landlords have indicated they are willing to consider acquiring property. The principle underpinning landlord selection is that the opportunity should be given to a landlord with housing stock in the area. Currently members of the team seek to firstly identify an obvious landlord operating in the immediate area of the property. If this is unsuccessful they then offer the property to the next landlord they can identify operating in the area, and so on. In the future the Government intend to involve staff in regional offices in identifying the most obvious landlord. If this landlord rejects the property they will offer it on a first come first serviced basis to other landlords that have indicated they will acquire properties in the area In some cases we found a clear rationale for landlords participating in the MTR scheme. Some local authorities viewed the HOSF as a mechanism for preventing homelessness. Staff we spoke to highlighted the strategic role the HOSF had to play. Funding available to support MTR acquisitions was often measured against the cost of dealing with a homelessness application. Some RSLs were also clear of the fit of the HOSF with their strategic objectives. 22

29 3.46 However, in other participating local authorities, the connection with homelessness responsibilities was less clear. And some RSLs appeared to be participating to acquire housing or prevent other landlords from coming into their areas Whilst we did not interview any of the 10 local authorities with housing stock not participating, we did review nine of their homelessness strategies and found: five strategies made no mention of the HOSF; two indicated they will investigate the use of MTR; one advised that they are unable to participate due to lack of funding; and one suggested they would promote the HOSF with the private sector and lenders. Case Study 1 Finding a Landlord This application was made in March The application was assessed as eligible for the Mortgage to Rent scheme. A local authority landlord was approached in May. Their assessment of repairs required identified artex, which potentially contained asbestos, present in the home. It was unable to decide whether it wished to purchase the property for over three months, taking the decision to a range of officers and Committees. At the same time, the applicant was going through court proceedings. The local authority confirmed that it was unable to purchase the property in mid August, as it was likely to incur a financial loss. The property was therefore offered to an RSL the following day, and following a repairs assessment and some queries with the survey, this landlord confirmed that it was happy to proceed with the purchase. 23