1.1 I am writing to seek your approval for the Royal Borough to participate in the regional Houseproud Scheme.

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1 The Royal Borough of Kensington & Chelsea Key Decision Report dated 3 rd April 2003 For Decision by Councillor Timothy Coleridge, Cabinet Member for Housing Report by the Director of Environmental Health HOUSEPROUD - EQUITY RELEASE FOR OLDER OWNER-OCCUPIERS 1. INTRODUCTION 1.1 I am writing to seek your approval for the Royal Borough to participate in the regional Houseproud Scheme. 2. BACKGROUND 2.1 The Regulatory Reform (Housing Assistance) England & Wales Order came into force on 18 th July 2002 and its effect is to allow local authorities almost complete discretion on private sector housing renewal policy, including whether to offer residents discretionary grants, loans, assistance in moving to a more suitable home or no assistance at all. Where assistance is given, the local authority may apply conditions that are relevant to their own circumstances. The only grants that will remain mandatory are those for disabled facilities and these are awarded up to a maximum of 25,000 subject to a prescribed test of resources. 2.2 The existing powers to give grant assistance (except in relation to mandatory disabled facilities grants) can continue until 18 th July 2003 but a local authority may use the new powers as soon as they have approved and published a new policy (its Private Sector Housing Renewal Strategy ). Once published, the existing grant powers cease to have effect. This strategy is in draft form and is currently out for consultation amongst key stakeholders. It includes a range of policy tools for housing renewal which reflect the Royal Borough s unique housing stock and market position. The strategy will be put before you following the consultation period. 2.3 The Housing Committee endorsed the current House Renovation Grant Policy on 23 rd October Although the policy attempted to target grant assistance at those most in need and to reflect the strategic aims 1

2 within the Housing Strategy it was restricted by the legislation set out in the Housing Grants, Construction and Regeneration Act These restrictions often led to large grants being made available to individuals or organisations, which in return offered no direct benefit to the Council. Grants have been too accessible for owner-occupiers with high levels of equity in their homes. 2.4 The Royal Borough s Private Sector Renewal Strategy will be wideranging, but a key element will be the enabling of equity release for owner-occupiers. Guidance from the Government s Housing Green Paper *1 clearly states that local authorities should target their resources more effectively and provide help to a wider range of homeowners. In particular, they should enable homeowners with equity tied up in their property to release some of it to fund repairs, rather than offer grant aid. This would free-up resources for more appropriate uses elsewhere in the sector. The Royal Borough has the highest property values in the UK, yet homeowners, particularly the elderly, often lack the available capital to fund home repairs, or have the available income to finance ordinary loans. 2.5 The Government's guidance also promotes regional and sub-regional working amongst local authorities in order to profit from economies of scale and to develop consistent regional policies. In light of this and the issues discussed above, the new Private Sector Renewal Strategy would benefit from participating in the "Houseproud" scheme which provides equity release products for certain owner-occupiers as a replacement for grants. 2.6 The Council's Private Sector Stock Condition Survey *2 showed that 51 millions of investment is needed to remedy unfitness and serious disrepair. The considerable equity in the owner-occupied stock, particularly amongst older owner-occupiers, leaves the Royal Borough ideally placed to benefit from equity-release schemes. 3. HOUSEPROUD 3.1 The Houseproud scheme is operated by the Home Improvement Trust, a not-for-profit organisation supported by the Special Grants Programme of the Office of the Deputy Prime Minister. Its purpose is to develop and make available affordable funding for essential repairs, improvements and adaptations to the homes of older home owners (60 years and above) and those under 60 with disabilities who need to make a client contribution to a disabled facilities grant under the test of resources. 2

3 3.2 The Home Improvement Trust: works with local authorites, national care agencies and Home Improvement Agencies to raise awareness of equity release options available to older home-owners, arranges the free services of an Independent Financial Adviser who will provide written advice on the options which are appropriate for the client, based on their individual circumstances, ensures that loan provider partners are regulated banks with empathy for the needs of older people and those with disabilities. The loan providers agree to make funds available at competitive rates and provide a guarantee of no re-possession whilst the original borrower remains in occupation, provides a centralised legal service through their solicitors at reduced rates to cover local authority searches, the registering of charges and arranging payments on completion of the works, arranges a competitive valuation service via the national Valuation Office, provides a confidential freephone Helpline for clients. 3.3 The Home Improvement Agency, "Staying Put" will act as the client's agent. Their surveyors will identify required, works, prepare specifications, appoint contractors and supervise the works through to final payment stage. Their fees will be added to the equity-release loan. In this way the client will receive the same level of service as under the current grant regime. An added benefit is that, as the funding is not via the grant programme but from private finance, the scope of works can go above the basic fitness standard, unlike the present grant funded system. 3.4 The Royal Borough for its part will: part-fund the running costs of the Home Improvement Trust to the sum of 10,000 per annum, for a minimum of two years initially, pay 500 towards the start-up costs of each loan. This sum becomes due when the Council is notified by the Home Improvement Trust that a new loan agreement has been entered into by the client. 3

4 3.5 Currently over 20 London Boroughs have signed formal agreements to participate in the Houseproud scheme. Loans will be provided by the Dudley Building Society and Barclays Bank plc. 4. KEY FEATURES OF HOUSEPROUD 4.1 There will be three types of loan on offer: Capital Release - No Service Advance. No repayments of either capital or interest are paid by the client. Both are rolled up into a charge, registered against the title and only become payable when the property is no longer the client's main residence. This type of loan is only available to those residents who are 75 years old or above. Up to 30% of the available equity may be borrowed. The interest charged is variable and usually slightly above the current market rate and confirmed in writing before the agreement is signed. Capital and Interest Repayment Advance. A straight forward mortgage upon which repayments of capital and interest are made each month. This type of loan is only available to those 60 years old or above. Up to 30% of the available equity may be borrowed. The interest charged is variable and confirmed in writing before the agreement is signed. Interest Only Advance. Interest payments are made monthly but the capital sum does not reduce, becoming payable when the property is no longer the client's main residence. This type of loan is only available to those 60 years old or above. Up to 30% of the available equity may be borrowed. The interest charged is variable and confirmed in writing before the agreement is signed. 5. FINANCIAL AND LEGAL CONSIDERATIONS 5.1 The Group Finance Manager confirms that the Council's contributions as detailed in 3.4 above can be paid from the Housing Capital Programme and can be met by the 2003/04 budget. 5.2 The Director of Law and Administration confirms that the action proposed is within the Council's powers. 6. CHIEF HOUSING OFFICER S COMMENTS 4

5 6.1 The Chief Housing Officer supports the recommendation to approve the Royal Borough's participation in the Houseproud Scheme. The Council has developed a Leaseholder Payments Plan, which will be launched at the Leaseholders Conference on 28 April. The Houseproud Scheme is an integral part of this payments plan. As part of the payments plan, the Council has undertaken to make arrangements to put leaseholders in touch with advice agencies who can direct them to financial institutions offering equity release products. 7. OPTIONS 7.1 You could approve the Council's participation in the regional Houseproud scheme as part of the proposed Private Sector Renewal Strategy. This will enable older owner-occupiers and those under 60 with disabilities to access equity release loans for repairs, improvements and adaptations. Working with the Home Improvement Agency "Staying Put", residents will be supported through the process of repairs and alterations to their homes. This in turn will reduce the demand on the discretionary grant budget, thereby releasing resources for more appropriate use. 7.2 You could decline to take part in this regional initiative. To do so would deny older home-owners access to the scheme. Individual borrowers are unlikely to be able to obtain these products with a no-repossession guarantee from the financial sector and they would have to finance all start-up costs themselves. Whilst the Royal Borough's Private Sector Renewal Strategy is not yet finalised, it is unlikely that the continuation of large grants for "equity-rich" owner-occupiers, contrary to Government guidance, will be tenable. 8. RECOMMENDATION 8.1 I recommend that you approve the Royal Borough's participation in the regional Houseproud scheme in partnership with the Home Improvement Trust. Paul Morse Director of Environmental Health Michael Stroud Executive Director, Environmental Services 5

6 FOR COMPLETION BY AUTHOR OF REPORT: Date of first appearance in Forward Plan: 3 rd April 2003 Key decision reference identifier from Forward Plan: 01166/3/H/A Background papers: *1 The Housing Green Paper Quality and Choice A decent home for all DETR - April *2 Private Sector Stock Condition Survey 2000: The Housing Consultancy Ltd. *3 Housing Renewal Guidance (Consultative Document) : ODPM : June 2002 Contact officer: Tim Keay, Head of Environmental Health (Residential Division) Tel: tim.keay@rbkc.gov.uk) FOR COMPLETION BY GOVERNANCE SERVICES: Report published on: 4th April 2003 Report circulated to the OSC on Social Services, Health & Housing on 4th April